PROJECT TIPS

You will START with the general ledger BEGINNING Account Balances of ACME Fireworks listed in the TRIAL BALANCE.

PART 1: RECORDING TRANSACTIONS

During January 2021, the following transactions occur:

January		2		Sold gift cards totaling $XXX. The cards are redeemable for merchandise within one year of the purchase date. HINT: You owe the amount of the gift cards that will be redeemed at a later date.
January		6		Purchase additional inventory on account, $XXX. (Chapter 6)
January		15		Firework sales for the first half of the month total $XXX. All of these sales are on account. The cost of the units sold is $XXX. (Chapter 6remember you will have 2 journal entries to complete with this transaction)
January		23		Receive $XXX from customers on accounts receivable. (Chapter 1)
January		25		Pay $XXX to inventory suppliers on accounts payable. (Chapter 1)
January		28		Write off accounts receivable as uncollectible, $XXX. (Chapter 5)
January		30		Firework sales for the second half of the month total $XXX. Sales include $XXX for cash and $XXX on account. The cost of the units sold is $XXX. (Chapter 6remember you will have 2 journal entries to complete with this transaction. JE#1 is part cash and part on account)
January		31		Pay cash for monthly salaries, $XXX. (Chapter 1)

PART 2: RECORDING ADJUSTING ENTRIES

AJE#1 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 $XXX and a two-year service life. (Chapter 7)

HINT: Use the January 31 equipment calculated in the general ledger.

AJE#2 The company estimates future uncollectible accounts. STEP 1:The company determines $XXX of accounts receivable on January 31 are past due, and 30% of these accounts are estimated to be uncollectible. STEP 2: The remaining accounts receivable on January 31 are not past due, and 5% of these accounts are estimated to be uncollectible. (Chapter 5)

HINT: You will first need to recalculate the general ledger balance in the Allowance for Uncollectible Accounts after your PART 1 transactions have been posted. You will then need to factor in the general ledger balance that is remaining in the Allowance for Uncollectible Accounts to use in calculating your AJE for bad debt expense.

HINT: Use the January 31 accounts receivable balance calculated in the general ledger.

Example: If your Accounts Receivable balance thus far is $180,000 and 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 expects 5% will not be collected.

The company estimates that 30% of the $11,000 of accounts receivable will not be collected.

$11,000 x .30 = $3,330

The company estimates that 5% of the remainder of accounts receivable will not be collected.

$180,000 (total accounts receivable) - $11,000 already accounted for = $169,000 which is the remaining amount.

$169,000 x .05 = $8,450

$3,330 + $8,450 = $11,750 this represents the companys new estimate of allowance for uncollectible accounts.

If the company currently has a balance in allowance for uncollectible accounts, you will need to account for that. If we assume in this example the companys current balance for allowance for uncollectible is a $500 debit, then you would need to add that to your new estimated allowance for uncollectibles.

The journal entry that would need to be recorded:

Bad Debt Expense $11,750

Allowance for Uncollectibles $11,750

AJE#3 Accrued interest expense on notes payable for January. (Chapter 3)

HINT: Use the January 31 notes payable balance calculated in the general ledger.

AJE#4 Accrued income taxes at the end of January are $XXX. (Chapter 3)

AJE#5 By the end of January, $XXX of the gift cards sold on January 2 have been redeemed.

HINT: You have now earned part of the deferred balance as REVENUE.

PART 3: PREPARE AN ADJUSTED TRIAL BALANCE as of January 31, 2021.

Be sure to RECORD and UPDATE all general ledger account transactions from Part 1 & Part 2.

PART 4: PREPARE A MULTIPLE-STEP INCOME STATEMENT

PART 5: PREPARE A CLASSIFIED BALANCE SHEET

PART 6: RECORDING CLOSING ENTRIES

PART 7: CALCULATE RATIOS