On January 1, Year 1, the general ledger of a company includes the following account balances:

Accounts	Debit				Credit
Cash	$	59,700
Accounts Receivable		27,000
Allowance for Uncollectible Accounts					$	3,200
Inventory		37,300
Notes Receivable (5%, due in 2 years)		24,000
Land		165,000
Accounts Payable						15,800
Common Stock						230,000
Retained Earnings						64,000
Totals	$	313,000			$	313,000

During January Year 1, the following transactions occur:

January		1		Purchase equipment for $20,500. The company estimates a residual value of $2,500 and a six-year service life.
January		4		Pay cash on accounts payable, $10,500.
January		8		Purchase additional inventory on account, $92,900.
January		15		Receive cash on accounts receivable, $23,000.
January		19		Pay cash for salaries, $30,800.
January		28		Pay cash for January utilities, $17,500.
January		30		Sales for January total $230,000. All of these sales are on account. The cost of the units sold is $120,000.

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 $4,000 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 2% 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 $33,600.
5. Accrued income taxes at the end of January are $10,000.

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.

Requirement 2:
b-1. Calculate the profit margin for the month of January.

Requirement 3:
c-1. Calculate the asset turnover ratio for the month of January.

Answer rating: 100% (QA)

A Company Journal Enteries Date Particulars Jan01 Equipment Jan04 Accounts Payable Cash Creditors pa... View the full answer