E7 21 The general ledger of TNT Fireworks assignment help

  • E7–21 On January 1, 2018, the general ledger of TNT Fireworks includes the following account balances:
  • During January 2018, the following transactions occur:

Accounts

Debit

Credit

Cash

$58,700

Accounts Receivable

25,000

Allowance for Uncollectible Accounts

$2,200

Inventory

36,300

Notes Receivable (5%, due in 2 years)

12,000

Land

155,000

Accounts Payable

14,800

Common Stock

220,000

Retained Earnings

________

50,000

Totals

$287,000

$287,000

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.

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Required:

1.

Record each of the transactions listed above.

2.

Record adjusting entries on January 31.

a.

Depreciation on the equipment for the month of January is calculated using the straight-line method.

b.

At the end of January, $3,000 of accounts receivable are past due, and the company estimates that 50% of these accounts will not be collected. Of the remaining accounts receivable, the company estimates that 3% will not be collected. The note receivable of $20,000 is considered fully collectible and therefore is not included in the estimate of uncollectible accounts.

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.

3.

Prepare an adjusted trial balance as of January 31, 2018, after updating beginning balances (above) for transactions during January (Requirement 1) and adjusting entries at the end of January (Requirement 2).

4.

Prepare a multiple-step income statement for the period ended January 31, 2018.

5.

Prepare a classified balance sheet as of January 31, 2018.

6.

Record closing entries.

7.

Analyze how well TNT Fireworks manages its assets:

a.

Calculate the return on assets ratio for the month of January. If 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?

b.

Calculate the profit margin for the month of January. 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?

c.

Calculate the asset turnover ratio for the month of January. 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?

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