On January 1, 2021, the general ledger of Tripley Company included the following account balances: Accounts Debit Credit Cash $ 70,000 Accounts receivable 40,000 Allowance for uncollectible accounts $ 5,000 Inventory 30,000 Building 70,000 Accumulated depreciation 10,000 Land 200,000 Accounts payable 20,000 Notes payable (8%, due in 3 years) 36,000 Common stock 100,000 Retained earnings 239,000 Totals $ 410,000 $ 410,000 The $30,000 beginning balance of inventory consists of 300 units, each costing $100. During January 2021, the company had the following transactions: January 2 Lent $20,000 to an employee by accepting a 6% note due in six months. 5 Purchased 3,500 units of inventory on account for $385,000 ($110 each) with terms 1/10, n/30. 8 Returned 100 defective units of inventory purchased on January 5. 15 Sold 3,300 units of inventory on account for $429,000 ($130 each) with terms 2/10, n/30. 17 Customers returned 200 units sold on January 15. These units were initially purchased by the company on January 5. The units are placed in inventory to be sold in the future. 20 Received cash from customers on accounts receivable. This amount includes $36,000 from 2020 plus amount receivable on sale of 2,700 units sold on January 15. 21 Wrote off remaining accounts receivable from 2020. 24 Paid on accounts payable. The amount includes the amount owed at the beginning of the period plus the amount owed from purchase of 3,100 units on January 5. 28 Paid cash for salaries during January, $28,000. 29 Paid cash for utilities during January, $10,000. 30 Paid dividends, $3,000. Month-end adjusting entries: Of the remaining accounts receivable, the company estimates that 10% will not be collected. Accrued interest revenue on notes receivable for January. Accrued interest expense on notes payable for January. Accrued income taxes at the end of January for $5,000. Depreciation on the building, $2,000. Requirements General Journal General Ledger Trial balance Income Statements Balance Sheet Analysis Analyze how well 3D Family Fireworks manages its receivables (a) Calculate the inventory turnover ratio for the month of January. If the industry average of the inventory turnover ratio for the month of January is 4.5 times, is the company selling its inventory more or less quickly than other companies in the same industry? The inventory turnover ratio is: times The company is managing its inventory more efficiently. (true or false) (b) Calculate the gross profit ratio for the month of January. If the industry average gross profit ratio is 33%, is the company more or less profitable per dollar of sales than other companies in the same industry? The gross profit ratio is: % The company is more profitable than other companies. (c) Used together, what might the inventory turnover ratio and gross profit ratio suggest about the company’s business strategy? Is the company’s strategy to sell a higher volume of less expensive items or does the company appear to be selling a lower volume of more expensive items? The company’s business strategy appears to be selling

On January 1, 2021, the general ledger of Tripley Company included the following account balances: Accounts Debit Credit Cash $ 70,000 Accounts receivable 40,000 Allowance for uncollectible accounts $ 5,000 Inventory 30,000 Building 70,000 Accumulated depreciation 10,000 Land 200,000 Accounts payable 20,000 Notes payable (8%, due in 3 years) 36,000 Common stock 100,000 Retained earnings 239,000 Totals $ 410,000 $ 410,000 The $30,000 beginning balance of inventory consists of 300 units, each costing $100. During January 2021, the company had the following transactions: January 2 Lent $20,000 to an employee by accepting a 6% note due in six months. 5 Purchased 3,500 units of inventory on account for $385,000 ($110 each) with terms 1/10, n/30. 8 Returned 100 defective units of inventory purchased on January 5. 15 Sold 3,300 units of inventory on account for $429,000 ($130 each) with terms 2/10, n/30. 17 Customers returned 200 units sold on January 15. These units were initially purchased by the company on January 5. The units are placed in inventory to be sold in the future. 20 Received cash from customers on accounts receivable. This amount includes $36,000 from 2020 plus amount receivable on sale of 2,700 units sold on January 15. 21 Wrote off remaining accounts receivable from 2020. 24 Paid on accounts payable. The amount includes the amount owed at the beginning of the period plus the amount owed from purchase of 3,100 units on January 5. 28 Paid cash for salaries during January, $28,000. 29 Paid cash for utilities during January, $10,000. 30 Paid dividends, $3,000. Month-end adjusting entries: Of the remaining accounts receivable, the company estimates that 10% will not be collected. Accrued interest revenue on notes receivable for January. Accrued interest expense on notes payable for January. Accrued income taxes at the end of January for $5,000. Depreciation on the building, $2,000. Requirements General Journal General Ledger Trial balance Income Statements Balance Sheet Analysis Analyze how well 3D Family Fireworks manages its receivables (a) Calculate the inventory turnover ratio for the month of January. If the industry average of the inventory turnover ratio for the month of January is 4.5 times, is the company selling its inventory more or less quickly than other companies in the same industry? The inventory turnover ratio is: times The company is managing its inventory more efficiently. (true or false) (b) Calculate the gross profit ratio for the month of January. If the industry average gross profit ratio is 33%, is the company more or less profitable per dollar of sales than other companies in the same industry? The gross profit ratio is: % The company is more profitable than other companies. (c) Used together, what might the inventory turnover ratio and gross profit ratio suggest about the company’s business strategy? Is the company’s strategy to sell a higher volume of less expensive items or does the company appear to be selling a lower volume of more expensive items? The company’s business strategy appears to be selling

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

On January 1, 2021, the general ledger of Tripley Company included the following account balances:

Accounts	Debit		Credit
Cash	$	70,000
Accounts receivable		40,000
Allowance for uncollectible accounts				$	5,000
Inventory		30,000
Building		70,000
Accumulated depreciation					10,000
Land		200,000
Accounts payable					20,000
Notes payable (8%, due in 3 years)					36,000
Common stock					100,000
Retained earnings					239,000
Totals	$	410,000		$	410,000

The $30,000 beginning balance of inventory consists of 300 units, each costing $100. During January 2021, the company had the following transactions:

January	2	Lent $20,000 to an employee by accepting a 6% note due in six months.
	5	Purchased 3,500 units of inventory on account for $385,000 ($110 each) with terms 1/10, n/30.
	8	Returned 100 defective units of inventory purchased on January 5.
	15	Sold 3,300 units of inventory on account for $429,000 ($130 each) with terms 2/10, n/30.
	17	Customers returned 200 units sold on January 15. These units were initially purchased by the company on January 5. The units are placed in inventory to be sold in the future.
	20	Received cash from customers on accounts receivable. This amount includes $36,000 from 2020 plus amount receivable on sale of 2,700 units sold on January 15.
	21	Wrote off remaining accounts receivable from 2020.
	24	Paid on accounts payable. The amount includes the amount owed at the beginning of the period plus the amount owed from purchase of 3,100 units on January 5.
	28	Paid cash for salaries during January, $28,000.
	29	Paid cash for utilities during January, $10,000.
	30	Paid dividends, $3,000.

Month-end adjusting entries:

Of the remaining accounts receivable, the company estimates that 10% will not be collected.
Accrued interest revenue on notes receivable for January.
Accrued interest expense on notes payable for January.
Accrued income taxes at the end of January for $5,000.
Depreciation on the building, $2,000.

Requirements

General Journal

General Ledger

Trial balance

Income Statements

Balance Sheet

Analysis

Analyze how well 3D Family Fireworks manages its receivables
(a) Calculate the inventory turnover ratio for the month of January. If the industry average of the inventory turnover ratio for the month of January is 4.5 times, is the company selling its inventory more or less quickly than other companies in the same industry?
The inventory turnover ratio is:		times

The company is managing its inventory more efficiently. (true or false)

(b) Calculate the gross profit ratio for the month of January. If the industry average gross profit ratio is 33%, is the company more or less profitable per dollar of sales than other companies in the same industry?
The gross profit ratio is:		%

The company is more profitable than other companies.

(c) Used together, what might the inventory turnover ratio and gross profit ratio suggest about the company’s business strategy? Is the company’s strategy to sell a higher volume of less expensive items or does the company appear to be selling a lower volume of more expensive items?
The company’s business strategy appears to be selling

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