Required information [The following information applies to the questions displayed below.] On January 1, 2021, the general ledger of ACME Fireworks includes the following account balances: Credit Debit $ 27,000 50,000 $ 6,100 Accounts Cash Accounts Receivable Allowance for Uncollectible Accounts Inventory Land Equipment Accumulated Depreciation Accounts Payable Notes Payable (6%, due April 1, 2022) Common Stock Retained Earnings Totals 21,900 65,000 24,500 3,400 30,400 69,000 54,000 25,500 $ 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. 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. 4. Prepare a multiple-step income statement for the period ended January 31, 2021. ACME FIREWORKS Income Statement For the year ended January 31, 2021 Sales Revenue $ 320,900 Cost of Goods Sold (172,300)| Gross Profit $ Bad Debt Expense 19,700 Salaries Expense 53,900 Interest Expense 345 Depreciation Expense 800 148,600 Total operating expenses Operating Income Income Tax Expense 74,745 73,855 (14,900) 58,955 58,955 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.) ACME FIREWORKS Classified Balance Sheet January 31, 2021 Liabilities $ 13,200 Accounts Payable Assets Cash Accounts Receivable Less: Allowance for Uncollectible Accounts Inventory $ 222,000 (19,100) $ 87,400 6,900 345 14,900 202,900 15,600 Total Current Assets 109,545 69,000 178,545 231,700 Total Current Liabilities Notes Payable Total Liabilities Stockholders' Equity 65,000 24,500 Common Stock (4,200) Retained Earnings Land Equipment Accumulated Depreciation 54,000 84,455 Total Stockholders' Equity Total Liabilities and Stockholders' Equity 138,455 $ 317,000 Total Assets $ 317,000
