Question

Required information [The following information applies to the questions displayed below. On January 1, 2021, the general ledger of TNT Fireworks includes the following account balances 17 Accounts Credit Debit Cash $ 5৪,900 25,400 $ 36,500 14,400 157,000 Accounts Receivable 57 warded Allowance for Uncollectible Accounts Inventory Notes Receivable (58, due in 2 years) Land 2,400 ed Accounts Payable 15,000 222,000 52,800 Common Stock Retained Earnings Totals $292,200 $292,200 During January 2021, the following transactions occur January 1 Purchase equipment for $19,700. The company estimates a residual value of $1,700 and a five-year service life. January 4 Pay cash on accounts payable, $9, 700 January January 15 Receive cash on accounts receivable, $22,200. January 19 Pay cash for salaries, $30,000. January 28 Pay cash for January utilities, $16,700. January 30 sales for January total $222,000. All of these sales are on account. The cost of the unita sold is 8 Purchase additional inventory on account, $84,900. $116,000 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 $3,200 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 $32,800. e. Accrued income taxes at the end of January are $9,200.

Answer 1

TNT Fireworks Journal Enteries Particulars 1.1.2021 Equipment a/c Debit in $Credit in $ Date Dr. 19700 To Cash 19700 |(Equipment purchased) 4.1.2021 Accounts Payable a/c 9700 Dr. To Cash 9700 (Accounts Payable paid in cash) 8.1.2021 Inventory a/c 84900 Dr. To Accounts Payable 84900 (Inventory purchased on account) 15.1.2021 Cash a/c 22200 Dr. 22200 To Accounts Receivable (Cash received from debtors) 19.1.2021 Salaries Expense a/c 30000 Dr. To Cash 30000 (Salary paid in cash) 28.1.2021 Utilities Expense a/c 16700 Dr. To Cash 16700 (Utilities paid in cash) 30.1.2021 Accounts Receivable a/c 222000 Dr. To Sales 222000 (Sales on account) Cost of goods sold a/c 116000 Dr. To Inventory (Cost of goods sold recorded) 116000

Adjusting Enteries Particulars 31.1.2021 Depreciation Expense - Equip a/c Dr. To Accum. Depre Equip |(Depreciation charged to equipment) (19700-1700)/(5x12) Debit in $Credit in $ Date 300 300 31.1.2021 Bad Debts a/c Dr. 5860 To Allowance for uncollectibles 5860 (Bad debts estimated) Past due 3200 2 1600 nt 225 0 3200 222000 x 3% 6660 16006660 8260 2400 5860 31.1.2021 Interest Receivable a/c Dr. 60 60 To Interest Income (Interest Income accrued) 14400 x 5% x 1/12 60 31.1.2021 Salaries Expense a/c To Salary Payable |(Salary paid in cash) 32800 Dr. 32800 31.1.2021 Income Tax Expense a/c 9200 Dr. To Income Tax Payable 9200 (Income Tax accrued) Closing Enteries Particulars Debit in $ Credit in $ Date 31.1.2021 Income Summary a/c Dr. 210860 To Cost of goods sold To Salaries Expense 116000 62800 To Utilities Expense 16700 To Depreciation Expense - Equip 300 To Bad Debts 5860 To Income Tax Expense 9200 (Expense accounts closed) 31.1.2021 Interest Income a/c Dr. 60 Sales a/c Dr. 222000 To Income Summary 222060 (Revenue accounts closed) 31.1.2021 Income Summary a/c To Retained Earnings (Profits transferred) 11200 Dr. 11200

Worksheet For the month ending 31.1.2021 Unadjusted Debit in $ Credit in $ Adjustments Debit in $ Credit in $ Debit in$ Credit in $ Adjusted Particulars Cash 5000 5000 Accounts Receivable 225200 225200 Allowance for uncollectibles 2400 5860 8260 Note Receivable (5% due in 2 years) 14400 14400 Interest Receivable 60 60 Inventory 5400 5400 Land 157000 157000 Equipment 70 9700 Accum. Depre Equip 300 300 Accounts Payable 90200 90200 Salary Payable 32800 32800 Income Tax Payable 9200 9200 Common Stock 222000 222000 Retained Earnings 52800 52800 Interest Income 60 60 Sales 222000 222000 Cost of goods sold 116000 116000 Salaries Expense 30000 32800 62800 Utilities Expense 16700 16700 Depreciation Expense - Equip 300 300 Bad Debts 5860 5860 Income Tax Expense 9200 9200 Totals 589400 589400 48220 48220 637620 637620 0 Net Income/Avg. Total Assets 11200/ (289800+418200) / 2 a1.Return on Assets Ratio = 11200 / 354000 3.16% a.Since Industry average is 2%, at 3.82% TNT has performed exceptionally well b1.Profit Margin = Net Income/ Sales 11200 222000 5.05% the company is more profitable than other companies in the same industry. c1.Asset Turnover Ratio Sales/Avg. Total Assets 222000 354000 0.627

Statement of Income For the month ending 31.1.2021 Sales 222000 Cost of goods sold -116000 Gross Profit 106000 Expenses: Salaries Expense 62800 Utilities Expense 16700 Depreciation Expense - Equip 300 Bad Debts 5860 85660 Operating Income 20340 Non Operating Items Interest Income 60 20400 Less:Income Tax Expense -9200 Net Income 11200 Statement of Retained Earnings For the month ending 31.1.2021 Beginning 52800 Net Income 11200 64000

Balance sheet As at 31.1.2021 Amounts in $ Amounts in $ Liabilities Amounts in $ Amounts in $ Assets Current Liabilities Current Assets Cash Accounts Payable 5000 90200 Salary Payable Accounts Receivable 225200 32800 Income Tax Payable Allowance for uncollectibles -8260 9200 132200 Note Receivable (5% due in 2 ye 14400 Interest Receivable 60 5400 Inventory 241800 Non Assets Land 157000 Shareholders Equity 19700 Common Stock Equipment 222000 Accum. Depre - Equip 19400 Retained Earnings -300 64000 286000 418200 Total Liabilities & Equity Total Assets 418200