Chapter 5 General Ledger Accounting Cycle

On January 1, 2018, the general ledger of 3D Family Fireworks includes the following account balances:

Accounts		Debit		Credit
Cash		$ 23,900
Accounts Receivable		13,600
Supplies		2,500
Notes Receivable (6%, due in 2 years)		20,000
Land		77,000
Allowance for Uncollectible Accounts				$ 1,400
Accounts Payable				7,200
Common Stock				96,000
Retained Earnings				32,400
Totals		$137,000		$137,000

During January 2018, the following transactions occur:

January 2	Provide services to customers for cash, $35,100.
January 6	Provide services to customers on account, $72,400.
January 10	Write off accounts receivable as uncollectible, $1,000.
January 20	Pay cash for salaries, $31,400.
January 22	Receive cash on accounts receivable, $70,000.
January 25	Pay cash on accounts payable, $5,500.
January 30	Pay cash for utilities during January, $13,700. 8.Record the adjustment needed for the allowance for uncollectible accounts at 12/31. At the end of January, $5,000 of accounts receivable are past due, and the company estimates that 20% of these accounts will not be collected. Of the remaining accounts receivable, the company estimates that 5% will not be collected. 9.Record the adjustment for supplies inventory. The Balance in the account at the end of January was $700. 10.Record the interest revenue on the (6%, due in 2 years) note receivable for January. 11.Record the adjustment for salaries payable. Unpaid salaries at the end of January are $33,500. 12.Record the entry to close the revenue accounts. 13.Record the entry to close the expense accounts. Create an Income Statement using the information above and calculate the amount of net income or net loss for the period. Create a balance sheet and calculate and enter the balance in the retained earnings account. Think carefully about how the ending balance of retained earnings is calculated. Analyze: a) calculate the receivables turnover ratio for the month of january (Hint: For the numerator, use total services provided to customers on account). If the industry average of the receivables turnover ratios for the month of January is 4.2 times, is the company collecting cash from customers more or less efficiently than other companies in the same industry. Accounts Receivable turnover - The Company is collecting more efficiently (true or false) - b) Calculate the ratio of Allowance for Uncollectible Accounts to Accounts Receivable at the end of January. Based on a comparison of this ratio to the same ratio at the beginning of January, does the company expect an improvement or worsening in cash collections from customers on credit sales? Ratio of Allowance for Uncollectible Accounts to Accounts Receivable - Should the company expect improving or worsening conditions? -