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On January 1, 2021, the general ledger of ACME Fireworks includes the following account balances: Accounts Debit Credit Cash $ 25,700 Accounts Receivable 47,400 Allowance

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

Accounts Debit Credit
Cash $ 25,700
Accounts Receivable 47,400
Allowance for Uncollectible Accounts $ 4,800
Inventory 20,600
Land 52,000
Equipment 18,000
Accumulated Depreciation 2,100
Accounts Payable 29,100
Notes Payable (6%, due April 1, 2022) 56,000
Common Stock 41,000
Retained Earnings 30,700
Totals $ 163,700 $ 163,700

During January 2021, the following transactions occur:

January 2 Sold gift cards totaling $9,200. The cards are redeemable for merchandise within one year of the purchase date.
January 6 Purchase additional inventory on account, $153,000.
January 15 Firework sales for the first half of the month total $141,000. All of these sales are on account. The cost of the units sold is $76,800.
January 23 Receive $126,000 from customers on accounts receivable.
January 25 Pay $96,000 to inventory suppliers on accounts payable.
January 28 Write off accounts receivable as uncollectible, $5,400.
January 30 Firework sales for the second half of the month total $149,000. Sales include $13,000 for cash and $136,000 on account. The cost of the units sold is $82,500.
January 31 Pay cash for monthly salaries, $52,600.
  • 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 $3,600 and a two-year service life.

  • The company estimates future uncollectible accounts. The company determines $17,000 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 3% of these accounts are estimated to be uncollectible. (Hint: Use the January 31 accounts receivable balance calculated in the general ledger.)

  • Accrued interest expense on notes payable for January.

  • Accrued income taxes at the end of January are $13,600.

  • By the end of January, $3,600 of the gift cards sold on January 2 have been redeemed.

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

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