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

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 (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, 2021.

5. Prepare a classified balance sheet as of January 31, 2021.

6. Record closing entries.

Transcribed Image Text:

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 Accounts Payable 1,500 28,500 Notes Payable (6%, due April 1, 2022) 50,000 Common Stock 35,000 Retained Earnings 33,100 $152,300 Totals $152,300