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Exercise 8-18 Complete the accounting cycle (LO8-1, 8-2, 8-4, 8-6)

[The following information applies to the questions displayed below.]

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

Accounts	Debit				Credit
Cash	$	27,000
Accounts Receivable		50,000
Allowance for Uncollectible Accounts					$	6,100
Inventory		21,900
Land		65,000
Equipment		24,500
Accumulated Depreciation						3,400
Accounts Payable						30,400
Notes Payable (6%, due April 1, 2022)						69,000
Common Stock						54,000
Retained Earnings						25,500
Totals	$	188,400			$	188,400

During January 2021, the following transactions occur:

January		2		Sold gift cards totaling $11,800. The cards are redeemable for merchandise within one year of the purchase date.
January		6		Purchase additional inventory on account, $166,000.
January		15		Firework sales for the first half of the month total $154,000. All of these sales are on account. The cost of the units sold is $83,300.
January		23		Receive $127,300 from customers on accounts receivable.
January		25		Pay $109,000 to inventory suppliers on accounts payable.
January		28		Write off accounts receivable as uncollectible, $6,700.
January		30		Firework sales for the second half of the month total $162,000. Sales include $10,000 for cash and $152,000 on account. The cost of the units sold is $89,000.
January		31		Pay cash for monthly salaries, $53,900.

1. Record each of the transactions listed above. (If no entry is required for a particular transaction/event, select "No Journal Entry Required" in the first account field.)

Exercise 8-18 Part 2

• Depreciation on the equipment for the month of January is calculated using the straight-line method. At the time the equipment was purchased, the company estimated a residual value of $5,300 and a two-year service life.

• The company estimates future uncollectible accounts. The company determines $30,000 of accounts receivable on January 31 are past due, and 30% 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.)

• Accrued interest expense on notes payable for January.

• Accrued income taxes at the end of January are $14,900.

• By the end of January, $4,900 of the gift cards sold on January 2 have been redeemed.

2. Record the adjusting entries on January 31 for the above transactions. (If no entry is required for a particular transaction/event, select "No Journal Entry Required" in the first account field.)

3. Prepare an adjusted trial balance as of January 31, 2021.

4. Prepare a multiple-step income statement for the period ended January 31, 2021

5. Prepare a classified balance sheet as of January 31, 2021. (Enter the Asset Accounts in order of liquidity. Amounts to be deducted should be indicated with a minus sign.)

6. Record closing entries. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.)

Exercise 8-18 Part 7

7. Analyze the following for ACME Fireworks

Requirement 1:

a-1. Calculate the current ratio at the end of January.

Requirement 2:

b-1. Calculate the acid-test ratio at the end of January.

Requirement 3:

c-1. Assume the notes payable were due on April 1, 2021, rather than April 1, 2022. Calculate the revised current ratio at the end of January.