[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	$	27,100
Accounts Receivable		50,200
Allowance for Uncollectible Accounts					$	6,200
Inventory		22,000
Land		66,000
Equipment		25,000
Accumulated Depreciation						3,500
Accounts Payable						30,500
Notes Payable (6%, due April 1, 2022)						70,000
Common Stock						55,000
Retained Earnings						25,100
Totals	$	190,300			$	190,300

During January 2021, the following transactions occur:

January		2		Sold gift cards totaling $12,000. The cards are redeemable for merchandise within one year of the purchase date.
January		6		Purchase additional inventory on account, $167,000.
January		15		Firework sales for the first half of the month total $155,000. All of these sales are on account. The cost of the units sold is $83,800.
January		23		Receive $127,400 from customers on accounts receivable.
January		25		Pay $110,000 to inventory suppliers on accounts payable.
January		28		Write off accounts receivable as uncollectible, $6,800.
January		30		Firework sales for the second half of the month total $163,000. Sales include $17,000 for cash and $146,000 on account. The cost of the units sold is $89,500.
January		31		Pay cash for monthly salaries, $54,000.

7. Analyze the following for ACME Fireworks Requirement 1:

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

Acid-test Ratio
Choose Numerator		Choose Denominator	=	Acid-test Ratio
			=	Acid-test Ratio
			=

a-2. If the average current ratio for the industry is 1.80, is ACME Fireworks more or less liquid than the industry average?

A. More likely

B. Less likely

Requirement 2:

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

Acid-test Ratio
Choose Numerator		Choose Denominator	=	Acid-test Ratio
			=	Acid-test Ratio
			=

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

b-2. If the average acid-test ratio for the industry is 1.50, is ACME Fireworks more or less likely to have difficulty paying its currently maturing debts (compared to the industry average)?

multiple choice 2

A. More likely

B. Less likely

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.

Current Ratio
Choose Numerator		Choose Denominator	=	Current Ratio
			=	Current Ratio
			=		times

c-2. Indicate whether the revised ratio would increase, decrease, or remain unchanged.

multiple choice 3

A. Decrease the current ratio

B. Increase the current ratio

C. Remain unchanged