Question
Required information [The following information applies to the questions displayed below.] On January 1, 2021, the general ledger of Big Blast Fireworks includes the following
Required information
[The following information applies to the questions displayed below.]
On January 1, 2021, the general ledger of Big Blast Fireworks includes the following account balances:
Accounts | Debit | Credit | ||||
Cash | $ | 21,900 | ||||
Accounts Receivable | 36,500 | |||||
Allowance for Uncollectible Accounts | $ | 3,100 | ||||
Inventory | 30,000 | |||||
Land | 61,600 | |||||
Accounts Payable | 32,400 | |||||
Notes Payable (8%, due in 3 years) | 30,000 | |||||
Common Stock | 56,000 | |||||
Retained Earnings | 28,500 | |||||
Totals | $ | 150,000 | $ | 150,000 | ||
The $30,000 beginning balance of inventory consists of 300 units, each costing $100. During January 2021, Big Blast Fireworks had the following inventory transactions:
January | 3 | Purchase 1,200 units for $126,000 on account ($105 each). | ||
January | 8 | Purchase 1,300 units for $143,000 on account ($110 each). | ||
January | 12 | Purchase 1,400 units for $161,000 on account ($115 each). | ||
January | 15 | Return 100 of the units purchased on January 12 because of defects. | ||
January | 19 | Sell 4,000 units on account for $600,000. The cost of the units sold is determined using a FIFO perpetual inventory system. | ||
January | 22 | Receive $580,000 from customers on accounts receivable. | ||
January | 24 | Pay $410,000 to inventory suppliers on accounts payable. | ||
January | 27 | Write off accounts receivable as uncollectible, $2,500. | ||
January | 31 | Pay cash for salaries during January, $128,000. |
The following information is available on January 31, 2021.
- At the end of January, the company estimates that the remaining units of inventory are expected to sell in February for only $100 each.
- The company estimates future uncollectible accounts. The company determines $4,000 of accounts receivable on January 31 are past due, and 40% of these accounts are estimated to be uncollectible. The remaining accounts receivable on January 31 are not past due, and 4% 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. Interest is expected to be paid each December 31.
- Accrued income taxes at the end of January are $12,300
2. Record adjusting entries on January 31 for the above transactions. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
- At the end of January, the company estimates that the remaining units of inventory are expected to sell in February for only $100 each. Record the adjustment for net realizable value.
Note: Enter debits before credits.
|
- At the end of January, $4,000 of accounts receivable are past due, and the company estimates that 40% of these accounts will not be collected. Of the remaining accounts receivable, the company estimates that 4% will not be collected. Record the adjustment for uncollectible accounts.
Note: Enter debits before credits.
|
- Accrued interest expense on notes payable for January. Interest is expected to be paid each December 31. Record the adjustment for interest expense.
Note: Enter debits before credits.
|
- Accrued income taxes at the end of January are $12,300. Record the adjustment for income taxes.
Note: Enter debits before credits.
|
3. Prepare an adjusted trial balance as of January 31, 2021.
Account | Debit | Credit |
Totals |
4. Prepare a multiple-step income statement for the period ended January 31, 2021.
Total operating expenses | ||
Operating income (loss) | ||
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