Chapter 7 General Ledger Accounting Cycle

On January 1, 2018, the general ledger of TNT Fireworks includes the following account balances:

Cash $ 58,700 (debit balance)

Accounts Receivable 25,000 (debit balance)

Inventory 36,300 (debit balance)

Notes Receivable (5%, due in 2 years) 12,000 (debit balance)

Land 155,000 (debit balance)

Allowance for Uncollectible Accounts $ 2,200 (credit balance)

Accounts Payable 14,800 (credit balance)

Common Stock 220,000 (credit balance)

Retained Earnings 50,500 (credit balance)

Totals $287,000 (debit balances) $287,000 (credit balances)

During January 2018, the following transactions occur: January 1 Purchase equipment for $19,500. The company estimates a residual value of $1,500 and a five-year service life. January 4 Pay cash on accounts payable, $9,500. January 8 Purchase additional inventory on account, $82,900. January 15 Receive cash on accounts receivable, $22,000. January 19 Pay cash for salaries, $29,800. January 28 Pay cash for January utilities, $16,500. January 30 Firework sales for January total $220,000. All of these sales are on account. The cost of the units sold is $115,000.

Record the adjustment for uncollectible accounts. At the end of January, $3,000 of accounts receivable are past due, and the company estimates that 50% of these accounts will not be collected. Of the remaining accounts receivable, the company estimates that 3% will not be collected. The note receivable of $20,000 is considered fully collectible and therefore is not included in the estimate of uncollectible accounts.

Record the adjustment for interest revenue. Accrued interest revenue on notes receivable for January.

Record the adjustment for income tax. Accrued interest expense on notes payable for January.

Record the entry to close the revenue accounts.

Record the entry to close the expense accounts.