Question
On January 1, 2018, the general ledger of ACME Fireworks includes the following account balances: Accounts Debit Credit Cash $ 26,800 Accounts Receivable 49,600 Allowance
On January 1, 2018, the general ledger of ACME Fireworks includes the following account balances:
Accounts | Debit | Credit | ||||
Cash | $ | 26,800 | ||||
Accounts Receivable | 49,600 | |||||
Allowance for Uncollectible Accounts | $ | 5,900 | ||||
Inventory | 21,700 | |||||
Land | 63,000 | |||||
Equipment | 23,500 | |||||
Accumulated Depreciation | 3,200 | |||||
Accounts Payable | 30,200 | |||||
Notes Payable (6%, due April 1, 2019) | 67,000 | |||||
Common Stock | 52,000 | |||||
Retained Earnings | 26,300 | |||||
Totals | $ | 184,600 | $ | 184,600 | ||
During January 2018, the following transactions occur: January 2. Sold gift cards totaling $11,400. The cards are redeemable for merchandise within one year of the purchase date. January 6. Purchase additional inventory on account, $164,000. January 15. Firework sales for the first half of the month total $152,000. All of these sales are on account. The cost of the units sold is $82,300. January 23. Receive $127,100 from customers on accounts receivable. January 25. Pay $107,000 to inventory suppliers on accounts payable. January 28. Write off accounts receivable as uncollectible, $6,500. January 30. Firework sales for the second half of the month total $160,000. Sales include $11,000 for cash and $149,000 on account. The cost of the units sold is $88,000. January 31. Pay cash for monthly salaries, $53,700.
1.
1. Record each of the transactions listed above. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
References
eBook & Resources
General JournalLearning Objective: 08-01 Distinguish between current and long-term liabilities.Learning Objective: 08-04 Explain the accounting for other current liabilities.
Difficulty: 2 MediumLearning Objective: 08-02 Account for notes payable and interest expense.Learning Objective: 08-06 Assess liquidity using current liability ratios.
Check my workPrevious attempt
2.
value:
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 $4,900 and a two-year service life. 2. At the end of January, $28,000 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 5% will not be collected. 3. Accrued interest expense on notes payable for January. 4. Accrued income taxes at the end of January are $14,700. 5. By the end of January, $4,700 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 transaction/event, select "No journal entry required" in the first account field.)
References
eBook & Resources
General JournalLearning Objective: 08-01 Distinguish between current and long-term liabilities.Learning Objective: 08-04 Explain the accounting for other current liabilities.
Difficulty: 2 MediumLearning Objective: 08-02 Account for notes payable and interest expense.Learning Objective: 08-06 Assess liquidity using current liability ratios.
3.
3. Prepare an adjusted trial balance as of January 31, 2018.
References
eBook & Resources
WorksheetLearning Objective: 08-01 Distinguish between current and long-term liabilities.Learning Objective: 08-04 Explain the accounting for other current liabilities.
Difficulty: 2 MediumLearning Objective: 08-02 Account for notes payable and interest expense.Learning Objective: 08-06 Assess liquidity using current liability ratios.
4. Prepare a multiple-step income statement for the period ended January 31, 2018.
References
eBook & Resources
WorksheetLearning Objective: 08-01 Distinguish between current and long-term liabilities.Learning Objective: 08-04 Explain the accounting for other current liabilities.
Difficulty: 2 MediumLearning Objective: 08-02 Account for notes payable and interest expense.Learning Objective: 08-06 Assess liquidity using current liability ratios.
5.
5. Prepare a classified balance sheet as of January 31, 2018. (Enter the Asset Accounts in order of liquidity. Amounts to be deducted should be indicated with a minus sign.)
References
eBook & Resources
WorksheetLearning Objective: 08-01 Distinguish between current and long-term liabilities.Learning Objective: 08-04 Explain the accounting for other current liabilities.
Difficulty: 2 MediumLearning Objective: 08-02 Account for notes payable and interest expense.Learning Objective: 08-06 Assess liquidity using current liability ratios.
6.
value: 15.00 points
6. Record closing entries. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
References
eBook & Resources
General JournalLearning Objective: 08-01 Distinguish between current and long-term liabilities.Learning Objective: 08-04 Explain the accounting for other current liabilities.
Difficulty: 2 MediumLearning Objective: 08-02 Account for notes payable and interest expense.Learning Objective: 08-06 Assess liquidity using current liability ratios.
7.
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?
more liquid | |
less liquid |
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)?
more likely | |
less likely |
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.
Decrease the current ratio | |
Increase the current ratio | |
Remain unchanged |
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started