Question
[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:
[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 | $ | 22,900 | ||||
Accounts Receivable | 39,000 | |||||
Allowance for Uncollectible Accounts | $ | 4,100 | ||||
Inventory | 35,000 | |||||
Land | 69,100 | |||||
Accounts Payable | 29,900 | |||||
Notes Payable (12%, due in 3 years) | 35,000 | |||||
Common Stock | 61,000 | |||||
Retained Earnings | 36,000 | |||||
Totals | $ | 166,000 | $ | 166,000 | ||
The $35,000 beginning balance of inventory consists of 350 units, each costing $100. During January 2021, Big Blast Fireworks had the following inventory transactions:
January | 3 | Purchase 1,400 units for $154,000 on account ($110 each). | ||
January | 8 | Purchase 1,500 units for $172,500 on account ($115 each). | ||
January | 12 | Purchase 1,600 units for $192,000 on account ($120 each). | ||
January | 15 | Return 125 of the units purchased on January 12 because of defects. | ||
January | 19 | Sell 4,600 units on account for $690,000. The cost of the units sold is determined using a FIFO perpetual inventory system. | ||
January | 22 | Receive $665,000 from customers on accounts receivable. | ||
January | 24 | Pay $495,000 to inventory suppliers on accounts payable. | ||
January | 27 | Write off accounts receivable as uncollectible, $3,000. | ||
January | 31 | Pay cash for salaries during January, $119,000. |
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 $4,500 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 $12,800.
a. At the end of January, the company estimates that the remaining units of inventory are expected to sell in February for only $100 each. b. At the end of January, $4,500 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. c. Accrued interest expense on notes payable for January. Interest is expected to be paid each December 31. d. Accrued income taxes at the end of January are $12,800.
3. Prepare an adjusted trial balance as of January 31, 2021.
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