Exercise 9 21 Complete the accounting cycle using long term liability transactions (LO9 2, 9 8) On January 1, 2021, the general ledger of Freedom Fireworks includes the following account balances Accounts Debit Credit Cash $ 11,200 Accounts Receivable 34,000 Allowance for Uncollectible Accounts $ 1,800 Inventory 152,000 Land 67,300 Buildings 120,000 Accumulated Depreciation 9,600 Accounts Payable 17,700 Common Stock 200,000 Retained Earnings 155,400 Totals $ 384,500 $ 384,500 During January 2021, the following transactions occur January 1 Borrow $100,000 from Captive Credit Corporation The installment note bears interest at 7 annually and matures in 5 years Payments of $1,980 are required at the end of each month for 60 months January 4 Receive $31,000 from customers on accounts receivable January 10 Pay cash on accounts payable, $11,000 January 15 Pay cash for salaries, $28,900 January 30 Firework sales for the month total $195,000 Sales include $65,000 for cash and $130,000 on account The cost of the units sold is $112,500 January 31 Pay the first monthly installment of $1,980 related to the $100,000 borrowed on January 1 Round your interest calculation to the nearest dollar Exercise 9 21 Part 2 The following information is available on January 31, 2021 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 $24,000 The company estimates future uncollectible accounts The company determines $3,000 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 balance calculated in the general ledger ) Unpaid salaries at the end of January are $26,100 Accrued income taxes at the end of January are $8,000 $17,411 of the long term note payable balance will be paid over the next year 2 Record the adjusting entries on January 31 for the above transactions

The Answer is in the image, click to view ...

Answered step by step

Verified Expert Solution

Link Copied!

Question

1 Approved Answer

Posted on Aug 09, 2024

Exercise 9-21 Complete the accounting cycle using long-term liability transactions (LO9-2, 9-8)

On January 1, 2021, the general ledger of Freedom Fireworks includes the following account balances:

Accounts	Debit		Credit
Cash	$	11,200
Accounts Receivable		34,000
Allowance for Uncollectible Accounts			$	1,800
Inventory		152,000
Land		67,300
Buildings		120,000
Accumulated Depreciation				9,600
Accounts Payable				17,700
Common Stock				200,000
Retained Earnings				155,400
Totals	$	384,500	$	384,500

During January 2021, the following transactions occur:

January 1		Borrow $100,000 from Captive Credit Corporation. The installment note bears interest at 7% annually and matures in 5 years. Payments of $1,980 are required at the end of each month for 60 months.
January 4		Receive $31,000 from customers on accounts receivable.
January 10		Pay cash on accounts payable, $11,000.
January 15		Pay cash for salaries, $28,900.
January 30		Firework sales for the month total $195,000. Sales include $65,000 for cash and $130,000 on account. The cost of the units sold is $112,500.
January 31		Pay the first monthly installment of $1,980 related to the $100,000 borrowed on January 1. Round your interest calculation to the nearest dollar.

Exercise 9-21 Part 2

The following information is available on January 31, 2021.

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 $24,000.
The company estimates future uncollectible accounts. The company determines $3,000 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 balance calculated in the general ledger.)
Unpaid salaries at the end of January are $26,100.
Accrued income taxes at the end of January are $8,000.
$17,411 of the long-term note payable balance will be paid over the next year.

2. Record the adjusting entries on January 31 for the above transactions.