[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 $ 26,900 49,800 $ 6,000 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 21,800 64,000 24,000 3,300 30,300 68,000 53,000 25,900 $186,500 $186,500 During January 2021, the following transactions occur. January 2 Sold gift cards totaling $11,600. The cards are redeemable for merchandise within one year of the purchase date. January 6 Purchase additional inventory on account, $165,000. January 15 Firework sales for the first half of the month total $153,000. All of these sales are on account. The cost of the units sold is $82,800. January 23 Receive $127,200 from customers on accounts receivable. January 25 Pay $108,000 to inventory suppliers on accounts payable. January 28 Write off accounts receivable as uncollectible, $6,600. January 30 Firework sales for the second half of the month total $161,000. Sales include $18,000 for cash and $143,000 on account. The cost of the units sold is $88,500. January 31 Pay cash for monthly salaries, $53,800. 7. Analyze the following for ACME Fireworks Requirement 1: a-1. Calculate the current ratio at the end of January Current Ratio Choose Numerator Choose Denominator Current Ratio Current 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? O More liquid Less liquid 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-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)? O More likely O Less likely 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. O Decrease the current ratio O Increase the current ratio Remain unchanged [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 $ 26,900 49,800 $ 6,000 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 21,800 64,000 24,000 3,300 30,300 68,000 53,000 25,900 $186,500 $186,500 During January 2021, the following transactions occur. January 2 Sold gift cards totaling $11,600. The cards are redeemable for merchandise within one year of the purchase date. January 6 Purchase additional inventory on account, $165,000. January 15 Firework sales for the first half of the month total $153,000. All of these sales are on account. The cost of the units sold is $82,800. January 23 Receive $127,200 from customers on accounts receivable. January 25 Pay $108,000 to inventory suppliers on accounts payable. January 28 Write off accounts receivable as uncollectible, $6,600. January 30 Firework sales for the second half of the month total $161,000. Sales include $18,000 for cash and $143,000 on account. The cost of the units sold is $88,500. January 31 Pay cash for monthly salaries, $53,800. 7. Analyze the following for ACME Fireworks Requirement 1: a-1. Calculate the current ratio at the end of January Current Ratio Choose Numerator Choose Denominator Current Ratio Current 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? O More liquid Less liquid 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-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)? O More likely O Less likely 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. O Decrease the current ratio O Increase the current ratio Remain unchanged
