On January 1, 2018, the general ledger of ACME Fireworks includes the following
ID: 2519463 • Letter: O
Question
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 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 straight-line 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.
3.
Prepare an adjusted trial balance as of January 31, 2018, after updating beginning balances (above) for transactions during January (Requirement1) and adjusting entries at the end of January (Requirement 2).
4.
Prepare a multiple-step income statement for the period ended January 31, 2018.
5.
Prepare a classified balance sheet as of January 31, 2018.
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, 2018, rather than April 1, 2019. 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).
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
Explanation / Answer
2.
3.
4.
.
5.
ACME FIREWORKS
ACME FIREWORKS General Journal for the month of January 2018 Date Account Title Debit Credit Jan.2 Cash 8000 Gift Cards 8000 (Sale of gift cards) Jan.6 Inventory 147000 Accounts Payable 147000 (Purchase of inventory on account) Jan.15 Accounts Receivable 135000 Sales 135000 (Sale in the first half of the month) Cost of goods sold 73800 Inventory 73800 (Cost of the goods sold) Jan.23 Cash 125400 Accounts Receivable 125400 (Receipt from customers on account) Jan.25 Accounts Payable 90000 Cash 90000 (Amount paid to suppliers on account) Jan.28 Allowance for uncollectible accounts 4800 Accounts Receivable 4800 (Write off of uncollectible accounts) Jan.30 Cash 11000 Accounts Receivable 132000 Sales 143000 (Sale in the seond half of the month) Cost of goods sold 79500 Inventory 79500 (Cost of the goods sold in second half) Jan.30 Salaries Expense 52000 Cash 52000 (Payment of salaries by cash)Related Questions
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