On January 1, 2021, the general ledger of Big Blast Fireworks included the following account balances:...

On January 1, 2021, the general ledger of Big Blast Fireworks included the following account balances:

Accounts	Debit		Credit
Cash	$	25,300
Accounts receivable		45,000
Allowance for uncollectible accounts				3,700
Inventory		47,000
Land		87,100
Accounts payable				26,700
Notes payable (12%, due in 3 years)				47,000
Common stock				73,000
Retained earnings				54,000
Totals	$	204,400	$	204,400

The $47,000 beginning balance of inventory consists of 470 units, each costing $100. During January 2021, Big Blast Fireworks had the following inventory transactions:

January	3	Purchased 1,550 units for $170,500 on account ($110 each).
January	8	Purchased 1,650 units for $189,750 on account ($115 each).
January	12	Purchased 1,750 units for $210,000 on account ($120 each).
January	15	Returned 185 of the units purchased on January 12 because of defects.
January	19	Sold 5,100 units on account for $765,000. The cost of the units sold is determined using a FIFO perpetual inventory system.
January	22	Received $749,000 from customers on accounts receivable.
January	24	Paid $520,000 to inventory suppliers on accounts payable.
January	27	Wrote off accounts receivable as uncollectible, $2,600.
January	31	Paid cash for salaries during January, $136,000.

The following information is available on January 31, 2021.

At the end of January, the company estimates that the remaining units of inventory are expected to sell in February for only $100 each.
At the end of January, $5,700 of accounts receivable are past due, and the company estimates that 40% of these accounts will not be collected. Of the remaining accounts receivable, the company estimates that 5% will not be collected.
Accrued interest expense on notes payable for January. Interest is expected to be paid each December 31.
Accrued income taxes at the end of January are $14,000.

* Question (1): I have done most of the journal entries but I need help with:

1- Journal entry on 19 Jan for COGS and Inventory.

2- Journal entry on 27 Jan for allowance for uncollectible account and accounts receivable.

3- Journal entry on 31 Jan for COGS and Inventory.

4- Journal entry on 31 Jan for Bad debt expense and allowance for uncollectible account.

* Question (2): Using the information from the requirements above, complete the 'Analysis'. (Enter your Inventory Turnover ratio and gross profit ratio value in one decimal place.)

Analyze how well Big Blast Fireworks’ manages its inventory:
(a) Calculate the inventory turnover ratio for the month of January. If the industry average of the inventory turnover ratio for the month of January is 15.8 times, is the company managing its inventory more or less efficiently than other companies in the same industry?
The inventory turnover ratio is??		???
The company managing its inventory more efficiently. (True or False)		TRUE
(b) Calculate the gross profit ratio for the month of January. If the industry average gross profit ratio is 29%, is the company more or less profitable per dollar of sales than other companies in the same industry?
The gross profit ratio is ???		???

Solutions

Expert Solution

ekkarill92 answered 1 year ago

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