On January 1, 2021, the general ledger of Freedom Fireworks includes the following account balances: Credit Debit $ 12,500 36,600 153,300 80,300 133,000 Accounts Cash Accounts Receivable Inventory Land Buildings Allowance for Uncollectible Accounts Accumulated Depreciation Accounts Payable Common Stock Retained Earnings Totals $ 3,100 10,900 32,000 213,000 156,700 $415,700 $415,700 During January 2021, the following transactions occur: January 1 Borrow $113,000 from Captive Credit Corporation. The installment note bears interest at 68 annually and matures in 5 years. Payments of $2,185 are required at the end of each month for 60 months. January 4 Receive $32,300 from customers on accounts receivable. January 10 Pay cash on accounts payable, $24,000. January 15 Pay cash for salaries, $30,200. January 30 Firework sales for the month total $201,200. Sales include $66,300 for cash and $134,900 on account. The cost of the units sold is $119,000. January 31 Pay the first monthly installment of $2,185 related to the $113,000 borrowed on January 1. Round your interest calculation to the nearest dollar. The following information is available on January 31, 2021. a. Depreciation on the building for the month of January is calculated using the straight-line method. At the time the building was purchased, the company estimated a service life of 10 years and a residual value of $26,800. b. The company estimates future uncollectible accounts. The company determines $4,300 of accounts receivable on January 31 are past due, and 50% of these accounts are estimated to be uncollectible. The remaining accounts receivable on January 31 are not past due, and 2% of these accounts are estimated to be uncollectible. (Hint: Use the January 31 accounts receivable balance calculated in the general ledger.) c. Unpaid salaries at the end of January are $27,400. d. Accrued income taxes at the end of January are $9,300. e. $20,079 of the long-term note payable balance will be paid over the next year. Requirement General Journal General Ledger Trial Balance Income Statement Balance Sheet Analysis If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field. View transaction list 1 14 > Borrow $113,000 from Captive Credit Corporation. The installment note bears interest at 6% annually and matures in 5 years. Payments of $2,185 are required at the end of each month for 60 months. Record the issuance of the long-term note payable. te bears are e of the 2 Receive $32,300 from customers on accounts receivable. 3 Pay cash on accounts payable, $24,000. Credit 4 Pay cash for salaries, $30,200. 5 Record the firework sales of $201,200. Sales include $66,300 for cash and $134,900 on account. Note : = journal entry has been entered Record entry Clear entry View general Journal Requirement General Journal General Ledger Trial Balance Income Statement Balance Sheet Analysis If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field. View transaction list 6 The cost of the units sold is $119,000. 14 > 7 Pay the first monthly installment of $2,185 related to the $113,000 long-term note payable borrowed in January 1. Round your interest calculation to the nearest dollar. te bears are e of the 8 Depreciation on the building for the month of January is calculated using the straight-line method. At the time the building was purchased, the company estimated a service life of 10 years and a residual value of $26,800. Prepare the adjusting journal entry for depreciation. Credit 9 At the end of January, $4,300 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 Note := journal entry has been entered Record entry Clear entry View general Journal Requirement General Journal General Ledger Trial Balance Income Statement Balance Sheet Analysis If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field. View transaction list 9 14 At the end of January, $4,300 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. te bears are e of the 10 Unpaid salaries at the end of January are $27,400. Prepare the adjusting entry for salaries. Credit 11 Accrued income taxes at the end of January are $9,300. Prepare the adjusting entry for income tax. 12 Record the reclassification of $20,079 from long-term notes payable to current notes payable. Note : = journal entry has been entered Record entry Clear entry View general Journal Requirement General Journal General Ledger Trial Balance Income Statement Balance Sheet Analysis If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field. View transaction list 14 ILLIVUIL, LIIL Lumpurny LLITTULLS LIUL IUWI HULU collected. No accounts were written off as uncollectible in January. > 10 Unpaid salaries at the end of January are $27,400. Prepare the adjusting entry for salaries. te bears are e of the 11 Accrued income taxes at the end of January are $9,300. Prepare the adjusting entry for income tax. Credit 12 Record the reclassification of $20,079 from long-term notes payable to current notes payable. 13 Prepare the closing entry for revenue. 14 Prepare the closing entry for expenses. Note : = journal entry has been entered Record entry Clear entry View general Journal Requirement General Journal General Ledger Trial Balance Income Statement Balance Sheet Analysis Choose the appropriate accounts to complete the company's income statement. Select 'adjusted' from the dropdown, which will then populate the balances in those accounts from the adjusted trial balance. Unadjusted Freedom Fireworks Multiple-Step Income Statement For the Month ended January 31, 2021 Gross profit $ 0 0 Total operating expenses Operating income 0 0 $ 0 Requirement General Journal General Ledger Trial Balance Income Statement Balance Sheet Analysis Choose the appropriate accounts to complete the company's balance sheet. Make sure to select 'adjusted' from the dropdown, which will then populate the balances in those accounts from the adjusted trial balance. Unadjusted Freedom Fireworks Classified Balance Sheet January 31, 2021 Assets Liabilities Current Assets: Current Liabilities: 0 Total Current Liabilities Long-term Liabilities Total Current Assets 0 Total Liabilities 0 Noncurrent Assets: Stockholders' Equity 0 Total Stockholders' Equity 0 Total Liabilities & Stockholders' Equity Total Assets $ $ 0 Requirement General Journal General Ledger Trial Balance Income Statement Balance Sheet Analysis Calculate the ratios to the nearest 1 decimal place. Analyze the following for Freedom Fireworks: (a) Calculate the debt to equity ratio. If 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? The debt to equity ratio is: Is the company more or less leveraged than other companies? (6) 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? The times interest earned ratio is: Is 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 interest rate than the average borrowing rate in the industry?