example 13-32 On January 1, 2024, the general ledger of Freedom Fireworks includes the following account balances: Borrow $100,000 from captive Credit Corporation. The installment note bears interest at 7% annually and matures in five years. Payments of $1,980 are required at the end of each month for 60 months. Receive $26,000 from customers on accounts receivable. January 1 January 4 January 10 Pay cash for salaries, $26,300. January 15 January 30 Pay cash on accounts payable, $10,000. Firework sales for the month total $189,000. Sales include $62,000 for cash and $127,000 on account. The cost of the units sold is $110,500. January 31 Pay the first monthly installment of $1,980 related to the $100,000 borrowed on January 1. round your interest calculation to the nearest req 1 Record each of the transactions listed in the general journal and post to the general ledger. 2 Record adjusting entries on January 31 in the general journal and post to the general ledger. Depreciation on the building for the month of January is calculated using the straight-line method. At the time the building was purchased, the a. company estimated a service life of 10 years and a residual value of $20,000. b. The company estimates additional future uncollectible accounts of $2,300. c. Unpaid salaries at the end of January are $25,900. d. Accrued income taxes at the end of January are $8,500. The portion of Notes Payable (long-term) due within the next 12 months is reclassified as Notes Payable (current). The amount of the e. reclassification is $17,411. 3 Prepare an adjusted trial balance as of January 31, 2024. The worksheet provided satisfies this requirement. 4 Prepare a multi-step income statement for the period ended January 31, 2024. 5 Prepare a statement of stockholders equity for the period ended January 31, 2024. 6 Prepare a classified balance sheet as of January 31, 2024. 7 Record the closing entries on January 31 in the general journal and post to the general ledger. 8 Analyze the following for Freedom Fireworks: 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 a. other companies in the same industry? 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 b. able to meet interest payments than other companies in the same industry? Based on the ratios calculated in (a) and (b), would Freedom Fireworks be more likely to receive a higher or lower interest rate than the average c. borrowing rate in the industry? Account Cash Accounts Receivable Freedom Fireworks Post-Closing Trial Balance January 31, 2024 Debit Credit 11,200 34,000 Allowance for Uncollectible Accounts 1,800 Inventory 152,000 Land 67,300 Building 120,000 Accumulated Depreciation, building 9,600 Accounts Payable 17,700 Notes Payable Interest Payable Income Tax Payable Common Stock Retained Earnings Sales Revenue Cost of Goods Sold Salaries Expense Depreciation Expense, Building Bad Debt Expense Interest Expense Income Tax Expense 200,000 155,400 384,500 384,500