On January 1, 2021, the general ledger of Big Blast Fireworks includes the following account balances: Accounts Cash Accounts Receivable Allowance for Uncollectible Accounts Inventory Land Accounts Payable Notes Payable (6%, due in 3 years) Common Stock Retained Earnings Totals Debit Credit $ 25,700 46,000 $ 4,100 49,000 90,100 25,700 49,000 75,000 57,000 $210,800 $210,800 The $49,000 beginning balance of inventory consists of 490 units, each costing $100. During January 2021, Big Blast Fireworks had the following inventory transactions: January 3 Purchase 1,750 units for $196,000 on account ($112 each). January 8 Purchase 1,850 units for $216,450 on account ($117 each). January 12 Purchase 1,950 units for $237,900 on account ($122 each). January 15 Return 195 of the units purchased on January 12 because of defects. January 19 Sell 5,700 units on account for $855,000. The cost of the units sold is determined using a FIFO perpetual inventory system. January 22 Receive $837,000 from customers on accounts receivable. January 24 Pay $620,000 to inventory suppliers on accounts payable. January 27 Write off ccounts receivable as uncollectible, $2,800. January 31 Pay cash for salaries during January, $138,000. The following information is available on January 31, 2021. 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. The company estimates future uncollectible accounts. The company determines $5,900 of accounts receivable on January 31 are past due, and 35% of these accounts are estimated to be uncollectible. The remaining accounts receivable on January 31 are not past due, and 5% of these accounts are estimated to be uncollectible. (Hint: Use the January 31 accounts receivable balance calculated in the general ledger.) 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 $14,200. Requirement General Journal General Ledger Trial Balance Income Statement Balance Sheet Analysis Using the information from the requirements above, complete the 'Analysis' tab. Enter your Inventory Turnover ratio and gross profit ratio va Analyze how well Big Blast Fireworks' manages its inventory: (a) Calculate the inventory turnover ratio for the month of January. If the industry average of the inventory turnover ratio for the month of January is 17.5 times, is th managing its inventory more or less efficiently than other companies in the same industry? The inventory turnover ratio is: 20.0 X 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 31%, is the company more or less profitable per dollar of sale 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 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 ite 13 Jan 31 245 Interest Expense Interest Payable 245 14 Jan 31 14,200 Income Tax Expense Income Taxes Payable 14,200 15 Jan 31 Sales Revenue 855,000 Retained Earnings 855,000 16 Jan 31 695,835 X 138,000 Retained Earnings Salaries Expense Interest Expense Income Tax Expense Bad Debt Expense 245 14,200 3,530 3,190 Cost of Goods Sold Inventory 23,790 5 Jan 19 Accounts Receivable 855,000 Sales Revenue 855,000 6 Jan 19 Cost of Goods Sold 85,000 X Inventory 85,000 X 7 Jan 22 Cash 837,000 Accounts Receivable 837,000
