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	$	26,400
Accounts Receivable		48,800
Allowance for Uncollectible Accounts					$	5,500
Inventory		21,300
Land		59,000
Equipment		21,500
Accumulated Depreciation						2,800
Accounts Payable						29,800
Notes Payable (6%, due April 1, 2022)						63,000
Common Stock						48,000
Retained Earnings						27,900
Totals	$	177,000			$	177,000

During January 2021, the following transactions occur:

January		2		Sold gift cards totaling $10,600. The cards are redeemable for merchandise within one year of the purchase date.
January		6		Purchase additional inventory on account, $160,000.
January		15		Firework sales for the first half of the month total $148,000. All of these sales are on account. The cost of the units sold is $80,300.
January		23		Receive $126,700 from customers on accounts receivable.
January		25		Pay $103,000 to inventory suppliers on accounts payable.
January		28		Write off accounts receivable as uncollectible, $6,100.
January		30		Firework sales for the second half of the month total $156,000. Sales include $15,000 for cash and $141,000 on account. The cost of the units sold is $86,000.
January		31		Pay cash for monthly salaries, $53,300.

7. Analyze the following for ACME Fireworks

Requirement 1:

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

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

• More liquid

• Less liquid

Requirement 2:

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)?

• More likely

• 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.

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	$	26,400
Accounts Receivable		48,800
Allowance for Uncollectible Accounts					$	5,500
Inventory		21,300
Land		59,000
Equipment		21,500
Accumulated Depreciation						2,800
Accounts Payable						29,800
Notes Payable (6%, due April 1, 2022)						63,000
Common Stock						48,000
Retained Earnings						27,900
Totals	$	177,000			$	177,000

During January 2021, the following transactions occur:

January		2		Sold gift cards totaling $10,600. The cards are redeemable for merchandise within one year of the purchase date.
January		6		Purchase additional inventory on account, $160,000.
January		15		Firework sales for the first half of the month total $148,000. All of these sales are on account. The cost of the units sold is $80,300.
January		23		Receive $126,700 from customers on accounts receivable.
January		25		Pay $103,000 to inventory suppliers on accounts payable.
January		28		Write off accounts receivable as uncollectible, $6,100.
January		30		Firework sales for the second half of the month total $156,000. Sales include $15,000 for cash and $141,000 on account. The cost of the units sold is $86,000.
January		31		Pay cash for monthly salaries, $53,300.

7. Analyze the following for ACME Fireworks

Requirement 1:

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

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

• More liquid

• Less liquid

Requirement 2:

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)?

• More likely

• 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.

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

• Decrease the current ratio

• Increase the current ratio

• Remain unchanged

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

• Decrease the current ratio

• Increase the current ratio

• Remain unchanged