Exercise 9-19

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

Accounts	Debit			Credit
Cash	$	11,300
Accounts Receivable		34,200
Inventory		152,100
Land		68,300
Buildings		121,000
Allowance for Uncollectible Accounts				$	1,900
Accumulated Depreciation					9,700
Accounts Payable					18,800
Common Stock					201,000
Retained Earnings					155,500
Totals	$	386,900		$	386,900

During January 2018, the following transactions occur:

January 1	Borrow $101,000 from Captive Credit Corporation. The installment note bears interest at 6% annually and matures in 5 years. Payments of $1,990 are required at the end of each month for 60 months.
January 4	Receive $31,100 from customers on accounts receivable.
January 10	Pay cash on accounts payable, $12,000.
January 15	Pay cash for salaries, $29,000.
January 30	Firework sales for the month total $195,200. Sales include $65,100 for cash and $130,100 on account. The cost of the units sold is $113,000.
January 31	Pay the first monthly installment of $1,990 related to the $101,000 borrowed on January 1. Round your interest calculation to the nearest dollar.

The following information is available on January 31, 2018.

1. Depreciation on the building for the month of January is calculated using the straight-line method. At the time the building was purchased, the company estimated a service life of 10 years and a residual value of $24,400.
2. The company estimates future uncollectible accounts. The company determines $3,100 of accounts receivable on January 31 are past due, and 50% of these accounts are estimated to be uncollectible. The remaining accounts receivable on January 31 are not past due, and 2% of these accounts are estimated to be uncollectible. (Hint: Use the January 31 accounts receivable ending balance shown in the general ledger to start your calculations.) Record the estimated bad debt expense.
3. Unpaid salaries at the end of January are $26,200. (Recognize that salaries are owed, but have not been paid yet.)
4. Accrue income taxes at the end of January are $8,100. (Recognize that income taxes are due, but have not been paid yet.)

Requirement:

• General Journal
• General Ledger
• Trial Balance
• Income Statement
• Balance Sheet
• Analysis