Question

Record the adjusting entries on January 31 for the above transactions.

Prepare an adjusted trial balance as of January 31, 2021.

Prepare a multiple-step income statement for the period ended January 31, 2021.

Prepare a classified balance sheet as of January 31, 2021.

Record closing entries.

Analyze how well TNT Fireworks manages its assets:

a-1. Calculate the return on assets ratio for the month of January

Answer 1

TNT Fireworks Journal Enteries Particulars 1.1.2021 Equipment a/c Debit in $Credit in $ Date 19900 Dr. To Cash 19900 |(Equipment purchased) 4.1.2021 Accounts Payable a/c 9900 Dr. To Cash 9900 (Accounts Payable paid in cash) 8.1.2021 Inventory a/c Dr. 86900 To Accounts Payable 86900 (Inventory purchased on account) 15.1.2021 Cash a/c Dr. 22400 22400 To Accounts Receivable (Cash received from debtors) 19.1.2021 Salaries Expense a/c Dr. 30200 To Cash 30200 (Salary paid in cash) 28.1.2021 Utilities Expense a/c 16900 Dr. To Cash 16900 (Utilities paid in cash) 30.1.2021 Accounts Receivable a/c 224000 Dr. To Sales 224000 (Sales on account) Cost of goods sold a/c 117000 Dr. 117000 To Inventory (Cost of goods sold recorded)

Adjusting Enteries Particulars 31.1.2021 Depreciation Expense - Equip a/c Dr. To Accum. Depre Equip |(Depreciation charged to equipment) (19900- 1900)/ (5x12) Debit in $Credit in $ Date 300 300 31.1.2021 Bad Debts a/c 5820 Dr. To Allowance for uncollectibles 5820 (Bad debts estimated) Past due 3400 2 1700 urrent 227400 3400 224000 x 3% 6720 1700 6720=8420 2600 = 5820 31.1.2021 Interest Receivable a/c Dr. 70 To Interest Income 70 (Interest Income accrued) 16800 x 5% x 1/12 =115 31.1.2021 Salaries Expense a/c To Salary Payable |(Salary paid in cash) Dr. 33000 33000 31.1.2021 Income Tax Expense a/c 9400 Dr. To Income Tax Payable 9400 (Income Tax accrued) Closing Enteries Particulars Debit in $ Credit in $ Date 31.1.2021 Income Summary a/c 212620 Dr. To Cost of goods sold To Salaries Expense 117000 63200 To Utilities Expense 16900 To Depreciation Expense - Equip 300 To Bad Debts 5820 To Income Tax Expense 9400 (Expense accounts closed) 31.1.2021 Interest Income a/c Dr. 70 Sales a/c 224000 Dr. To Income Summary 224070 (Revenue accounts closed) 31.1.2021 Income Summary a/c To Retained Earnings (Profits transferred) 11450 Dr. 11450

Worksheet For the month ending 31.1.2021 Debit in $ Credit in $ Debit in $ Credit in $ Debit in $ Credit in $ Particulars Cash 4600 4600 Accounts Receivable 227400 227400 Allowance for uncollectibles 5820 8420 2600 Note Receivable (5% due in 2 years) 16800 16800 Interest Receivable 70 70 Inventory 6600 6600 Land 159000 159000 Equipment Accum. Depre- Equip Accounts Payable 19900 19900 300 300 92200 92200 Salary Payable 33000 33000 Income Tax Payable 9400 9400 Common Stock 224000 224000 Retained Earnings 55600 55600 Interest Income 70 70 Sales 224000 224000 Cost of goods sold 117000 117000 Salaries Expense 33000 30200 63200 Utilities Expense 16900 16900 Depreciation Expense - Equip 300 300 Bad Debts 5820 5820 Income Tax Expense 9400 9400 Totals 48590 598400 598400 48590 646990 646990 0 Net Income/Avg. Total Assets 11450/ (294800 425650) / 2 a1.Return on Assets Ratio =11450/360225 =3.18% a.Since Industry average is 2%, at 3.18% TNT has performed exceptionally well

Statement of Income For the month ending 31.1.2021 Sales 224000 Cost of goods sold -117000 Gross Profit 107000 Expenses: Salaries Expense 63200 Utilities Expense 16900 Depreciation Expense - Equip 300 Bad Debts 5820 86220 Operating Income 20780 Non Operating Items Interest Income 70 20850 -9400 Less:Income Tax Expense Net Income 11450 Statement of Retained Earnings For the month ending 31.1.2021 Beginning 55600 Net Income 11450 67050

Balance sheet As at 31.1.2021 Amounts in $ Amounts in $ Liabilities Amounts in $ Amounts in $ Assets Current Liabilities Current Assets Cash Accounts Payable 4600 92200 Salary Payable Accounts Receivable 227400 33000 Income Tax Payable Allowance for uncollectibles -8420 9400 134600 Note Receivable (5% due in 2 ye 16800 Interest Receivable 70 6600 Inventory 247050 Non Assets Land 159000 Shareholders Equity Common Stock Equipment 19900 224000 Accum. Depre - Equip 19600 Retained Earnings -300 67050 291050 425650 Total Liabilities & Equity Total Assets 425650