On January 1, 2024, the general ledger of Big Blast Fireworks includes the following account balances:

The $30,000 beginning balance of inventory consists of 300 units, each costing $100. During January 2024, Big Blast Fireworks had the following inventory transactions:
January 3 Purchase 1,200 units for $126,000 on account ($105 each).
January 8 Purchase 1,300 units for $143,000 on account ($110 each).
January 12 Purchase 1,400 units for $161,000 on account ($115 each).
January 15 Return 100 of the units purchased on January 12 because of defects.
January 19 Sell 4,000 units on account for $600,000. The cost of the units sold is determined using a FIFO perpetual inventory system.
January 22 Receive $580,000 from customers on accounts receivable.
January 24 Pay $410,000 to inventory suppliers on accounts payable.
January 27 Write off accounts receivable as uncollectible, $2,500.
January 31 Pay cash for salaries during January, $128,000.

Required:
1. Record each of the transactions listed above, assuming a FIFO perpetual inventory system.
2. Record adjusting entries on January 31.
a. At the end of January, the company estimates that the remaining units of inventory purchased on January 12 are expected to sell in February for only $100 each. Prepare the adjusting entry using the lower of cost and net realizable value method.
b. The company records an adjusting entry for $3,000 for estimated future uncollectible accounts.
c. The company accrues interest on notes payable for January. Interest is expected to be paid each December 31.
d. The company accrues income taxes at the end of January of $12,300.
3. Prepare an adjusted trial balance as of January 31, 2024, after updating beginning balances (above) for transactions during January (requirement 1) and adjusting entries at the end of January (requirement 2).
4. Prepare a multiple-step income statement for the period ended January 31, 2024.
5. Prepare a classified balance sheet as of January 31, 2024.
6. Record closing entries.
7. 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 18.5 times, is the company managing its inventory more or less efficiently than other companies in the same industry?
b. Calculate the gross profit ratio for the month of January. If the industry average gross profit ratio is 33%, is the company more or less profitable per dollar of sales than other companies in the same industry?
c. Used together, what might the inventory turnover ratio and gross profit ratio suggest about Big Blast Fireworks’ business strategy? Is the company’s strategy to sell a higher volume of less expensive items or does the company appear to be selling a lower volume of more expensive items?

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Accounts Cash Accounts Receivable Allowance for Uncollectible Accounts Inventory Land Accounts Payable Notes Payable (8%, due in 3 years) Common Stock Retained Earnings Totals Debit $ 21,900 36,500 30,000 61,600 $150,000 Credit $ 3,100 32,400 30,000 56,000 28,500 $150,000