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On January 1, 2018, the general ledger of Freedom Fireworks includes the following account balances: Credit Debit s181,88e 35, 288 152,688 73, 308 126,800 Accounts
On January 1, 2018, the general ledger of Freedom Fireworks includes the following account balances: Credit Debit s181,88e 35, 288 152,688 73, 308 126,800 Accounts Cash Accounts Receivable Inventory Land Buildings Allowance for Uncollectible Accounts Accumulated Depreciation Accounts Payable Bonds Payable Discount on Bonds Payable Common Stock Retained Earnings $ 2,48e 18, 28e 24, 308 126,800 38,688 286,808 15e,6e8 Totals $519,58e 519,588 During January 2018, the following transactions occur: January 1 Borrow $106,000 from Captive Credit Corporation. The installment note bears interest at 6% annually and matures in 5 January 1 Called the bonds at the contractual call price of $186,000. The 5% bonds pay interest sem annually each June 30 and years. Payments of $2,848 are required at the end of each month for 6e months December 31 anuary 4 Receive $31,68e From customers on accounts receivable January 18 Pay cash on accounts payable, $17,88e January 15 Pay cash for salaries, $29,5e January 3e Firework sales for the month total $196,280. Sales include $65,68 for cash and $138,680 on account. The cost of the units sold is $115, 588 January 31 Pay the first monthly installment of $2,848 related to the $186,808 borrowed on January 1. Round your interest The following information is available on January 31, 2018. a. Depreciation on the building for the month of January is calculated using the straight-line method. At the time the building was calculation to the nearest dollar purchased, the company estimated a service life of 10 years and a residual value of $24.600. b. At the end of January, $3,600 of accounts receivable are past due, and the company estimates that 50% of these accounts will not be collected. Of the remaining accounts receivable, the company estimates that 2% will not be collected. No accounts were written off as uncollectible in January. c. Unpaid salaries at the end of January are $26,700 d. Accrued income taxes at the end of January are $5,600. General Trial BalanceStatement Ledger General Income RequirementJournal Balance Sheet Analysis 1. Record each of the transactions listed above in the General Journal tab (these are shown as items 1-8) assuming a FIFO perpetual inventory system. The transaction on January 30 requires two entries: one to record sales revenue and one to record cost of goods sold. Review the 'General Ledger and the 'Trial Balance' tabs to see the effect of the transactions on the account balances. 2. Record adjusting entries on January 31. in the General Journal tab (these are shown as items 9-12) 3. Review the adjusted Trial Balance' as of January 31, 2018, in the 'Trial Balance' tab. 4. Prepare a multiple-step income statement for the period ended January 31, 2018, in the Income Statement' tab. 5. Prepare a classified balance sheet as of January 31, 2018, in the Balance Sheet tab. 6. Record the closing entries in the 'General Journal' tab (these are shown as items 13-15) 7. Using the information from the requirements above, complete the 'Analysis' tab. General Journal> General Ledger Trial Balance Inc General Requirement Journal ome Balance SheeAnalvsis Statement Using the information from the requirements above, complete the 'Analysis'. (Calculate the ratios to the nearest 1 decimal place.) the (a) Calculate the debt to equity ratio lf the average debt to equity ratio for the industry is 1, is Freedom Fireworks more or less leveraged than other companies in the same industry? e debt to equity ratio is Is the company more or less leveraged than other companies (b) Calculate the times interest earned ratio. If the average times interest earned ratio for the industry is 20 times, is the company more or less able to meet interest payments than other companies in the same industry? e times interest earned ratio is: s the company more or less able to meet interest payments than other companies? (c) Based on the ratios calculated in (a) and (b), would Freedom Fireworks be more likely to receive a higher or lower rate than the average b orrowin g rate in the industry? K Balance Sheet Analysis
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