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The following information applies to the questions displayed below.] On January 1, 2021, the general ledger of Grand Finale Fireworks includes the following account balances:

The following information applies to the questions displayed below.]

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

Accounts Debit Credit
Cash $ 43,800
Accounts Receivable 46,700
Supplies 8,600
Equipment 75,000
Accumulated Depreciation $ 10,100
Accounts Payable 15,700
Common Stock, $1 par value 11,000
Additional Paid-in Capital 91,000
Retained Earnings 46,300
Totals $ 174,100 $ 174,100

During January 2021, the following transactions occur:

January 2 Issue an additional 2,000 shares of $1 par value common stock for $40,000.
January 9 Provide services to customers on account, $16,700.
January 10 Purchase additional supplies on account, $6,000.
January 12 Purchase 1,300 shares of treasury stock for $19 per share.
January 15 Pay cash on accounts payable, $17,600.
January 21 Provide services to customers for cash, $50,200.
January 22 Receive cash on accounts receivable, $17,700.
January 29 Declare a cash dividend of $0.30 per share to all shares outstanding on January 29. The dividend is payable on February 15. (Hint: Grand Finale Fireworks had 11,000 shares outstanding on January 1, 2021, and dividends are not paid on treasury stock.)
January 30 Resell 800 shares of treasury stock for $21 per share.
January 31 Pay cash for salaries during January, $43,100.

7. Analyze the following for Grand Finale Fireworks:

a-1. Calculate the return on equity for the month of January.

a-2. If the average return on equity for the industry for January is 2.3%, is the company more or less profitable than other companies in the same industry?

multiple choice 1
  • More profitable
  • Less profitable

b. How many shares of common stock are outstanding as of January 31, 2021?

c-1. Calculate earnings per share for the month of January. (Hint: To calculate average shares of common stock outstanding take the beginning shares outstanding plus the ending shares outstanding and divide the total by 2.)

c-2. If earnings per share was $3.60 last year (i.e., an average of $3.60 per month), is earnings per share for January 2021 better or worse than last years average?

multiple choice 2
  • Better
  • Worse

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