Required information Exercise 7-21B 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. Year 1, the general ledger of a company includes the following account balances Credit Debit $ 68,709 29,000 $ 4,200 Accounts Cash Accounts Receivable Allowance for Uncollectible Accounts Inventory Notes Receivable (5%, due in 2 years) Land Accounts Payable Common Stock Retained Earnings Totals 38,300 36,000 175,000 16,809 240,eee 78,eee $339, eee $339, eee During January Year 1, the following transactions occur. January 1 Purchase equipment for $21,500. The company estimates a residual value of $3,500 and a five- year service life. January 4 Pay cash on accounts payable, $11,50e. January 8 Purchase additional inventory on account, $102,900. January 15 Receive cash on accounts receivable, $24,000. January 19 Pay cash for salaries, $31,800. January 28 Pay cash for January utilities, $18,5ee. January 30 Sales for January total $240,000. All of these sales are on account. The cost of the units sold is $125,eee. 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 $5,000 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 2% 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 $34,600. e. Accrued income taxes at the end of January are $11,000. 2. Record the adjusting entries on January 31 for the above transactions. (If no entry is transaction/event, select particular "No Journal Entry Required" in the first account View transaction list Journal entry worksheet ces 1 2 3 5 Depreciation on the equipment for the month of January is calculated using the straight-line method. Record the adjusting entry for depreciation. Note: Enter debits before credits. General Journal Debit Credit Date January 31 Record entry Clear entry View general journal 3. Prepare an adjusted trial balance as of January 31, Year 1. Adjusted Trial Balance January 31, Year 1 Accounts Debit Credit OK K onces Totals Exercise 7-21B Part 4 4. Prepare a multiple-step income statement for the period ended January 31, Year 1 Multiple-Step Income Statement For the month ended January 31, Year 1 Expenses Total Operating Expenses Exercise 7-21B Part 5 5. Prepare a classified balance sheet as of January 31, Year 1. (Deductible amounts should be indicated with sign.) Balance Sheet January 31, Year 1 Assets Liabilities Total Current Liabilities Stockholder's Equity Total Current Assets Total Stockholders' Equity Total Liabilities and Stockholders' Equity Total Assets Journal entry worksheet Record the closing entry for revenues. Note: Enter debits before credits. General Journal Debit Credit Date January 31 Record entry Clear entry View general journal Exercise 7-21B Part 7 of 7 7. Analyze how well the company manages its assets: Requirement 1: a-1. Calculate the return on assets ratio for the month of January Return on Assets Ratio Choose Denominator Book Choose Numerator Return on Assets Ratio Return on assets ASK ferences 0-2. the average return on assets for the industry in January is 2%, is the company more or less profitable than other companies in the same industry More profitable Less profitable Requirement 2: b.1. Calculate the profit margin for the month of January Choose Numerator Profit Margin Choose Denominator Profit Margin Profit Margin = nces b.2. If the industry average profit margin is 4%, is the company more or less efficient at converting sales to profit than other companies in the same industry? More efficient Less efficient Requirement 3: c-1. Calculate the asset turnover ratio for the month of January Choose Numerator Asset Turnover Ratio Choose Denominator Asset Turnover Ratio Asset Turnover times ences c-2. If the industry average asset turnover is of 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