Question
On January 1, 2018, the general ledger of ACME Fireworks includes the following account balances: Accounts Debit Credit Cash $ 25,500 Accounts Receivable 47,000 Allowance
On January 1, 2018, the general ledger of ACME Fireworks includes the following account balances:
Accounts | Debit | Credit | ||||
Cash | $ | 25,500 | ||||
Accounts Receivable | 47,000 | |||||
Allowance for Uncollectible Accounts | $ | 4,600 | ||||
Inventory | 20,400 | |||||
Land | 50,000 | |||||
Equipment | 17,000 | |||||
Accumulated Depreciation | 1,900 | |||||
Accounts Payable | 28,900 | |||||
Notes Payable (6%, due April 1, 2019) | 54,000 | |||||
Common Stock | 39,000 | |||||
Retained Earnings | 31,500 | |||||
Totals | $ | 159,900 | $ | 159,900 | ||
During January 2018, the following transactions occur: January 2. Sold gift cards totaling $8,800. The cards are redeemable for merchandise within one year of the purchase date. January 6. Purchase additional inventory on account, $151,000. January 15. Firework sales for the first half of the month total $139,000. All of these sales are on account. The cost of the units sold is $75,800. January 23. Receive $125,800 from customers on accounts receivable. January 25. Pay $94,000 to inventory suppliers on accounts payable. January 28. Write off accounts receivable as uncollectible, $5,200. January 30. Firework sales for the second half of the month total $147,000. Sales include $12,000 for cash and $135,000 on account. The cost of the units sold is $81,500. January 31. Pay cash for monthly salaries, $52,400.
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.)
2.
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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 $3,800 and a two-year service life. 2. At the end of January, $15,000 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 3% will not be collected. 3. Accrued interest expense on notes payable for January. 4. Accrued income taxes at the end of January are $13,400. 5. By the end of January, $3,400 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.)
3.
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3. Prepare an adjusted trial balance as of January 31, 2018.
4.
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4. Prepare a multiple-step income statement for the period ended January 31, 2018.
5.
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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.)
6.
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6. Record closing entries. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
7.
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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 |
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