Question
On January 1, 2018, the general ledger of ACME Fireworks includes the following account balances: Accounts Debit Credit Cash $ 26,700 Accounts Receivable 49,400 Allowance
On January 1, 2018, the general ledger of ACME Fireworks includes the following account balances:
Accounts | Debit | Credit | ||||
Cash | $ | 26,700 | ||||
Accounts Receivable | 49,400 | |||||
Allowance for Uncollectible Accounts | $ | 5,800 | ||||
Inventory | 21,600 | |||||
Land | 62,000 | |||||
Equipment | 23,000 | |||||
Accumulated Depreciation | 3,100 | |||||
Accounts Payable | 30,100 | |||||
Notes Payable (6%, due April 1, 2019) | 66,000 | |||||
Common Stock | 51,000 | |||||
Retained Earnings | 26,700 | |||||
Totals | $ | 182,700 | $ | 182,700 | ||
During January 2018, the following transactions occur: |
January 2 | Sold gift cards totaling $11,200. The cards are redeemable for merchandise within one year of the purchase date. |
January 6 | Purchase additional inventory on account, $163,000. |
January 15 | Firework sales for the first half of the month total $151,000. All of these sales are on account. The cost of the units sold is $81,800. |
January 23 | Receive $127,000 from customers on accounts receivable. |
January 25 | Pay $106,000 to inventory suppliers on accounts payable. |
January 28 | Write off accounts receivable as uncollectible, $6,400. |
January 30 | Firework sales for the second half of the month total $159,000. Sales include $13,000 for cash and $146,000 on account. The cost of the units sold is $87,500. |
January 31 | Pay cash for monthly salaries, $53,600. |
The following information is available on January 31, 2018.
- Depreciation on the equipment for the month of January is calculated using the straight-line method. At the time the equipment was purchased, the company estimated a residual value of $5,000 and a two-year service life.
- The company estimates future uncollectible accounts. At the end of January, considering the total ending balance of the accounts receivable account shown in the general ledger, $27,000 is now past due (older than 90 days), while the remainder of the balance is current (less than 90 days old). The company estimates that 30% of the past due balance will be uncollectible and only 4% of the current balance will become uncollectible. Please record the estimated bad debt expense.
- Accrue the interest expense on notes payable for January. (Hint: recognize the expense and add as a liability, since the interest expense has not been paid yet)
- Accrue income taxes at the end of January are $14,600. (Hint: recognize the expense and add as a liability, since the income taxes have not been paid yet)
- By the end of January, $4,600 of the gift cards sold on January 2 have been redeemed.
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