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

Account

Debit

Credit

Cash

$26,100

Accounts Receivable

$48,200

Allowance for Uncollectible Accounts

$5200

Inventory

$21,000

Land

$56,000

Equipment

$20,000

Accumulated Depreciation

$2,500

Accounts Payable

$29,500

Notes Payable (6%, due April 1, 2019)

$60,000

Common Stock

$45,000

Retained Earnings

$29,100

Totals

$171,300

$171,300

During January 2018, the following transactions occur: January 2. Sold gift cards totaling $10,000. The cards are redeemable for merchandise within one year of the purchase date. January 6. Purchase additional inventory on account, $157,000. January 15. Firework sales for the first half of the month total $145,000. All of these sales are on account. The cost of the units sold is $78,800. January 23. Receive $126,400 from customers on accounts receivable. January 25. Pay $100,000 to inventory suppliers on accounts payable. January 28. Write off accounts receivable as uncollectible, $5,800. January 30. Firework sales for the second half of the month total $153,000. Sales include $16,000 for cash and $137,000 on account. The cost of the units sold is $84,500. January 31. Pay cash for monthly salaries, $53,000.

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 $4,400 and a two-year service life. 2. At the end of January, $21,000 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 $14,000. 5. By the end of January, $4,000 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

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?

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)? 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.

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.) View transaction list View journal entry worksheet No Date General Journal Debit Credit January 02 Cash 10,000 Deferred revenue 10,000 2January 06 Inventory 157,000 Accounts payable 157,000 3January 15 Accounts receivable 145,000 Sales revenue 145,000 4January 15 Cost of goods sold 78,800 Inventory 78,800 5January 23 Cash 126,400 Accounts receivable 126,400 6January 25 Accounts payable 100,000 Cash 100,000 7January 28 Allowance for uncollectible accounts 5,800 Accounts receivable 5,800