On January 1, 2021, the general ledger of Freedom Fireworks includes the following account balances Accounts Debit Credit Cash $ 11,200 Accounts Receivable 34,000 Allowance for Uncollectible Accounts $ 1,800 Inventory 152,000 Land 67,300 Buildings 120,000 Accumulated Depreciation 9,600 Accounts Payable 17,700 Common Stock 200,000 Retained Earnings 155,400 Totals $ 384,500 $ 384,500 During January 2021, the following transactions occur January 1 Borrow $100,000 from Captive Credit Corporation The installment note bears interest at 7 annually and matures in 5 years Payments of $1,980 are required at the end of each month for 60 months January 4 Receive $31,000 from customers on accounts receivable January 10 Pay cash on accounts payable, $11,000 January 15 Pay cash for salaries, $28,900 January 30 Firework sales for the month total $195,000 Sales include $65,000 for cash and $130,000 on account The cost of the units sold is $112,500 January 31 Pay the first monthly installment of $1,980 related to the $100,000 borrowed on January 1 Round your interest calculation to the nearest dollar 7 Analyze the following for Freedom Fireworks Requirement 1 a 1 Calculate the debt to equity ratio Debt to Equity Ratio Choose Numerator Choose Denominator Il Debt to Equity Ratio Debt to Equity Ratio a 2 If the average debt to equity ratio for the industry is 1 0, is Freedom Fireworks more or less leveraged than other companies in the same industry O Less leveraged More leveraged Requirement 2 b 1 Calculate the times interest earned ratio Times Interest Earned Ratio Choose Numerator Choose Denominator Time Interest Earned Ratio Time Interest Earned Ratio b 2 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 O More able to meet interest O Less able to meet interest Requirement 3 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 O Lower interest rate O Higher interest rate

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Posted on Jul 23, 2024

On January 1, 2021, the general ledger of Freedom Fireworks includes the following account balances: Accounts Debit Credit Cash $ 11,200 Accounts Receivable 34,000 Allowance

On January 1, 2021, the general ledger of Freedom Fireworks includes the following account balances:

Accounts	Debit		Credit
Cash	$	11,200
Accounts Receivable		34,000
Allowance for Uncollectible Accounts			$	1,800
Inventory		152,000
Land		67,300
Buildings		120,000
Accumulated Depreciation				9,600
Accounts Payable				17,700
Common Stock				200,000
Retained Earnings				155,400
Totals	$	384,500	$	384,500

During January 2021, the following transactions occur:

January 1		Borrow $100,000 from Captive Credit Corporation. The installment note bears interest at 7% annually and matures in 5 years. Payments of $1,980 are required at the end of each month for 60 months.
January 4		Receive $31,000 from customers on accounts receivable.
January 10		Pay cash on accounts payable, $11,000.
January 15		Pay cash for salaries, $28,900.
January 30		Firework sales for the month total $195,000. Sales include $65,000 for cash and $130,000 on account. The cost of the units sold is $112,500.
January 31		Pay the first monthly installment of $1,980 related to the $100,000 borrowed on January 1. Round your interest calculation to the nearest dollar.

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7. Analyze the following for Freedom Fireworks: Requirement 1: a-1. Calculate the debt to equity ratio. Debt to Equity Ratio Choose Numerator Choose Denominator Il Debt to Equity Ratio Debt to Equity Ratio . a-2. If the average debt to equity ratio for the industry is 1.0, is Freedom Fireworks more or less leveraged than other companies in the same industry? O Less leveraged More leveraged Requirement 2: b-1. Calculate the times interest earned ratio. Times Interest Earned Ratio Choose Numerator Choose Denominator Time Interest Earned Ratio Time Interest Earned Ratio b-2. 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? O More able to meet interest O Less able to meet interest Requirement 3: 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? O Lower interest rate O Higher interest rate