Question
On January 1, 2024, the general ledger of Freedom Fireworks includes the following account balances: Accounts Debit Credit Cash $ 11,200 Accounts Receivable 34,000 Allowance
On January 1, 2024, 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 2024, 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. 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. |
The following information is available on January 31, 2024.
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 additional future uncollectible accounts of $2,300.
Unpaid salaries at the end of January are $26,100.
Accrued income taxes at the end of January are $8,000.
The portion of Notes Payable (long-term) due within the next 12 months is reclassified as Notes Payable (current). The amount of the reclassification is $17,411.
Record the entry to close the revenue accounts.
The company estimates additional future uncollectible accounts of $2,300. Record the adjusting entry for uncollectible accounts.
Record the entry to close the expense accounts.
Pay the first monthly installment of $1,980 related to the $100,000 borrowed on January 1.
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