Exercise 8-18 Complete the accounting cycle (LO8-1,8-2,8-4,8-6)

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Required information Exercise 8-18 Complete the accounting cycle (LO8-1, 8-2, 8-4, 8-6) [The following information applies to the questions displayed below.] On January 1, 2021, the general ledger of ACME Fireworks includes the following account balances: Accounts Debit Credit Cash $ 26,300 Accounts Receivable 48,600 Allowance for Uncollectible Accounts $ 5,400 Inventory 21,200 Land Equipment 58,000 21,000 Accumulated Depreciation 2,700 Accounts Payable 29,700 Notes Payable (6%, due April 1, 2022) 62,000 Common Stock Retained Earnings 47,000 28,300 Totals $175,100 $175, 100 During January 2021, the following transactions occur. January 2 Sold gift cards totaling $10,400. The cards are redeemable for merchandise within one year of the purchase date. January 6 Purchase additional inventory on account, $159,000. January 15 Firework sales for the first half of the month total $147,000. All of these sales are on account. The cost of the units sold is $79,800. January 23 Receive $126,600 from customers on accounts receivable. January 25 Pay $102,000 to inventory suppliers on accounts payable. January 28 Write off accounts receivable as uncollectible, $6,000. January 30 Firework sales for the second half of the month total $155,000. Sales include $11,000 for cash and $144,000 on account. The cost of the units sold is $85,500. January 31 Pay cash for monthly salaries, $53,200. No 1 2 3 4 5 6 7 8 9 10 Date January 02 January 06 January 15 January 15 January 23 January 25 January 28 January 30 January 30 January 31 Cash Deferred Revenue Accounts Payable Accounts Receivable Sales Revenue Cost of Goods Sold Inventory Accounts Receivable Inventory Answer is complete and correct. General Journal Cash Accounts Payable Cash Allowance for Uncollectible Accounts Accounts Receivable - Cash Accounts Receivable Sales Revenue Cost of Goods Sold Inventory Salanes Expense Cash 33 33 3 33 00 00 33 *** 33 Debit 10,400 159,000 147,000 79,800 126,600 102,000 6,000 11,000 144,000 85,500 53,200 Credit 10,400 159,000 147,000 79,800 126,600 102,000 6,000 155,000 85,500 53,200 Exercise 8-18 Part 2 Depreciation on the equipment for the month of January is calculated using the straight-line method. At the time the equipment was purchased, the company estimated a residual value of $4,200 and a two-year service life. The company estimates future uncollectible accounts. The company determines $23,000 of accounts receivable on January 31 are past due, and 30% of these accounts are estimated to be uncollectible. The remaining accounts receivable on January 31 are not past due, and 3% of these accounts are estimated to be uncollectible. (Hint: Use the January 31 accounts receivable balance calculated in the general ledger) Accrued interest expense on notes payable for January. Accrued income taxes at the end of January are $14,200. . By the end of January, $4,200 of the gift cards sold on January 2 have been redeemed. 2. Record the adjusting entries on January 31 for the above transactions. (If no entry is required for a particular transaction/event, select "No Journal Entry Required" in the first account field.) Answer is complete and correct. No Date General Journal Debit Credit January 31 Depreciation Expense 700 Accumulated Depreciation January 31 Bad Debt Expense 13,020 Allowance for Uncollectible Accounts January 31 Interest Expense 310 January 31 14,200 January 31 4,200 1 2 3 4 5 Interest Payable Income Tax Expense Income Tax Payable Deferred Revenue Sales Revenue 33 O O 00 O 00 3 700-> 13,020 310 14,200 4,200 Exercise 8-18 Part 3 3. Prepare an adjusted trial balance as of January 31, 2021. Answer is not complete. ACME Fireworks Adjusted Trial Balance January 31, 2021 Cash $ Accounts Receivable Allowance for Uncollectible Accounts Inventory Land Equipment Accumulated Depreciation Accounts Payable Deferred Revenue Notes Payable Common Stock Retained Earnings Sales Revenue Cost of Goods Sold Bad Debt Expense Salaries Expense Depreciation Expense Income Tax Expense Interest Expense Interest Payable Accounts Totals 3000 Debit Credit 19,100 207,000 12,420 14,900 58,000 21,000 3,400 86,700 6,200 62,000 47,000 28,300 1 x 165,300 13,020 53,200 700 14,200 310 310 $ 566,730 $ 246,331 Exercise 8-18 Part 4 4. Prepare a multiple-step income statement for the period ended January 31, 2021. Answer is complete but not entirely correct. ACME FIREWORKS Income Statement For the year ended January 31, 2021 $ 1x Sales Revenue Cost of Goods Sold 165,300 Gross Profit $ (165,299) Salaries Expense $ 53,200 Bad Debt Expense 13,020 Depreciation Expense 700 Total operating expenses 66,920 (232,219) Operating Income Interest Expense 310 Income Before Taxes (232,529) Income Tax Expense 14,200 $ (246,729) Net Income Exercise 8-18 Part 5 5. Prepare a classified balance sheet as of January 31, 2021. (Enter the Asset Accounts in order of liquidity. Amounts to be deducted should be indicated with a minus sign.) Answer is complete and correct. ACME FIREWORKS Classified Balance Sheet January 31, 2021 Assets Liabilities Cash $ 86,700 Accounts Receivable O 6,200 Less Allowance for Uncollectible Accounts 310 Inventory 14,200 Total Current Assets 107,410 62,000 169,410 Land 47,000 Equipment 87,770 Accumulated Depreciation 134,770 Total Assets $ 304,180 > *** $207,000 $ 19,100 Accounts Payable Deferred Revenue Interest Payable Income Tax Payable (12,420) 194,580 14,900 228,580 58,000 21,000 (3,400) 304,180 $ Total Current Liabilities Notes Payable Total Liabilities Common Stock Retained Earnings Stockholders' Equity Total Stockholders' Equity Total Liabilites and Stockholders Equity 0000 O O Exercise 8-18 Part 5 5. Prepare a classified balance sheet as of January 31, 2021. (Enter the Asset Accounts in order of liquidity. Amounts to be deducted should be indicated with a minus sign.) Answer is complete and correct. ACME FIREWORKS Classified Balance Sheet January 31, 2021 Assets Liabilities Cash $ 19,100 Accounts Payable $ 86,700 Accounts Receivable Deferred Revenue Less: Allowance for Uncollectible Accounts 6,200 310 194,580 Interest Payable Inventory 14,900 Income Tax Payable 14,200 Total Current Assets 228,580 Total Current Liabilities Notes Payable 107,410 62,000 Total Liabilities 169.410 Land 58,000 Common Stock O 47,000 Equipment 21,000 Retained Earnings 87,770 Accumulated Depreciation (3,400) 134,770 $ $ 304,180 Total Assets 304 180 O 000 O s 207,000 (12,420) Stockholders' Equity Total Stockholders' Equity Total Liabilities and Stockholders' Equity 0000 3 Exercise 8-18 Part 5 5. Prepare a classified balance sheet as of January 31, 2021 (Enter the Asset Accounts in order of liquidity. Amounts to be deducted should be indicated with a minus sign.) Answer is complete and correct. ACME FIREWORKS Classified Balance Sheet January 31, 2021 Assets Liabilities Cash $ 19,100 Accounts Payable $ 86,700 Accounts Receivable Deferred Revenue 6,200 Less Allowance for Uncollectible Accounts 194,580 Interest Payable 310 Inventory 14,900 Income Tax Payable) 14,200 Total Current Assets 228,580 107,410 62.000 109.410 Land 58.000 47.000 87,770 Equipment 21,000 Accumulated Depreciation (3,400) 134,770 Total Assets 304 180 $304,180 >> 3 000 O 207,000 (12,420) Total Current Liabilities Notes Payable Total Liabaties Common Stock Retained Earnings Stockholders' Equity Total Stockholders' Equity Total Liabilities and Stockholders Equity 0000 > Exercise 8-18 Part 6 6. Record closing entries. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.) Answer is complete but not entirely correct. No General Journal Credit Date January 31, 2021 Sales Revenue Retained Earnings January 31, 2021 Retained Earnings Cost of Goods Sold Bad Debt Expense Salaries Expense Depreciation Expense Interest Expense Income Tax Expense 1 2 0000000 Debit 10 246,730 10 165,300 13,020 53,200 700 310 14,200 0000 Exercise 8-18 Part 7 7. Analyze the following for ACME Fireworks Requirement 1: a-1. Calculate the current ratio at the end of January. Answer is complete but not entirely correct. Current Ratio Choose Numerator Current Assets Choose Denominator Current Liabilities Current Ratio Current Ratio 10 107,410 0.00 a-2. If the average current ratio for the industry is 1.80, is ACME Fireworks more or less liquid than the industry average? More liquid Less liquid Requirement 2: b-1. Calculate the acid-test ratio at the end of January. Answer is complete but not entirely correct. Acid-test Ratio Choose Numerator Quick Assets Choose Denominator Acid-test Ratio Current Liabilities B Acid-test Ratio 107,410 10 + 0.00 b-2. If the average acid-test ratio for the industry is 1.50, is ACME Fireworks more or less likely to have difficulty paying its currently maturing debts (compared to the industry average)? More likely Less likely Requirement 3: c-1. Assume the notes payable were due on April 1, 2021, rather than April 1, 2022. Calculate the revised current ratio at the end of January Answer is complete but not entirely correct. Current Ratio Choose Numerator Choose Denominator Current Ratio Current Assets Current Liabilities OE Current Ratio 1.00 times 18 X = c-2. Indicate whether the revised ratio would increase, decrease, or remain unchanged. Decrease the current ratio O Increase the current ratio Remain unchanged