Question
On January 1, 2018, the general ledger of ACME Fireworks includes the following account balances: Accounts Debit Credit Cash $ 26,700 Accounts Receivable 49,400 Allowance
On January 1, 2018, the general ledger of ACME Fireworks includes the following account balances:
Accounts | Debit | Credit | ||||
Cash | $ | 26,700 | ||||
Accounts Receivable | 49,400 | |||||
Allowance for Uncollectible Accounts | $ | 5,800 | ||||
Inventory | 21,600 | |||||
Land | 62,000 | |||||
Equipment | 23,000 | |||||
Accumulated Depreciation | 3,100 | |||||
Accounts Payable | 30,100 | |||||
Notes Payable (6%, due April 1, 2019) | 66,000 | |||||
Common Stock | 51,000 | |||||
Retained Earnings | 26,700 | |||||
Totals | $ | 182,700 | $ | 182,700 | ||
During January 2018, the following transactions occur: January 2. Sold gift cards totaling $11,200. The cards are redeemable for merchandise within one year of the purchase date. January 6. Purchase additional inventory on account, $163,000. January 15. Firework sales for the first half of the month total $151,000. All of these sales are on account. The cost of the units sold is $81,800. January 23. Receive $127,000 from customers on accounts receivable. January 25. Pay $106,000 to inventory suppliers on accounts payable. January 28. Write off accounts receivable as uncollectible, $6,400. January 30. Firework sales for the second half of the month total $159,000. Sales include $13,000 for cash and $146,000 on account. The cost of the units sold is $87,500. January 31. Pay cash for monthly salaries, $53,600.
1. record each of the transactions listed above.
part two: 1. 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 $5,000 and a two-year service life.
2. At the end of January, $27,000 of accounts receivable are past due, and the company estimates that 30% of these accounts will not be collected. Of the remaining accounts receivable, the company estimates that 4% will not be collected. 3. Accrued interest expense on notes payable for January. 4. Accrued income taxes at the end of January are $14,600. 5. By the end of January, $4,600 of the gift cards sold on January 2 have been redeemed. 2. Record the adjusting entries on January 31 for the above transactions.
3. Prepare an adjusted trial balance as of January 31, 2018.
4. Prepare a multiple-step income statement for the period ended January 31, 2018.
5. Prepare a classified balance sheet as of January 31, 2018.
6. Record closing entries.
7. Analyze the following for ACME Fireworks
Requirement 1:
a-1. Calculate the current ratio at the end of January.
a-2. If the average current ratio for the industry is 1.80, is ACME Fireworks more or less liquid than the industry average?
Requirement 2:
b-1. Calculate the acid-test ratio at the end of January.
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)?
Requirement 3:
c-1. Assume the notes payable were due on April 1, 2018, rather than April 1, 2019. Calculate the revised current ratio at the end of January.
c-2. Indicate whether the revised ratio would increase, decrease, or remain unchanged.
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