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:
January1 Purchase equipment for $20,900. The company estimates a residual value of $2,900 and a four-year service life.
January4 Pay cash on accounts payable, $10,900.
January8 Purchase additional inventory on account, $96,900.
January15 Receive cash on accounts receivable, $23,400.
January19 Pay cash for salaries, $31,200.
January28 Pay cash for January utilities, $17,900.
January30 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:
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 $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.)
c. Accrued interest revenue on notes receivable for January.
d. Unpaid salaries at the end of January are $34,000.
e. Accrued income taxes at the end of January are $10,400.
1. Record the adjusting entries on January 31 for the above transactions(Please write out)
2. Prepare an adjusted trial balance as of January 31, 2021.(Please write out)
3. Prepare a multiple-step income statement for the period ended January 31, 2021.(Please write out)
4. Prepare a classified balance sheet as of January 31, 2021. (Deductible amounts should be indicated with a minus sign.)(Please write out).
5. Record closing entries(Please write out)
6. 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

TNT Fireworks

1. Adjusting Entries on January 31:

Accounts                              Debit         Credit

a. Depreciation Expense     $375

Accumulated Depreciation                $375

b. Uncollectible Expense   $5,620

Allowance for Uncollectible Accounts $5,620

c. Accrued interest revenue $120

Interest Revenue                                 $120

d. Salaries Expense           $34,000

Salaries payable                                 $34,000

e. Income Tax Expense     $10,400

Income tax payable                            $10,400

2. Adjusted Trial Balance as of January 31, 2021:

Accounts                              Debit         Credit

Cash                                   $ 2,600

Accounts Receivable       238,400

Allowance for Uncollectible Accounts $9,220

Inventory                            12,600

Notes Receivable

(5%, due in 2 years)        28,800

Land                                169,000

Equipment                       20,900

Accumulated Depreciation                      375

Depreciation Expense         375

Salaries Expense           65,200

Utilities Expense             17,900

Income Tax Expense     10,400

Uncollectible Expense   5,620

Accounts Payable                             102,200

Salaries Payable                                34,000

Income Taxes Payable                      10,400

Common Stock                              234,000

Retained Earnings                           69,600

Sales Revenue                              234,000

Interest Revenue                                  120

Accrued Interest

Receivable                      120

Cost of Goods Sold 122,000

Total                      $693,925  $693,915

3. Multi-step Income Statement for the period ended January 31, 2021:

Sales Revenue                              234,000

Cost of goods sold                        122,000

Gross profit                                  $112,000

Interest Revenue                                 120

Total revenue                              $112,120

Depreciation Expense         375

Salaries Expense           65,200

Utilities Expense             17,900

Uncollectible Expense   5,620  $89,095

Income before tax                      $23,025

Income Tax Expense                    10,400

Net Income                                 $12,625

Retained Earnings, January 1     69,600

Retained Earnings, January 31 $82,225

4. Classified Balance Sheet as of January 31, 2021:

Assets:

Cash                                                   $ 2,600

Accounts Receivable       238,400

Uncollectible Accounts       9,220   229,180

Accrued Interest Receivable                   120

Inventory                                             12,600

Current assets                              $244,500

Notes Receivable

(5%, due in 2 years)         28,800

Land                                  169,000

Equipment            20,900

Accumulated Dep.     375 20,525  218,325

Total assets                                  $462,825

Liabilities:

Accounts Payable           102,200

Salaries Payable               34,000

Income Taxes Payable     10,400 $146,600

Equity:

Common Stock             234,000

Retained Earnings          82,225  $316,225

Total liabilities and Equity           $462,825

5. Closing Journal Entries:

Accounts                              Debit         Credit

Income Summary             $221,495

Depreciation Expense                                  375

Salaries Expense                                    65,200

Utilities Expense                                      17,900

Income Tax Expense                              10,400

Uncollectible Expense                             5,620

Cost of Goods Sold                             122,000

To close temporary accounts to the income summary.

Sales Revenue                 234,000

Interest Revenue                     120

Income Summary                              $234,120

To close temporary accounts to the income summary.

Cash                                   $ 2,600

Accounts Receivable       238,400

Inventory                             12,600

Notes Receivable

(5%, due in 2 years)         28,800

Accrued Interest

Receivable                             120

Land                                169,000

Equipment                       20,900

Allowance for Uncollectible Accounts $9,220

Accumulated Depreciation                        375

Accounts Payable                               102,200

Salaries Payable                                   34,000

Income Taxes Payable                         10,400

Common Stock                                 234,000

Retained Earnings                              82,225

To close permanent accounts to the balance sheet.

Explanation:

a) Data and Calculations:

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

See workings attached.

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