Required information Exercise 7-21 Complete the accounting cycle using long-term asset transactions (L07-4.7.7) [The following information applies to the questions displayed below.) On January 1, 2021, the general ledger of TNT Fireworks includes the following account balances! Accounts Debit Credit Cash $ 58,700 Accounts Receivable 25,000 Allowance for Uncollectible $ 2,200 Accounts Inventory 36,300 Notes Receivable (53, due in 12,000 2 years) Land 155,000 Accounts Payable 14,800 Common Stock 220,000 Retained Earnings 50,000 Totals $287,000 $287,000 During January 2021, the following transactions occur January 1 Purchase equipment for $19,500. The company estimates a residual value of $1,500 and a five-year service life. January 4 Pay cash on accounts payable, $9,500. January 8 Purchase additional inventory on account, $82,900. January 15 Receive cash on accounts receivable, $22,000. January 19 Pay cash for salaries, $29,800. January 28 Pay cash for January utilities, $16,500. January 30 Firework sales for January total $220,000. All of these sales are on account. The cost of the units sold is $115,000. Information for adjusting entries: a. Depreciation on the equipment for the month of January is calculated using the straight-line method. b. The company estimates future uncollectible accounts. The company determines $3,000 of accounts receivable on January 31 are past due, and 50% of these accounts are estimated to be uncollectible. The remaining accounts receivable on January 31 are not past due, and 3% of these accounts are estimated to be uncollectible. (Hint: Use the January 31 accounts receivable balance calculated in the general ledger) c. Accrued interest revenue on notes receivable for January d. Unpaid salaries at the end of January are $32,600. e. Accrued income taxes at the end of January are $9,000. Exercise 7-21 Part 7 7. Analyze how well TNT Fireworks manages its assets: Requirement 1: 2-1. Calculate the return on assets ratio for the month of January Choose Numerator Return on Assets Ratio + Choose Denominator = Return on Assets Ratio Return on assets a-2. If the average return on assets for the industry in January is 2%, is the company more or less profitable than ott companies in the same industry? More profitable Less profitable Requirement 2: b-1. Calculate the profit margin for the month of January. If the industry average profit margin is 4%. Profit Margin Choose Denominator Choose Numerator Profit Margin Profit Margin 2 th Required information t7 of 7 Choose Numerator Choose Denominator Profit Margin Profit Margin 25:18 Book Print b-2. If the industry average proft margin is 4%, is the company more or less efficient at converting sales to profit than other companies in the same industry? ference More efficient Less efficient Requirement 3: 0-1. Calculate the asset turnover ratio for the month of January. If the industry average asset turnover is 0.5 times per month Choose Numerator Asset Turnover Ratio Choose Denominator Asset Turnover Ratio Asset Tumover times 2. If the industry average asset turnover is 0.5 times per month, is the company more or less efficient at producing revenues with its assets than other companies in the same industry? More efficient Less efficient
