Question

Exercise 7-21 Complete the accounting cycle using long-term asset transactions (L07-4, 7-7) (GL) On January 1, 2021, the general ledger of TNT Fireworks includes the following account balances: Credit Debit $ 58,900 25,400 $ 2,400 Accounts Cash Accounts Receivable Allowance for Uncollectible Accounts Inventory Notes Receivable (52, due in 2 years) Land Accounts Payable Common Stock Retained Earnings Totals 36,500 14,400 157,000 15,000 222,000 52,800 $292,200 $ 292,200 During January 2021, the following transactions occur January 1 Purchase equipment for $19,700. The company estimates a residual value of $1,700 and a five-year service fe. January 4 Pay cash on accounts payable, $9,700. January 8 Purchase additional inventory on account, $84,900. January 15 Receive cash on accounts receivable, $22,200. January 19 Pay cash for salaries, $30,000. January 28 Pay cash for January utilities, $16,700. January 30 Sales for January total $222,000. All of these sales are on account. The cost of the units sold is $116,000. The following information is available on January 31, 2021. a. Depreciation on the equipment for the month of January is calculated using the straight-line method, b. The company estimates the amount of their uncollectible accounts. The company determines $3,200 out of the total accounts

Answer 1

TNT Fireworks Journal entries Date Account 1-Jan Equipment Cash Credit Calculation Debit 19,700 19,700 9,700 4-Jan Accounts Payable Cash 9,700 84,900 8-Jan Inventory Accounts Payable 84,900 22,200 15-Jan Cash Accounts Receivable 22,200 30,000 19-Jan Salaries expense Cash 30,000 16,700 28-Jan Utilities Expense Cash 16,700 222,000 222,000 30-Jan Accounts Receivable Sales Revenue Cost of goods sold Inventory 116,000 116,000 Adjusting entries 31-Jan Depreciation expense Accumulated Depreciation-Equipment 300 =(19,700-1,700)/5*1/12 300 5,860 Workings below 31-Jan Bad debts expense Allowance for Uncollectible Accounts 5,860 60 =14,400*5%*1/12 31-Jan Accrued Interest Revenue Interest Revenue 32,800 31-Jan Salaries expense Salaries Payable 32,800 9,200 31-Jan Income tax expense Income tax Payable 9,200 wkgs Bad debts expense Accounts Receivable Past due Not past due Total Accts RecUcollectible % Uncollectible Amount 3,200 50% 1,600 222,000 3% 6,660 225,200 8,260 Allowance for Uncollectible Accounts Adjusted Ending Balance Beginning Balance Bad debts expense 8,260 2,400 5,860

TNT Fireworks T Accounts Date Debit Date Credit Date Credit Cash Debit Date Credit Accounts Receivable $ 25,400 15-Jan $ 22,200 $ 222,000 Date Debit Date Credit Allowance for Uncollectible Accounts Op bal $ 2,400 31-Jan $ 5,860 Date Debit Date Inventory Op bal $ 36,500 8 -Jan $ 84,900 30-Jan Op bal $ 58,900 15-Jan $ 22,200 Op bal 30-Jan $116,000 1-Jan $ 19,700 4-Jan $ 9,700 19-Jan $ 30,000 28-Jan $ 16,700 Bal. $ 8,260 Bal. Bal. $ 5,000 Accrued Interest Revenue 31-Jan $ 60 Bal. $ 225,200 Notes Receivable (5%, due in 2 years) Op bal $ 14,400 $ 5,400 Equipment $ 19,700 Land $157,000 Op bal 1-Jan Bal. Bal. Bal. $ 60 Accumulated Depreciation-Equipment 31-Jan $ 300 Bal. $ 14,400 Accounts Payable 4-Jan $ 9,700 Op bal $15,000 8-Jan $ 84,900 $ 157,000 Salaries Payable 31-Jan $ 19,700 Income tax Payable 31-Jan $ $ 32,800 9,200 $ 300 $ 90,200 Bal. $ 32,800 Bal. $ 9,200 Bal. Common Stock Op bal Bal. Retained Earnings Op bal $222,000 $ 52,800 Bal. $ 52,800 $ 222,000 Sales Revenue 30-Jan $ 222,000 Bal. Cost of goods sold $116,000 Interest Revenue 31-Jan $ 30-Jan 60 Salaries expense 19-Jan $ 30,000 31-Jan $ 32,800 $ 222,000 Bal. $ Bal. Utilities Expense 28-Jan $ 16,700 $116,000 Depreciation expense $ 300 Bal. Bad debts expense 31-Jan $ 5,860 60 Bal. $ 62,800 Income tax expense 31-Jan $ 9,200 31-Jan Bal. $ 16,700 Bal. $ 300 Bal. $ 5,860 Bal. $ 9,200

Unadjusted TB Debit Credit 5,000 225,200 2,400 5,400 Adjusted TB Debit Credit 5,000 225,200 8,260 5,400 14,400 157,000 19,700 14,400 157,000 19,700 90,200 TNT Fireworks Account Names Cash Accounts Receivable Allowance for Uncollectible Accounts Inventory Accrued Interest Revenue Notes Receivable (5%, due in 2 years) Land Equipment Accumulated Depreciation-Equipment Accounts Payable Salaries Payable Income tax Payable Common Stock Retained Earnings Sales Revenue Cost of goods sold Interest Revenue Salaries expense Utilities Expense Depreciation expense Bad debts expense Income tax expense Totals 300 90,200 32,800 9,200 222,000 52,800 222,000 222,000 52,800 222,000 116,000 116,000 30,000 16,700 62,800 16,700 300 5,860 9,200 637,620 637,620 589,400 589,400

222,000 116,000 106,000 TNT Fireworks Income Statement For Month ended Jan 31, 2021 Revenues Sales Revenue Cost of goods sold Total Revenues Operating Expenses Salaries expense Utilities Expense Depreciation expense Bad debts expense Total Operating Expenses Operating Income Interest Revenue Net Income before taxes Income tax expense Net Income 62,800 16,700 300 5,860 85,660 20,340 60 20,400 9,200 11,200 Statement of Retained Earnings For Month ended Jan 31, 2021 Retained Earnings, Jan 1, 2021 Net Income Retained Earnings, Jan 31, 2021 52,800 11,200 64,000

TNT Fireworks Balance Sheet As of Jan 31, 2021 Assets Current Assets Cash Accounts Receivable Allowance for Uncollectible Accounts Inventory Accrued Interest Revenue Total Current Assets 5,000 225,200 (8,260) 216,940 5,400 60 227,400 157,000 Property, Plant & Equipment Land Equipment Accumulated Depreciation Equipment Equipment, Net Total Property, Plant & Equipment 19,700 (300) 19,400 176,400 Other Assets Notes Receivable (5%, due in 2 years) Total Assets 14,400 418,200 Liabilities & Stockholders Equity Current Liabilities Accounts Payable Salaries Payable Income tax Payable Total Current Liabilities 90,200 32,800 9,200 132,200 Stockholders Equity Common Stock Retained Earnings Total Stockholders Equity Total Liabilities & Stockholders Equity 222,000 64,000 286,000 418,200

222,000 Closing entries 31-Jan Sales Revenue Interest Revenue Retained Earnings 222,060 210,860 31-Jan Retained Earnings Cost of goods sold Salaries expense Utilities Expense Depreciation expense Bad debts expense Income tax expense 116,000 62,800 16,700 300 5,860 9,200