View transaction list View journal entry worksheet No Credit Date Jan 02 Account Title Cash Deferred Revenue Debit 8,400 1 8,400 2 Jan 06 149,000 Inventory Accounts Payable 149,000 3 Jan 15 137,000 Accounts Receivable Sales Revenue 137,000 4 Jan 15 74,800 Cost of Goods Sold Inventory 74,800 5 Jan 23 125,600 Cash Accounts Receivable 125,600 6 Jan 25 Accounts Payable Cash 92,000 92,000 7 Jan 28 5,000 Allowance for Uncollectible Accounts Accounts Receivable 5,000 8 Jan 30 Accounts Receivable Cash Sales Revenue 130,000 15,000 145,000 9 Jan 30 80,500 Cost of Goods Sold Inventory 80,500 10 Jan 31 52,200 Salaries Expense Cash 52,200 11 Jan 31 500 Depreciation Expense Accumulated Depreciation 500 12 Jan 31 10,700 Bad Debt Expense Allowance for Uncollectible Accounts 10,700 13 Jan 31 260 Interest Expense Interest Payable 260 14 Jan 31 13,200 Income Tax Expense Income Taxes Payable 13,200 15 Jan 31 3,200 Deferred Revenue Sales Revenue 3,200 On January 1, 2021, the general ledger of ACME Fireworks includes the following account balances: Credit Debit $ 25, 300 46,600 $ 4,400 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 20,200 48,000 16,500 1,700 28,700 52,000 37,000 32,800 $156,600 $156, 600 During January 2021, the following transactions occur: January 2 Sold gift cards totaling $8,400. The cards are redeemable for merchandise within one year of the purchase date. January 6 Purchase additional inventory on account, $149,000. January 15 Firework sales for the first half of the month total $137,000. All of these sales are on account. The cost of the units sold is $74,800. January 23 Receive $125,600 from customers on accounts receivable. January 25 Pay $92,000 to inventory suppliers on accounts payable. January 28 Write off accounts receivable as uncollectible, $5,000. January 30 Firework sales for the second half of the month total $145,000. Sales include $15,000 for cash and $130,000 on account. The cost of the units sold is $80,500. January 31 Pay cash for monthly salaries, $52,200. The following information is available on January 31. The following information is available on January 31. a. 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 $4,500 and a two-year service life. b. The company estimates future uncollectible accounts. The company determines $13,000 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 4% of these accounts are estimated to be uncollectible. (Hint: Use the January 31 accounts receivable balance calculated in the general ledger.) C. Accrued interest expense on notes payable for January. d. Accrued income taxes at the end of January are $13,200. e. By the end of January, $3,200 of the gift cards sold on January 2 have been redeemed (ignore cost of goods sold). 12 Jan 31 Bad Debt Expense 10,700 X Allowance for Uncollectible Accounts 10,700 13 Jan 31 Interest Expense 260 Analyze the following for ACME Fireworks: (a) Calculate the current ratio at the end of January. If the average current ratio for the industry is 1.8, is ACME Fireworks more or less liquid than the industry average? The current ratio is: Is the company more or less liquid than the industry average? (b) Calculate the acid-test ratio at the end of January. If the average acid-test ratio for the industry is 1.5, is ACME Fireworks more or less likely to have difficulty paying its currently maturing debts (compared to the industry average)? The acid-test ratio is: Is the company more or less likely to have difficulty paying its currently maturing debts? (c) 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, and indicate whether the revised ratio would increase, decrease, or remain unchanged compared to your answer in (a). The revised current ratio is Indicate whether the revised ratio would increase, decrease, or remain unchanged compared to your answer in (a). Roland Chant