Question
On January 1, 2021, the general ledger of Freedom Fireworks includes the following account balances: Accounts Debit Credit Cash $ 11,400 Accounts Receivable 34,400 Inventory
On January 1, 2021, the general ledger of Freedom Fireworks includes the following account balances:
Accounts | Debit | Credit | |||||
Cash | $ | 11,400 | |||||
Accounts Receivable | 34,400 | ||||||
Inventory | 152,200 | ||||||
Land | 69,300 | ||||||
Buildings | 122,000 | ||||||
Allowance for Uncollectible Accounts | $ | 2,000 | |||||
Accumulated Depreciation | 9,800 | ||||||
Accounts Payable | 19,900 | ||||||
Common Stock | 202,000 | ||||||
Retained Earnings | 155,600 | ||||||
Totals | $ | 389,300 | $ | 389,300 | |||
During January 2021, the following transactions occur:
January 1 | Borrow $102,000 from Captive Credit Corporation. The installment note bears interest at 7% annually and matures in 5 years. Payments of $2,020 are required at the end of each month for 60 months. | |
January 4 | Receive $31,200 from customers on accounts receivable. | |
January 10 | Pay cash on accounts payable, $13,000. | |
January 15 | Pay cash for salaries, $29,100. | |
January 30 | Firework sales for the month total $195,400. Sales include $65,200 for cash and $130,200 on account. The cost of the units sold is $113,500. | |
January 31 | Pay the first monthly installment of $2,020 related to the $102,000 borrowed on January 1. Round your interest calculation to the nearest dollar. |
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 $24,200.
- Unpaid salaries at the end of January are $26,300.
- Accrued income taxes at the end of January are $8,200.
- $17,759 of the long-term note payable balance will be paid over the next year.
- The company estimates the amount of their bad debt expense and uncollectible accounts at the end of each month. Out of the total accounts receivable shown on the General Ledger (See General Ledger Tab for total A/R balance) on January 31, the company determines $3,200 is past due, and 50% of these past due amounts are estimated to be uncollectible (Hint: multiply the percentage by the $ amount of the A/R that is past due). The remaining accounts receivable balance on January 31 is current (total A/R minus amount that is past due), and 3% of the current balance is estimated to be uncollectible.
How Would the following events be put into a journal entry? Also, how would they be reflected on an income statement and balance sheet?
1. JAN 01 Borrow $102,000 from Captive Credit Corporation. The installment note bears interest at 7% annually and matures in 5 years. Payments of $2,020 are required at the end of each month for 60 months. Record the issuance of the long-term note payable.
2. JAN 04 Receive $31,200 from customers on accounts receivable.
3. JAN 10 Pay cash on accounts payable, $13,000.
4. JAN 15 Pay cash for salaries, $29,100.
5. JAN 30 Record the firework sales of $195,400. Sales include $65,200 for cash and $130,200 on account.
6. JAN 30 The cost of the units sold is $113,500.
7. JAN 31 Pay the first monthly installment of $2,020 related to the $102,000 long-term note payable borrowed on January 1.
8. JAN 31 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 $24,200. Prepare the adjusting journal entry for depreciation.
9. JAN 31 At the end of January, $3,200 of accounts receivable are past due, and the company estimates that 50% of these accounts will not be collected. Of the remaining accounts receivable, the company estimates that 3% will not be collected. No accounts were written off as uncollectible in January.
10. JAN 31 Unpaid salaries at the end of January are $26,300. Prepare the adjusting entry for salaries.
11. JAN 31 Accrued income taxes at the end of January are $8,200. Prepare the adjusting entry for income tax.
12. JAN 31 Record the reclassification of $17,759 from long-term notes payable to current notes payable.
13. JAN 31 Prepare the closing entry for revenue.
14. JAN 31 Prepare the closing entry for expenses.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started