E6-21 PLEASE NOTE THAT THE NUMBERS IN THIS EXERCISE ARE DIFFERENT THAN IN THE TEXT!!! On January 1, 2024, the general ledger of Big Blast Fireworks includes the following account balances: Credit Accounts Cash Debit $ 32,500 26,000 Accounts Receivable. Allowance for Uncollectible Accounts 1,800 Inventory 40,000 Land $5,000 Accounts Payable 32,400 Notes Payable (4%, due in 3 years) 30,000 Common stock 56,000 Retained Earnings 33,300 Totals $ 153,500 $ 153,500 The $40,000 beginning balance of inventory cosists of 400 units, each costing $100. During January 2024, Big Blast Fireworks had the following inventory transactions: During January 2024, the following transactions occur: January 3 January 8 January 12 January 15 Purchase 1,150 units for $120,750 on account ($105 each) Purchase 1,250 units for $137,500 on account ($110 each) Purchase 1,400 units for $161,000 on account ($115 each) January 19 Return 100 of the units purchased on January 12 because of defects. Sell 4,000 units on account for $600,000. The cost of the units sold is determined by using a FIFO perpetual inventory system. Receive $565,000 from customers on accounts receivable. Pay $410,000 to inventory suppliers on accounts payable. January 22 January 24 January 27 January 31 Write off accounts receivable as uncollectible, $2,500. Pay cash for salaries during January, $118,000 $ Write off accounts receivable as uncollectible, $2,500. Pay cash for salaries during January, $118,000 Required: 1. Record each of the transactions listed above. 2. Record adjusting entries on January 31. a. At the end of January, the 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. [Hint: Determine the number of units remaining from January 12 afer subtracting the units retuned on January 15 and the units assumed sold (FIFO) on January 19.) b. The company calculates that estimated future uncollectible acounts are $3,300 using the accounts receivable aging method (Hint: this method does consider the balance in the allowance account in calculating the adjustment!) C The company accrues interest on notes payable for January. Interest is expecteed to be paid each December 31. d. The company accrues income taxes at the end of January of $10,300. 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) [Note: a worksheet is provided and the trial balance there counts for this] 4. Prepare an income statement for the period ended January 31, 2024. 5 Prepare a classified balance sheet as of January 31, 2024. 6. Record the closing entries. Prepare a post-closing trial balance (Cathy added) January 27 January 31 7. 1 2 3 4 5 6 7 8 9 DATE 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 General Journal Wrote off an account GENERAL JOURNAL DESCRIPTION POST. REF. Page: DEBIT 63 CREDIT ACCOUNT: DATE 2024 Jan ACCOUNT: DATE 2024 Jan ACCOUNT: DATE 2024 Jan ACCOUNT: DATE 2024 Jan ACCOUNT: DATE 2024 Jan ACCOUNT DATE 2024 Jan Cash 1 Balance POST REF. V POST REF. V Allowance for Uncollectible accounts POST ITEM REF V POST REF. V POST REF V POST REF Accounts Receivable ITEM 1 Balance 1 Balance Inventory 1 Balance Land 1 Balance ITEM 1 Balance ITEM ITEM Accounts Payable ITEM GENERAL LEDGER DEBIT DEBIT DEBIT DEBIT DEBIT DEBIT CREDIT CREDIT CREDIT CREDIT CREDIT CREDIT ACCOUNT NO: DEBIT 32.500.00 ACCOUNT NO: DEBIT 26.000.00 ACCOUNT NO: DEBIT ACCOUNT NO: DEBIT 40,000.00 ACCOUNT NO DEBIT 55,000 00 ACCOUNT NO DEBIT BALANCE BALANCE BALANCE BALANCE BALANCE BALANCE CREDIT 115 CREDIT 121 CREDIT CREDIT 201 CREDIT 101 CREDIT 1.800.00 32,400.00 ACCOUNT: DATE 2024 Jan ACCOUNT: DATE ACCOUNT: DATE ACCOUNT DATE 2024 Jan ACCOUNT: DATE 2024 Jan ACCOUNT: DATE 17 ACCOUNT: DATE ACCOUNT DATE 1 Notes Payable (4%, due in 3 years) ITEM Balance Interest Payable ITEM Income Taxes Payable ITEM Common Stock ITEM Retained Earnings ITEM 1 Balance 1 Balance Sales Revenue ITEM Cost of Goods sold ITEM Salaries Expense ITEM POST REF. V POST REF. POST REF POST REF. V POST REF. V POST REF POST REF POST REF DEBIT DEBIT DEBIT DEBIT DEBIT DEBIT DEBIT DERIT CREDIT CREDIT CREDIT CREDIT CREDIT CREDIT CREDIT CREDIT ACCOUNT NO: DEBIT ACCOUNT NO: DEBIT ACCOUNT NO: DEBIT ACCOUNT NO DEBIT ACCOUNT NO DEBIT ACCOUNT NO: DEBIT ACCOUNT NO DEBIT ACCOUNT NO BALANCE BALANCE BALANCE BALANCE BALANCE BALANCE BALANCE 30,000,00 231 CREDIT 241 CREDIT 301 CREDIT BALANCE 211 CREDIT 56,000.00 311 CREDIT 33.300.00 401 CREDIT 501 CREDIT 511 ACCOUNT NAME cash Accounts Recortable Land Peyg come To Payable 10 Cock redag Rev asof d 14 Galeries Expanse 15ad Debt Expense pe 34 39 ACCOUNT: DATE ACCOUNT: DATE ACCOUNT: DATE Bad Debt Expense ITEM Interest Expense ITEM Income Tax Expense ITEM POST REF. POST REF. POST REF. Big Mat wirks Worksheet For the month ended ry 11, 2024 ABLIMENTS CREDIT TRIAL BALANCE DEBIT DEBIT DEBIT CREDIT CREDIT CREDIT ADUSTED FRIAL BALANCE Dear CREDIT ACCOUNT NO: DEBIT ACCOUNT NO: DEBIT ACCOUNT NO: DEBIT INCOME STATEMENT CREDIT DEBIT 521 CREDIT 531 CREDIT 541 CREDIT BALANCE BALANCE BALANCE BALANCE SHEET DEBIT CREDIT Big Blast Fireworks Income Statement For the month ended January 31, 2024 Revenue Sales Revenue Revenue Cost of Goods sold Gross profit Expenses Salaries Expense Bad Debt Expense Total operating expenses Operating Income Interest expense Income before taxes. Income tax Expense Net Income (Loss) Beginning balance January 1, 2024 Issuance of common stock Add: Net income (or Less: Net loss) Less: Dividends Ending balance January 31, 2024 Big Blast Fireworks Statement of Stockholders' Equity For the month ended January 31, 2024 Common Stock Retained Earnings Total Stockholders Equity Assets Current Assets Cash Accounts receivable Less: Allowance for Uncollectible Accounts Inventory Total current assets Long-term Assets Land Total Assets Big Blast Fireworks Balance Sheet January 31, 2024 Account Cash Accounts Receivable Allowance for Uncollectible Accounts Inventory Accounts Payab Income Tax Payable Con Stock Betained Carings Sales Bewnor Cout of goods sold Wome Tax Experme Current liabilities Accounts Payable Interest Payable Income Tax Payable Notes Payable Total Liabilities Common Stock Retained earnings Liabilities Total current liabilities Stockholders' Equity Total liabilities and stockholders' equity Total stockholders' equity Big Blast Fireworks Post Closing Trial Balance January 31, 2024 Debit Credit