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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.

  1. At the end of January, the company estimates that the remaining units of inventory are expected to sell in February for only $100 each.
  2. 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.)
  3. Accrued interest expense on notes payable for January. Interest is expected to be paid each December 31.
  4. 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.

Date General Journal Debit Credit
January 31
  • 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.

Date General Journal Debit Credit
January 31
  • 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.

Date General Journal Debit Credit
January 31
  • Accrued income taxes at the end of January are $12,300. Record the adjustment for income taxes.

Note: Enter debits before credits.

Date General Journal Debit Credit
January 31

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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