Exercise 7-21B Complete the accounting cycle using long-term asset transactions (LO7-4, 7-7) [The following information applies to the questions displayed below.) On January 1, Year 1, the general ledger of a company includes the following account balances: Credit Debit $ 59,300 26,200 $ 2,800 Accounts Cash Accounts Receivable Allowance for Uncollectible Accounts Inventory Notes Receivable (5%, due in 2 years) Land Accounts Payable Common Stock Retained Earnings Totals 36,900 19,200 161,000 15,400 226,000 58,400 $302,600 $302,600 During January Year 1, the following transactions occur: January 1 Purchase equipment for $20,100. The company estimates a residual value of $2,100 and a four-year service life. January 4 Pay cash on accounts payable, $10,100. January 8 Purchase additional inventory on account, $88,900. January 15 Receive cash on accounts receivable, $22,600. January 19 Pay cash for salaries, $30,400. January 28 Pay cash for January utilities, $17,100. January 30 Sales for January total $226,000. All of these sales are on account. The cost of the units sold is $118,000. 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 $3,600 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 $33,200. e. Accrued income taxes at the end of January are $9,600. Exercise 7-21B Part 7 7. Analyze how well the company manages its assets: Requirement 1: a-1. Calculate the return on assets ratio for the month of January. Answer is complete but not entirely correct. Return on Assets Ratio Choose Denominator = Return on Assets Ratio Choose Numerator Net Income 14,145 4 Average Total Assets 370,723 X Return on assets 3.8% 4 Required information Requirement 2: b-1. Calculate the profit margin for the month of January. Answer is not complete. Profit Margin Choose Numerator Choose Denominator Profit Margin Profit Margin Net Income Net Sales = = 0 b-2. 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? More efficient Less efficient Requirement 3: C-1. Calculate the asset turnover ratio for the month of January. X Answer is not complete. Asset Turnover Ratio Choose Numerator + Choose Denominator Asset Turnover Ratio Net Sales - Average Total Assets Asset Turnover $ 433,025 0.00 times C-2. If the industry average asset turnover is 0.4 times per month, is the company more or less efficient at producing revenues with its assets than other companies in the same industry? More efficient Less efficient