Question

Pharoah Company's balance sheet at December 31, 2021, is presented below. Pharoah Company Balance Sheet December 31, 2021 Cash Accounts payable $8,680 $13,720 20,500 Accounts receivable Common stock 20,700 Allowance for doubtful accounts (780) Retained earnings 13,610 Inventory 9,550 $42.990 $42,990 During January 2022, the following transactions occurred. Pharoah uses the perpetual inventory method. Jan. 1 Pharoah accepted a 4-month, 8% note from Betheny Company in payment of Betheny's $4,800 account. 3 Pharoah wrote off as uncollectible the accounts of Walter Corporation ($500) and Drake Company ($300). 8 Pharoah purchased $16,380 of inventory on account. 11 Pharoah sold for $25,800 on account inventory that cost $16,470. 15 Pharoah sold inventory that cost $670 to Jack Rice for $900. Rice charged this amount on his Visa First Bank ca First Bank is 3%. 17 Pharoah collected $21,600 from customers on account. 21 Pharoahnaid $17.600 on accounts pavable

Answer 1

Journal entries for January transactions:

Date	Account title and explanation	Debit	Credit
Jan 1	Notes receivable	$4,800
	Accounts receivable		$4,800
	[Note received for accounts receivable]
Jan 3	Allowance for doubtful account	$800
	Accounts receivable [500+300]		$800
	[Write off of uncollectible]
Jan 8	Merchandise inventory	$16,380
	Accounts payable		$16,380
	[Purchase of inventory on account]
Jan 11	Accounts receivable	$25,800
	Sales revenue		$25,800
	[Sales on account]
	Cost of goods sold	$16,470
	Merchandise inventory		$16,470
	[Cost of goods sold]
Jan 15	Cash	$873
	Card fee expense [900 x 3%]	$27
	Sales revenue		$900
	[Sales revenue]
	Cost of goods sold	$670
	Merchandise inventory		$670
	[Cost of goods sold]
Jan 17	Cash	$21,600
	Accounts receivable		$21,600
	[Collections from customers]
Jan 21	Accounts payable	$17,600
	Cash		$17,600
	[Paid for accounts payable]
Jan 24	Accounts receivable	$300
	Allowance for doubtful account		$300
	[To reinstate previosuly writen off account]
	Cash	$300
	Accounts receivable		$300
	[Collections from customers]
Jan 27	Supplies	$1,280
	Cash		$1,280
	[purchase of advertising supplies]
Jan 31	Operating expenses	$3,260
	Cash		$3,260
	[Paid for operating expenses]

Adjusting entries:

	Date	Account title and explanation	Debit	Credit
1	Jan 31	Interest receivable	$384
		Interest revenue [4,800 x 8%]		$384
		[To record interest revenue]
2	Jan 31	Bad debt expense (See T-account)	$866
		Allowance for doubtful accounts		$866
		[To record bad debt expense]
3	Jan 31	Supplies expense [1,280-540]	$740
		Supplies		$740
		[To record supplies expense]
4	Jan 31	Income tax expense	$3,536
		Income tax payable		$3,536
		[To record income tax expense]

Adjusted Trial balance:

PHAROAH COMPANY
Adjusted Trial Balance
For the month ended January 31,2022
Account title	Debit	Credit
Cash	$14,353
Inventory	$8,790
Supplies	$540
Interest receivable	$384
Notes receivable	$4,800
Accounts receivable	$19,100
Allowance for doubtful accounts		$1,146
Accounts payable		$7,460
Income tax payable		$1,515
Common stock		$20,700
Retained earnings		$13,610
Sales revenue		$26,700
Interest revenue		$384
Cost of goods sold	$17,140
Card fee expense	$27
Other operating expenses	$3,260
Bad debt expense	$866
Supplies expense	$740
Income tax expense	$1,515
Total	$71,515	$71,515

Calculations:

Accounts receivable
Beg.	$20,500	Jan 1	$4,800
Jan 11	$25,800	Jan 3	$800
Jan 24	$300	Jan 17	$21,600
		Jan 24	$300
End.	$19,100
Allowance for doubtful account
Jan 3	$800	Beg.	$780
		Jan 24	$300
		Jan 31 Bad debt expense*	$866
		End. (19,100 x 6%)	$1,146
Cash
Beg.	$13,720	Jan 21	$17,600
Jan 15	$873	Jan 27	$1,280
Jan 17	$21,600	Jan 31	$3,260
Jan 24	$300
End.	$14,353
Accounts payable
Jan 21	$17,600	Beg.	$8,680
		Jan 8	$16,380
		End.	$7,460
Inventory
Beg.	$9,550	Jan 11	$16,470
Jan 8	$16,380	Jan 15	$670
End.	$8,790

*Bad debt expense is a balancing figure.

Income statement:

PHAROAH COMPANY
Income statement
For the month ended January 31,2022
Sales revenue (25,800+900)		$26,700
Cost of goods sold (16,470+670)		($17,140)
Gross profit		$9,560
Operating Expenses:
Card fee expense	$27
Other operating expenses	$3,260
Bad debt expense	$866
Supplies expense	$740
Operating expenses		($4,893)
Operating income		$4,667
Non-operating income(expense):
Interest revenue		$384
Income before income tax		$5,051
Income tax expense (5,051 x 30%)		($1,515)
Net income		$3,536

Statement of retained earnings:

PHAROAH COMPANY
Statement of retained earnings
For the month ended January 31,2022
Retained earnings, January 1,2022	$13,610
Net income	$3,536
Retained earnings, January 31,2022	$17,146

Balance Sheet:

PHAROAH COMPANY
Balance sheet
For the month ended January 31,2022
Assets
Current assets:
Cash		$14,353
Accounts receivable	$19,100
Allowance for doubtful accounts	($1,146)	$17,954
Inventory		$8,790
Supplies		$540
Interest receivable		$384
Notes receivable		$4,800
Total Assets		$46,821
Liabilities and stockholder's equity
Current liabilities:
Accounts payable		$7,460
Income tax payable		$1,515
Total liabilties		$8,975
Stockholder's equity:
Common stock		$20,700
Retained earnings		$17,146
Total stockholder's equity		$37,846
Total liabilities and stockholder's equity		$46,821