Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Exercise 6-21B Complete the accounting cycle using inventory transactions (LO6-2, 6-3, 6-5, 6-6, 6-7) [The following information applies to the questions displayed below.] On January

Exercise 6-21B Complete the accounting cycle using inventory transactions (LO6-2, 6-3, 6-5, 6-6, 6-7)

[The following information applies to the questions displayed below.]

On January 1, Year 1, the general ledger of a company includes the following account balances:

Accounts Debit Credit
Cash $ 22,500
Accounts Receivable 38,000
Allowance for Uncollectible Accounts $ 3,700
Inventory 33,000
Land 66,100
Accounts Payable 30,900
Notes Payable (8%, due in 3 years) 33,000
Common Stock 59,000
Retained Earnings 33,000
Totals $ 159,600 $ 159,600

The $33,000 beginning balance of inventory consists of 330 units, each costing $100. During January Year 1, the company had the following inventory transactions:

January 3 Purchase 1,200 units for $129,600 on account ($108 each).
January 8 Purchase 1,300 units for $146,900 on account ($113 each).
January 12 Purchase 1,400 units for $165,200 on account ($118 each).
January 15 Return 115 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 $577,000 from customers on accounts receivable.
January 24 Pay $407,000 to inventory suppliers on accounts payable.
January 27 Write off accounts receivable as uncollectible, $2,800.
January 31 Pay cash for salaries during January, $117,000.

The following information is available on January 31, Year 1.

  1. At the end of January, the company estimates that the remaining units of inventory are expected to sell in February for only $100 each.
  2. The company estimates future uncollectible accounts. The company determines $4,300 of accounts receivable on January 31 are past due, and 30% of these accounts are estimated to be uncollectible. The remaining accounts receivable on January 31 are not past due, and 5% of these accounts are estimated to be uncollectible. (Hint: Use the January 31 accounts receivable balance calculated in the general ledger.)
  3. Accrued interest expense on notes payable for January. Interest is expected to be paid each December 31.
  4. Accrued income taxes at the end of January are $12,600.

Exercise 6-21B Part 3

a. At the end of January, the company estimates that the remaining units of inventory are expected to sell in February for only $100 each. b. At the end of January, $4,300 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. Interest is expected to be paid each December 31. d. Accrued income taxes at the end of January are $12,600.

3. Prepare an adjusted trial balance as of January 31, Year 1.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

More Books

Students also viewed these Accounting questions