On January 1, 2021, the general ledger of Big Blast Fireworks included the following account balances: Credit F11 Debit $ 21,900 36,500 3,100 Accounts Cash Accounts receivable Allowance for uncollectible accounts Inventory Land Accounts payable Notes payable (8%, due in 3 years) Common stock Retained eamings Totals 30,000 61,600 32.400 30,000 0 56,000 28,500 $ 150,000 $ 150,000 The $30,000 beginning balance of inventory consists of 300 units, each costing $100. During January 2021, Big Blast Fireworks had the following inventory transactions: January 3 Purchased 1,200 units for $126,000 on account ($105 each). January 8 Purchased 1,300 units for $143,000 on account ($110 each). January 12 Purchased 1,400 units for $ 161,000 on account ($115 each). January 15 Returned 100 of the units purchased on January 12 because of defects. January 19 Sold 4,000 units on account for $600,000. The cost of the units sold is determined using a FIFO perpetual inventory system. January 22 Received $580,000 from customers on accounts receivable. January 24 Paid $410,000 to inventory suppliers on accounts payable. January 27 Wrote off accounts receivable as uncollectible, $2,500. January 31 Paid cash for salaries during January, $128,000. The following information is available on January 31, 2021. a. At the end of January, the company estimates that the remaining units of inventory are expected to sell in February for only $100 each. b. At the end of January, $4,000 of accounts receivable are past due, and the company estimates that 40% of these accounts will not be collected. Of the remaining accounts receivable, the company estimates that 4% will not be collected. c. Accrued interest expense on notes payable for January. Interest is expected to be paid each December 31. d. Accrued income taxes at the end of January are $12,300. Requirement General Journal General Ledger Trial Balance Income Statement Balance Sheet Analysis Using the information from the requirements above, complete the 'Analysis'. (Enter your Inventory Turnover ratio and gross profit ratio value in one deci Analyze how well Big Blast Fireworks' manages its Inventory: (a) Calculate the inventory tumover ratio for the month of January. If the industry average of the inventory turnover ratio for the month of January is 18.5 times, is the company managing its inventory more or less officiently than other companies in the same industry? F The inventory turnover ratio is times The company managing its inventory more efficiently. (True or False) True (b) Calculate the gross profit ratio for the month of January. If the industry average gross profit ratio is 33%, is the company more or less profitable per dollar of sales than other companies in the same industry? The gross profit ratio is: % Is the company more or less profitable per dollar of sales? Less (c) Used together, what might the inventory turnover ratio and gross profit ratio suggest about Big Blast Fireworks' business strategy? Is the company's strategy to sell a higher volume of less expensive items or does the company appear to be selling a lower volume of more expensive items? Based on the inventory turnover ratio and the gross profit ratio, Big Blast Fireworks' business strategy appears to be selling a higher volume of less expensive items Balance Shoot Analysis >
