On January 1 2018 the general ledger of TNT Fireworks includ

On January 1, 2018, the general ledger of TNT Fireworks includes the following account balances Accounts Cash Accounts Receivable Inventory Notes Receivable (5%, due in 2 years) Land Allowance for Uncollectible Accounts Accounts Payable Common Stock Retained Earning Debit 60,200 28,000 37,800 30,000 170,000 Credit 3,700 16,300 235,000 71,000 Totals $326,000 $326,000 During January 2018, the following transactions occur: Purchase equipment for $21,000. The company estimates a residual value of $3,000 and a six-year service life Pay cash on accounts payable, $11,000 Purchase additional inventory on account, $97,900 Receive cash on accounts receivable, $23,500 Pay cash for salaries, $31,300 Pay cash for January utilities, $18,000 Firework sales for January total $235,000. All of these sales are on account. The cost of the units sold is $122,500 January 1 January 4 January 8 January 15 January 19 January 28 January 30 The following information is available on January 31, 2018 a. Depreciation on the equipment for the month of January is calculated using the straight-line method b. At the end of January, $4,500 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 2% will not be collected. The note receivable of $30,000 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 $34,100 e. Accrued income taxes at the end of January are $10,500

Solution

Trial Balance For the Month ended Jan 31, 2018 Particulars Dr. Amt. Cr. Amt. Cash              2,400 Accounts Receivable          239,500 Allowance for Uncollectible Accounts              6,950 Inventory            13,200 Interest Reveivable                  125 Notes Receivable - 5%            30,000 Land          170,000 Equipment            21,000 Accumulated Depreciation - Equipment                  250 Accounts Payable          103,200 Salary Payable            34,100 Income Tax Payable            10,500 Common Stock          235,000 Retained Earnings            71,000 Sales Revenue          235,000 Cost of Goods Sold          122,500 Salaries Expenses            65,400 Utilities Expenses            18,000 Depreciation Expenses                  250 Bad Debt Expenses              3,250 Income Tax Expenses            10,500 Interest Revenue                  125 Total          696,125          696,125                     -   Answer 1. Income Statement For the Month Ended Jan 31, 2018 Sales Revenue Sales          235,000 Less: Sales Return & Allowances                     -   Net Sales          235,000 Less: Cost of Goods Sold          122,500 Gross Margin          112,500 Operating Expenses Selling & Administrative Expenes: Salaries Expenses            65,400 Utilities Expenses            18,000 Depreciation Expenses                  250 Bad Debt Expenses              3,250            86,900 Net Operating Income            25,600 Other Income & Losses Interest Revenue                  125 Net Income (Loss) before Tax            25,725 Income Tax Expenses            10,500 Net Income (Loss)            15,225 Answer 2. Balance Sheet As on Jan 31, 2018 Assets Current Assets Cash              2,400 Accounts Receivable          239,500 Allowance for Uncollectible Accounts            (6,950)          232,550 Inventory            13,200 Interest Reveivable                  125          248,275 Other Assets Notes Receivable - 5%            30,000 Property, Plant & Equipment Land          170,000 Equipment            21,000 Accumulated Depreciation - Equipment                (250)            20,750          190,750 Total Assets          469,025 Liabilities & Stockholders\' Equity Liabilities Current Liabilities Accounts Payable          103,200 Salary Payable            34,100 Income Tax Payable            10,500          147,800 Other Liabilities                     -   Total Liabilities          147,800 Stockholders\' Equity Common Stock          235,000 Retained Earnings            86,225 Total Stockholders\' Equity          321,225 Total Liabilities & Stockholders\' Equity          469,025 Answer 3.a-1. Return on Assets Ratio = Net Profit / Average Total Assets Average Total Assets = ($322,300 + $469,025) / 2 = $395,662.50 Return on Assets Ratio = $15,225 / $395,662.50 Return on Assets Ratio = 3.85% (Approx.) Answer 3.a-2. Company is more profitable than other Companies in other industry. Answer 3.b-1. Profit Margin Ratio = Net Income / Sales Profit Margin Ratio = $15,225 / $235,000 Profit Margin Ratio = 6.48% (Approx.) Answer 3.b-2. Company is more efficient than other Companies in other industry. Answer 3.c-1. Assets Turnover Ratio = Net Sales / Average Total Assests Assets Turnover Ratio = $235,000 / $395,662.50 Assets Turnover Ratio = 0.59 times (Approx.) Answer 3.c-2. Company is more efficient than other Companies in other industry.