On January 1, 2021, the general ledger of ACME Fireworks includes the following account balances: Accounts                                                 Debit                    Credit Cash                                                       $ 25,100 Accounts Receivable                                 46,200 Allowance for Uncollectible Accounts                                 $ 4,200 Inventory                                                   20,000 Land                                                          46,000 Equipment                                                15,000 Accumulated Depreciation                                                   1,500 Accounts Payable                                                                28,500 Notes Payable (6%, due April 1, 2022)                                50,000 Common Stock                                                                    35,000 Retained Earnings                                                                33,100 Totals                                                     $152,300           $152,300 During January 2021, the following transactions occur: January 2 Sold gift cards totaling $8,000

On January 1, 2021, the general ledger of ACME Fireworks includes the following account balances: Accounts                                                 Debit                    Credit Cash                                                       $ 25,100 Accounts Receivable                                 46,200 Allowance for Uncollectible Accounts                                 $ 4,200 Inventory                                                   20,000 Land                                                          46,000 Equipment                                                15,000 Accumulated Depreciation                                                   1,500 Accounts Payable                                                                28,500 Notes Payable (6%, due April 1, 2022)                                50,000 Common Stock                                                                    35,000 Retained Earnings                                                                33,100 Totals                                                     $152,300           $152,300 During January 2021, the following transactions occur: January 2 Sold gift cards totaling $8,000. The cards are redeemable for merchandise within one year of the purchase date. January 6 Purchase additional inventory on account, $147,000. January 15 Firework sales for the first half of the month total $135,000. All of these sales are on account. The cost of the units sold is $73,800. January 23 Receive $125,400 from customers on accounts receivable. January 25 Pay $90,000 to inventory suppliers on accounts payable. January 28 Write off accounts receivable as uncollectible, $4,800. January 30 Firework sales for the second half of the month total $143,000. Sales include $11,000 for cash and $132,000 on account. The cost of the units sold is $79,500. January 31 Pay cash for monthly salaries, $52,000. Required : 1. Record each of the transactions listed above. 2. Record adjusting entries on January 31. a. Depreciation on the equipment for the month of January is calculated using the straightline method. At the time the equipment was purchased, the company estimated a residual value of $3,000 and a two-year service life. b. At the end of January, $11,000 of accounts receivable are past due, and the company estimates that 30% of these accounts will not be collected. Of the remaining accounts receivable, the company estimates that 5% will not be collected. c. Accrued interest expense on notes payable for January. d. Accrued income taxes at the end of January are $13,000. e. By the end of January, $3,000 of the gift cards sold on January 2 have been redeemed (ignore cost of goods sold). 3. Prepare an adjusted trial balance as of January 31, 2021, after updating beginning balances (above) for transactions during January and adjusting entries at the end of January. 4. Prepare a multiple-step income statement for the period ended January 31, 2021. 5. Prepare a classified balance sheet as of January 31, 2021. 6. Record closing entries. 7. 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? 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)? 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).

-25-


Buy plagiarism free, original and professional custom paper online now at a cheaper price. Submit your order proudly with us



Essay Hope