Question
On January 1, 2024, the general ledger of Dynamite Fireworks includes the following account balances: Accounts Debit Credit Cash $23,900 Accounts Receivable 5,300 Supplies 3,200
On January 1, 2024, the general ledger of Dynamite Fireworks includes the following account balances:
Accounts | Debit | Credit |
---|---|---|
Cash | $23,900 | |
Accounts Receivable | 5,300 | |
Supplies | 3,200 | |
Land | 51,000 | |
Accounts Payable | $3,300 | |
Common Stock | 66,000 | |
Retained Earnings | 14,100 | |
Totals | $83,400 | $83,400 |
During January 2024, the following transactions occur:
January 2 | Purchase rental space for one year in advance, $6,300 ($525/month). |
---|---|
January 9 | Purchase additional supplies on account, $3,600. |
January 13 | Provide services to customers on account, $25,600. |
January 17 | Receive cash in advance from customers for services to be provided in the future, $3,800. |
January 20 | Pay cash for salaries, $11,600. |
January 22 | Receive cash on accounts receivable, $24,200. |
January 29 | Pay cash on accounts payable, $4,100. |
Required: 1. Record each of the transactions listed above. 2. Record the adjusting entries on January 31.
- Rent for the month of January has expired.
- Supplies remaining at the end of January total $2,900. All other supplies have been used.
- By the end of January, $3,275 of services has been provided to customers who paid in advance on January 17.
- Unpaid salaries at the end of January are $5,730.
3. Prepare an adjusted trial balance as of January 31, 2024. 4. Prepare an income statement for the period ended January 31, 2024. 5. Prepare a classified balance sheet as of January 31, 2024. 6. Record closing entries. 7. Analyze the following features of Dynamite Fireworks financial condition:
- What is the amount of profit reported for the month of January?
- Calculate the ratio of current assets to current liabilities (the current ratio) at the end of January.
- Based on Dynamite Fireworks profit and ratio of current assets to current liabilities, indicate whether Dynamite Fireworks appears to be in good or bad financial condition.
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