On January 1, 2021, the general ledger of ACME Fireworks includes the following account balances: Accounts...

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

Accounts	Debit		Credit
Cash	$	25,500
Accounts Receivable		47,000
Allowance for Uncollectible Accounts			$	4,600
Inventory		20,400
Land		50,000
Equipment		17,000
Accumulated Depreciation				1,900
Accounts Payable				28,900
Notes Payable (6%, due April 1, 2022)				54,000
Common Stock				39,000
Retained Earnings				31,500
Totals	$	159,900	$	159,900

During January 2021, the following transactions occur:

January	2	Sold gift cards totaling $8,800. The cards are redeemable for merchandise within one year of the purchase date.
January	6	Purchase additional inventory on account, $151,000.
January	15	Firework sales for the first half of the month total $139,000. All of these sales are on account. The cost of the units sold is $75,800.
January	23	Receive $125,800 from customers on accounts receivable.
January	25	Pay $94,000 to inventory suppliers on accounts payable.
January	28	Write off accounts receivable as uncollectible, $5,200.
January	30	Firework sales for the second half of the month total $147,000. Sales include $12,000 for cash and $135,000 on account. The cost of the units sold is $81,500.
January	31	Pay cash for monthly salaries, $52,400.

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

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

Solutions

Expert Solution

ekkarill92 answered 1 year ago

Next > < Previous

Related Solutions

On January 1, 2021, the general ledger of ACME Fireworks includes the following account balances: Accounts...

On January 1, 2021, the general ledger of ACME Fireworks includes the following account balances: Accounts Debit Credit Cash $ 25,500 Accounts Receivable 47,000 Allowance for Uncollectible Accounts $ 4,600 Inventory 20,400 Land 50,000 Equipment 17,000 Accumulated Depreciation 1,900 Accounts Payable 28,900 Notes Payable (6%, due April 1, 2022) 54,000 Common Stock 39,000 Retained Earnings 31,500 Totals $ 159,900 $ 159,900 During January 2021, the following transactions occur: January 2 Sold gift cards totaling $8,800. The cards are redeemable for...

On January 1, 2021, the general ledger of ACME Fireworks includes the following account balances: Accounts...

On January 1, 2021, the general ledger of ACME Fireworks includes the following account balances: Accounts Debit Credit Cash $ 25,700 Accounts Receivable 47,400 Allowance for Uncollectible Accounts $ 4,800 Inventory 20,600 Land 52,000 Equipment 18,000 Accumulated Depreciation 2,100 Accounts Payable 29,100 Notes Payable (6%, due April 1, 2022) 56,000 Common Stock 41,000 Retained Earnings 30,700 Totals $ 163,700 $ 163,700 During January 2021, the following transactions occur: January 2 Sold gift cards totaling $9,200. The cards are redeemable for...

On January 1, 2021, the general ledger of ACME Fireworks includes the following account balances: Accounts...

On January 1, 2021, the general ledger of ACME Fireworks includes the following account balances: Accounts Debit Credit Cash $ 27,100 Accounts Receivable 50,200 Allowance for Uncollectible Accounts $ 6,200 Inventory 22,000 Land 66,000 Equipment 25,000 Accumulated Depreciation 3,500 Accounts Payable 30,500 Notes Payable (6%, due April 1, 2022) 70,000 Common Stock 55,000 Retained Earnings 25,100 Totals $ 190,300 $ 190,300 During January 2021, the following transactions occur: January 2 Sold gift cards totaling $12,000. The cards are redeemable for...

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

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...

On January 1, 2018, the general ledger of ACME Fireworks includes the following account balances: Accounts...

On January 1, 2018, the general ledger of ACME Fireworks includes the following account balances: Accounts Debit Credit Cash $ 35,500 Accounts Receivable 50,200 Inventory 22,000 Land 86,000 Equipment 25,000 Allowance for Uncollectible Accounts 6,200 Accumulated Depreciation 3,500 Accounts Payable 30,500 Notes Payable (6%, due April 1, 2019) 70,000 Warranty Liability 26,000 Common Stock 55,000 Retained Earnings 27,500 Totals $ 218,700 $ 218,700 During January 2018, the following transactions occur: January 2 Sold gift cards totaling $12,000. The cards are...

On January 1, 2018, the general ledger of ACME Fireworks includes the following account balances: Accounts...

On January 1, 2018, the general ledger of ACME Fireworks includes the following account balances: Accounts Debit Credit Cash $ 27,100 Accounts Receivable 50,200 Allowance for Uncollectible Accounts $ 6,200 Inventory 22,000 Land 66,000 Equipment 25,000 Accumulated Depreciation 3,500 Accounts Payable 30,500 Notes Payable (6%, due April 1, 2019) 70,000 Common Stock 55,000 Retained Earnings 25,100 Totals $ 190,300 $ 190,300 During January 2018, the following transactions occur: January 2 Sold gift cards totaling $12,000. The cards are redeemable for...

On January 1, 2018, the general ledger of ACME Fireworks includes the following account balances: Accounts...

On January 1, 2018, 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, 2019) 50,000 Common Stock 35,000 Retained Earnings 33,100 Totals $152,300 $152,300 During January 2018, the following transactions occur: January 2 Sold gift cards totaling $8,000. The cards are redeemable for merchandise...

On January 1, 2021, the general ledger of Freedom Fireworks includes the following account balances: Accounts...

On January 1, 2021, the general ledger of Freedom Fireworks includes the following account balances: Accounts Debit Credit Cash $ 101,500 Accounts Receivable 34,600 Inventory 152,300 Land 70,300 Buildings 123,000 Allowance for Uncollectible Accounts $ 2,100 Accumulated Depreciation 9,900 Accounts Payable 21,000 Bonds Payable 123,000 Discount on Bonds Payable 30,300 Common Stock 203,000 Retained Earnings 153,000 Totals $ 512,000 $ 512,000 During January 2021, the following transactions occurred: January 1 Borrowed $103,000 from Captive Credit Corporation. The installment note bears...

On January 1, 2021, the general ledger of Freedom Fireworks includes the following account balances: Accounts...

On January 1, 2021, the general ledger of Freedom Fireworks includes the following account balances: Accounts Debit Credit Cash $ 102,700 Accounts Receivable 37,000 Inventory 153,500 Land 82,300 Buildings 135,000 Allowance for Uncollectible Accounts $ 3,300 Accumulated Depreciation 11,100 Accounts Payable 34,200 Bonds Payable 135,000 Discount on Bonds Payable 31,500 Common Stock 215,000 Retained Earnings 143,400 Totals $ 542,000 $ 542,000 During January 2021, the following transactions occurred: January 1 Borrowed $115,000 from Captive Credit Corporation. The installment note bears...

On January 1, 2021, the general ledger of Freedom Fireworks includes the following account balances: Accounts...

On January 1, 2021, the general ledger of Freedom Fireworks includes the following account balances: Accounts Debit Credit Cash $ 13,200 Accounts Receivable 38,000 Inventory 154,000 Land 87,300 Buildings 140,000 Allowance for Uncollectible Accounts $ 3,800 Accumulated Depreciation 11,600 Accounts Payable 39,700 Common Stock 220,000 Retained Earnings 157,400 Totals $ 432,500 $ 432,500 During January 2021, the following transactions occur: January 1 Borrow $120,000 from Captive Credit Corporation. The installment note bears interest at 5% annually and matures in 5...

Subjects