On January 1, 2018, the general ledger of ACME Fireworks includes the following account balances:

Accounts		Debit			Credit
Accounts Receivable		46,200
Inventory		20,000
Land		66,000
Equipment		15,000
Allowance for Uncollectible Accounts				$	4,200
Accumulated Depreciation					1,500
Accounts Payable					28,500
Notes Payable (6%, due April 1, 2019)					50,000
Warranty Liability					30,000
Common Stock					35,000
Retained Earnings					23,100
Totals	$	172,300		$	172,300

During January 2018, the following transactions occur:

January		2		Sold gift cards totaling $8,000. The cards are redeemable for fireworks set-up services within one year of the purchase date.
January		6		Purchase additional inventory on account, $147,000.
January		15		Firework sales for the first half of the month total $135,000. All of these sales are on account. The cost of the units sold is $73,800.
January		20		ACME paid a warranty claim of $25,000.
January		23		Receive $125,400 from customers on accounts receivable.
January		25		Pay $90,000 to inventory suppliers on accounts payable.
January		28		Write off accounts receivable as uncollectible, $4,800.
January		30		Firework sales for the second half of the month total $143,000. Sales include $11,000 for cash and $132,000 on account. The cost of the units sold is $79,500.
January		31		Pay cash for monthly salaries, $52,000.

The following information is available on January 31, 2018.

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 $3,000 and a two-year service life.
2. ACME provides a quality assurance warranty on all sales, and estimates the liability associated with the warranty to be 10% of sales revenue. ACME accrues warranty expense on the last day of each month. The warranty liability covers the life of the product and so is classified as non-current.
3. During January an appeals court ruled against ACME in a lawsuit involving a customer injury. The customer sued ACME for damages following a firework mishap. ACME now believes it is probable that it will incur a $15,000 loss associated with the claim, but it intends to pursue further appeal and the case could drag on for another couple of years.
4. During January a customer sued ACME for damages after inadvertently igniting a Vesuvius Spark Fountain in his backpack. ACME believes the probability of incurring a loss on the claim to be remote.
5. At the end of January, $11,000 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.
6. ACME accrued interest expense on notes payable for January.
7. ACME accrued income taxes at the end of January are $6,000.
8. By the end of January, $3,000 of the gift cards sold on January 2 have been redeemed for fireworks set-up services.

Requirements:

The solution to the Week 1 Group Assignment has now been posted in the Week 1 Group Learning Module. Please review the solutions, and use the correct balances to complete the following Week 2 requirements:

1. Prepare a multiple-step income statement.
2. Prepare an unclassified balance sheet.
3. Prepare journal entries to close the general ledger (hint: please close directly to Retained Earnings).
4. Prepare a post-closing trial balance.

HERE ARE THE SOLUTIONS FROM WEEK 1:

ACME Fireworks
Balance Sheet
January 31, 2018
Assets
	Current Assets:
	Cash	$2,500
	Accounts Receivable	$170,890
	Allowance for Uncollectible Accounts	$12,110
	Inventory	$13,700
	Total Current Assest:	$199,200
	Investments:
	Property, Plant, and Equipment:
	Land	$66,000
	Equipment	$15,000
	Less: Accumulated Depreciation	-$2,000
	Net Property, Plant, and Equipment:	$79,000
	Total Assests:	$278,200
Liabilities and Stockholders Equity
	Current Liabilities:
	Accounts Payable	$85,500
	Interest Payable	$250
	Income Tax Payable	$6,000
	Deferred Revenue	$5,000
	Total Current Liabilities:	$96,750
	Long Term Liabilities:
	Notes Payable	$50,000
	Warrenty Liability	$32,800
	Total Long Term Liabilities:	$82,800
	Total Liabilities:	$179,550
	Stockholders' Equity:
	Common Stock	$35,000
	Retained Earnings	$63,650
	Total Stockholders' Equity	$98,650
	Total Liabilities and Stockholders' Equity:	$278,200

ACME Fireworks
Trial Balance
January 31, 2018
Account Title	Debit	Credit
Cash	$2,500
Accounts Receivable	$170,890
Allowance for Uncollectable Accounts	$12,110
Inventory	$13,700
Land	$66,000
Equipment	$15,000
Accumulated Depreciation		$2,000
Accounts Payable		$85,500
Interest Payable		$250
Income Tax Payable		$6,000
Deferred Revenue		$5,000
Notes Payable		$50,000
Warrenty Liability		$32,800
Common Stock		$35,000
Retained Earnings		$23,100
Sales Revenue		$281,000
Cost of Goods Sold	$153,300
Depreciation Expense	$500
Salaries Expense	$52,000
Bad Debt Expense	$600
Interest Expense	$250
Income Tax Expense	$6,000
Warrenty Expense	$27,800
Totals	$520,650	$520,650

ACME Fireworks
Income Statement
For the Year Ended January 31, 2018
Revenues and Gains:
	Sales revenue	281,000
	Less: Costs of goods sold		(153,300)
Gross margin			127,700
	Less:operating expenses
	Sales expense:
	Bad debt expense	4,800
	office and administrative expense :
	Depreciation expense	500
	salaries expense	52,000
	Income from operations		70,400
	Less: other expenses
	Interest expense		(250)
	Income before tax		70,650
	Less:income tax expense		(6,000)
	Net income		64,650