On January 1, 2024, the general ledger of Freedom Fireworks includes the following account balances: During January

Question:

On January 1, 2024, the general ledger of Freedom Fireworks includes the following account balances:

During January 2024, the following transactions occurred:
January 1 Borrowed $100,000 from Captive Credit Corporation. The installment note bears interest at 7% annually and matures in 5 years. Payments of $1,980 are required at the end of each month for 60 months.
January 1 Called the bonds at the contractual call price of $100,000. The 6% bonds pay interest semiannually each June 30 and December 31.
January 4 Received $31,000 from customers on accounts receivable.
January 10 Paid cash on accounts payable, $11,000.
January 15 Paid cash for salaries, $28,900.
January 30 Firework sales for the month totalled $195,000. Sales included $65,000 for cash and $130,000 on account. The cost of the units sold was $112,500.
January 31 Paid the first monthly installment of $1,980 related to the $100,000 borrowed on January 1.
(Round your interest calculation to the nearest dollar.)
The following information is available on January 31, 2024.
1. Depreciation on the building for the month of January is calculated using the straight-line method. At the time the building was purchased, the company estimated a service life of ten years and a residual value of $24,000.
2. At the end of January, $3,000 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. No accounts were written off as uncollectible in January.
3. Unpaid salaries at the end of January are $26,100.
4. Accrued income taxes at the end of January are $5,000.

Required:
1. Record each of the transactions listed above in the “General Journal” tab (these are shown as items 1–7) assuming a FIFO perpetual inventory system. The transaction on January 30 requires two entries: one to record sales revenue and one to record cost of goods sold. Review the “General Ledger” and the “Trial Balance” tabs to see the effect of the transactions on the account balances.
2. Record adjusting entries on January 31. in the “General Journal” tab (these are shown as items 8–11).
3. Review the adjusted “Trial Balance” as of January 31, 2024, in the “Trial Balance” tab.
4. Prepare an income statement for the period ended January 31, 2024, in the “Income Statement” tab).
5. Prepare a classified balance sheet as of January 31, 2024, in the “Balance Sheet” tab.
6. Record closing entries in the “General Journal” tab (these are shown as items 12 and 13).
7. Using the information from the requirements above, complete the “Analysis” tab.
a. Calculate the debt to equity ratio. If the average debt to equity ratio for the industry is 1.0, is Freedom Fireworks more or less leveraged than other companies in the same industry?
b. Calculate the times interest earned ratio. If the average times interest earned ratio for the industry is 20 times, is the company more or less able to meet interest payments than other companies in the same industry?