On January 1, 2018, the general ledger of ACME Fireworks includes the following account balances Accounts Debit Credit Accounts Receivable 46,200 Inventory 20,000 Land 66,000 Equipment 15,000 Allowance for Uncollectible Accounts $ 4,200 Accumulated Depreciation 1,500 Accounts Payable 28,500 Notes Payable (6 , due April 1, 2019) 50,000 Warranty Liability 30,000 Common Stock 35,000 Retained Earnings 23,100 Totals $ 172,300 $ 172,300 During January 2018, the following transactions occur January 2 Sold gift cards totaling $8,000 The cards are redeemable for fireworks set up services within one year of the purchase date January 6 Purchase additional inventory on account, $147,000 January 15 Firework sales for the first half of the month total $135,000 All of these sales are on account The cost of the units sold is $73,800 January 20 ACME paid a warranty claim of $25,000 January 23 Receive $125,400 from customers on accounts receivable January 25 Pay $90,000 to inventory suppliers on accounts payable January 28 Write off accounts receivable as uncollectible, $4,800 January 30 Firework sales for the second half of the month total $143,000 Sales include $11,000 for cash and $132,000 on account The cost of the units sold is $79,500 January 31 Pay cash for monthly salaries, $52,000 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 $3,000 and a two year service life ACME provides a quality assurance warranty on all sales, and estimates the liability associated with the warranty to be 10 of sales revenue ACME accrues warranty expense on the last day of each month The warranty liability covers the life of the product and so is classified as non current During January an appeals court ruled against ACME in a lawsuit involving a customer injury The customer sued ACME for damages following a firework mishap ACME now believes it is probable that it will incur a $15,000 loss associated with the claim, but it intends to pursue further appeal and the case could drag on for another couple of years During January a customer sued ACME for damages after inadvertently igniting a Vesuvius Spark Fountain in his backpack ACME believes the probability of incurring a loss on the claim to be remote At the end of January, $11,000 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 REQUIREMENT PREPARE A JOURNAL ENTRIES INCLUDING ADJUSTMENT ENTRIES TO CLOSE THE GENERAL LEDGER

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Posted on Sep 07, 2024

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

Accounts		Debit		Credit

Accounts Receivable		46,200
Inventory		20,000
Land		66,000
Equipment		15,000
Allowance for Uncollectible Accounts			$	4,200
Accumulated Depreciation				1,500
Accounts Payable				28,500
Notes Payable (6%, due April 1, 2019)				50,000
Warranty Liability				30,000
Common Stock				35,000
Retained Earnings				23,100
Totals	$	172,300	$	172,300

During January 2018, the following transactions occur:

January	2	Sold gift cards totaling $8,000. The cards are redeemable for fireworks set-up services within one year of the purchase date.
January	6	Purchase additional inventory on account, $147,000.
January	15	Firework sales for the first half of the month total $135,000. All of these sales are on account. The cost of the units sold is $73,800.
January	20	ACME paid a warranty claim of $25,000.
January	23	Receive $125,400 from customers on accounts receivable.
January	25	Pay $90,000 to inventory suppliers on accounts payable.
January	28	Write off accounts receivable as uncollectible, $4,800.
January	30	Firework sales for the second half of the month total $143,000. Sales include $11,000 for cash and $132,000 on account. The cost of the units sold is $79,500.
January	31	Pay cash for monthly salaries, $52,000.

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 $3,000 and a two-year service life.
ACME provides a quality assurance warranty on all sales, and estimates the liability associated with the warranty to be 10% of sales revenue. ACME accrues warranty expense on the last day of each month. The warranty liability covers the life of the product and so is classified as non-current.
During January an appeals court ruled against ACME in a lawsuit involving a customer injury. The customer sued ACME for damages following a firework mishap. ACME now believes it is probable that it will incur a $15,000 loss associated with the claim, but it intends to pursue further appeal and the case could drag on for another couple of years.
During January a customer sued ACME for damages after inadvertently igniting a Vesuvius Spark Fountain in his backpack. ACME believes the probability of incurring a loss on the claim to be remote.
At the end of January, $11,000 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.

REQUIREMENT:

PREPARE A JOURNAL ENTRIES INCLUDING ADJUSTMENT ENTRIES TO CLOSE THE GENERAL LEDGER