Question

On January 1, 2021, the general ledger of TNT Fireworks includes the following account balances:
  

Accounts	Debit				Credit
Cash	$	60,100
Accounts Receivable		27,800
Allowance for Uncollectible Accounts					$	3,600
Inventory		37,700
Notes Receivable (5%, due in 2 years)		28,800
Land		169,000
Accounts Payable						16,200
Common Stock						234,000
Retained Earnings						69,600
Totals	$	323,400			$	323,400

  
During January 2021, the following transactions occur:
  

January		1		Purchase equipment for $20,900. The company estimates a residual value of $2,900 and a four-year service life.
January		4		Pay cash on accounts payable, $10,900.
January		8		Purchase additional inventory on account, $96,900.
January		15		Receive cash on accounts receivable, $23,400.
January		19		Pay cash for salaries, $31,200.
January		28		Pay cash for January utilities, $17,900.
January		30		Sales for January total $234,000. All of these sales are on account. The cost of the units sold is $122,000.

Information for adjusting entries:

1. Depreciation on the equipment for the month of January is calculated using the straight-line method.
2. The company estimates future uncollectible accounts. The company determines $4,400 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.)
3. Accrued interest revenue on notes receivable for January.
4. Unpaid salaries at the end of January are $34,000.
5. Accrued income taxes at the end of January are $10,400.

2.Record the adjusting entries on January 31 for the above transactions(Please write out)

3. Prepare an adjusted trial balance as of January 31, 2021.(Please write out)

4. Prepare a multiple-step income statement for the period ended January 31, 2021.(Please write out)

5. Prepare a classified balance sheet as of January 31, 2021. (Deductible amounts should be indicated with a minus sign.)(Please write out).

6. Record closing entries(Please write out)

7. Analyze how well TNT Fireworks manages its assets:

a-1. Calculate the return on assets ratio for the month of January.

	Return on Assets Ratio Choose Numerator ÷ Choose Denominator = Return on Assets Ratio ÷ = Return on assets ÷ =

Answer 1

TNT Fireworks Journal entries Date Account 1-Jan Equipment Cash Credit Calculation Debit 20,900 20,900 10,900 4-Jan Accounts Payable Cash 10,900 96,900 8-Jan Inventory Accounts Payable 96,900 23,400 15-Jan Cash Accounts Receivable 23,400 31,200 19-Jan Salaries expense Cash 31,200 17,900 28-Jan Utilities Expense Cash 17,900 234,000 234,000 122,000 122,000 30-Jan Accounts Receivable Sales Revenue Cost of goods sold Inventory Req2 Adjusting entries 31-Jan Depreciation expense Accumulated Depreciation-Equipment 375 = (20,900-2,900)/4*1/12 375 5,620 Workings below 31-Jan Bad debts expense Allowance for Uncollectible Accounts 5,620 120 =28,800*5%*1/12 31-Jan Accrued Interest Revenue Interest Revenue 120 34,000 31-Jan Salaries expense Salaries Payable 34,000 10,400 10,400 31-Jan Income tax expense Income tax Payable Req6 Closing entries 31-Jan Sales Revenue Interest Revenue Retained Earnings 234,000 120 234,120 221,495 31-Jan Retained Earnings Cost of goods sold Salaries expense Utilities Expense Depreciation expense Bad debts expense Income tax expense 122,000 65,200 17,900 375 5,620 10,400 wkgs Bad debts expense Accounts Receivable Past due Not past due Total Accts Rec 4,400 234,000 238,400 Ucollectible % Uncollectible Amount 50% 2,200 3% 7,020 9,220 Allowance for Uncollectible Accounts Adjusted Ending Balance Beginning Balance Bad debts expense 9,220 3,600 5,620

Credit TNT Fireworks T Accounts Date Debit Date Credit Cash Op bal $ 60,100 1-Jan $ 20,900 15-Jan $ 23,400 4-Jan $ 10,900 19-Jan $ 31,200 28-Jan $ 17,900 Date Debit Date Credit Accounts Receivable Op bal $ 27,800 15-Jan $ 23,400 30-Jan $ 234,000 Date Debit Date Credit Allowance for Uncollectible Accounts Op bal $3,600 31-Jan $ 5,620 Date Debit Date Inventory Op bal $ 37,700 8-Jan $ 96,900 30-Jan $ 122,000 Bal. Bal. $ 2,600 Accrued Interest Revenue 31-Jan $ 120 Bal. $ 238,400 Notes Receivable (5%, due in 2 years) Op bal $ 28,800 Land $169,000 $ 9,220 Bal. $ 12,600 Equipment 1-Jan $ 20,900 Op bal Bal. Bal. Bal. Bal. $ 120 Accumulated Depreciation-Equipment 31-Jan $ 375 $ 28,800 Accounts Payable -Jan $ 10,900 Op bal 8-Jan $ 169,000 Salaries Payable 31-Jan $ 34,000 $ 20,900 Income tax Payable 31-Jan $ 10,400 4 $ 16,200 $ 96,900 $ 375 $102,200 Bal. $ 34,000 Bal. $ 10,400 Bal. Common Stock Op bal Bal. Retained Earnings Op bal $234,000 $ 69,600 $ 69,600 Bal. $ 234,000 Sales Revenue 30-Jan $ 234,000 Bal. Cost of goods sold $ 122,000 30-Jan Interest Revenue 31-Jan $ 120 Salaries expense 19-Jan $ 31,200 31-Jan $ 34,000 $234,000 Bal. $ Bal. Utilities Expense 28-Jan $ 17,900 $ 122,000 Depreciation expense $ 375 Bal. Bad debts expense $ 5,620 120 Bal. $ 65,200 Income tax expense 31-Jan $ 10,400 31-Jan 31-Jan Bal. $ 17,900 Bal. $ 375 Bal. $ 5,620 Bal. $ 10,400

TNT Fireworks Account Names Cash Accounts Receivable Allowance for Uncollectible Accounts Inventory Accrued Interest Revenue Notes Receivable (5%, due in 2 years) Land Equipment Accumulated Depreciation Equipment Accounts Payable Salaries Payable Income tax Payable Common Stock Retained Earnings Sales Revenue Cost of goods sold Interest Revenue Salaries expense Utilities Expense Depreciation expense Bad debts expense Income tax expense Totals Req3 Adjusted TB Debit Credit 2,600 238,400 9,220 12,600 120 28,800 169,000 20,900 375 102,200 34,000 10,400 234,000 69,600 234,000 122,000 120 65,200 17,900 375 5,620 10,400 693,915 693,915

234,000 122,000 112,000 Req 4 TNT Fireworks Income Statement For Month ended Jan 31, 2021 Revenues Sales Revenue Cost of goods sold Gross Profit Operating Expenses Salaries expense Utilities Expense Depreciation expense Bad debts expense Total Operating Expenses Operating Income Interest Revenue Net Income before taxes Income tax expense Net Income 65,200 17,900 375 5,620 89,095 22,905 120 23,025 10,400 12,625 Statement of Retained Earnings For Month ended Jan 31, 2021 Retained Earnings, Jan 1, 2021 Net Income Retained Earnings, Jan 31, 2021 69,600 12,625 82,225

Req5 TNT Fireworks Balance Sheet As of Jan 31, 2021 Assets Current Assets Cash Accounts Receivable Allowance for Uncollectible Accounts Inventory Accrued Interest Revenue Total Current Assets 2,600 238,400 (9,220) 229,180 12,600 120 244,500 169,000 Property, Plant & Equipment Land Equipment Accumulated Depreciation Equipment Equipment, Net Total Property, Plant & Equipment 20,900 (375) 20,525 189,525 Other Assets Notes Receivable (5%, due in 2 years) Total Assets 28,800 462,825 Liabilities & Stockholders Equity Current Liabilities Accounts Payable Salaries Payable Income tax Payable Total Current Liabilities 102,200 34,000 10,400 146,600 Stockholders Equity Common Stock Retained Earnings Total Stockholders Equity Total Liabilities & Stockholders Equity 234,000 82,225 316,225 462,825

Req 7
Numerator	/	Denominator	=	Return on assets ratio
Net Income	/	Average Total Assets	=	Return on assets
=12,625	/	=((462,825+(323,400-3,600))/2)	=	0.0323	times