Question

Ivanhoe Company's balance sheet at December 31, 2021, is presented below. Ivanhoe Company Balance Sheet December 31, 2021 Cash $13,660 Accounts payable $8,010 Accounts receivable 21,700 Common stock 18,900 Allowance for doubtful accounts (750) Retained earnings 17,070 Inventory 9.370 $43.980 $43.980 During January 2022, the following transactions occurred. Ivanhoe uses the perpetual inventory method. Jan. 1 Ivanhoe accepted a 4-month, 8% note from Betheny Company in payment of Betheny's $3,600 account. 3 Ivanhoe wrote off as uncollectible the accounts of Walter Corporation ($500) and Drake Company ($300). 8 Ivanhoe purchased $17.750 of inventory on account. 11 Ivanhoe sold for $27,000 on account inventory that cost $16,490. 15 Ivanhoe sold inventory that cost $680 to Jack Rice for $1.000. Rice charged this amount on his Visa Flest Bank card. The service fee charged Ivanhoe by First Bank is 3X 17 Ivanhoe collected $21,100 from customers on account. 21 Ivanhoe paid $15,660 on accounts payable. 24 Ivanhoe received payment in full ($300) from Drake Company on the account written off on January 3 27. Ivanhoe purchased advertising supplies for $1.260 cash. 31 Ivanhoe paid other operating expenses, $3.500.

Answer 1

Journal Entries:

Date	Account title and explanation	Debit	Credit
Jan 1	Notes receivable	$3,600
	Accounts receivable		$3,600
	[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	$17,750
	Accounts payable		$17,750
	[Purchase of inventory on account]
Jan 11	Accounts receivable	$27,000
	Sales revenue		$27,000
	[Sales on account]
	Cost of goods sold	$16,490
	Merchandise inventory		$16,490
	[Cost of goods sold]
Jan 15	Cash	$970
	Card fee expense [1,000 x 3%]	$30
	Sales revenue		$1,000
	[Sales revenue]
	Cost of goods sold	$680
	Merchandise inventory		$680
	[Cost of goods sold]
Jan 17	Cash	$21,100
	Accounts receivable		$21,100
	[Collections from customers]
Jan 21	Accounts payable	$15,660
	Cash		$15,660
	[Paid for accounts payable]
Jan 24	Accounts receivable	$300
	Allowance for doubtful account		$300
	[To reinstate previously written off account]
	Cash	$300
	Accounts receivable		$300
	[Collections from customers]
Jan 27	Supplies	$1,260
	Cash		$1,260
	[purchase of advertising supplies]
Jan 31	Operating expenses	$3,500
	Cash		$3,500
	[Paid for operating expenses]
Adjustments
Date	Account title and explanation	Debit	Credit
Jan 31	Interest receivable	$24
	Interest revenue [3,600 x 8% x 1/12]		$24
	[To record interest revenue]
Jan 31	Bad debt expense	$1,142
	Allowance for doubtful accounts		$1,142
	[To record bad debt expense]
Jan 31	Supplies expense [1,260-560]	$700
	Supplies		$700
	[To record supplies expense]
Jan 31	Income tax expense (from income statement)	$1,645
	Income tax payable		$1,645
	[To record income tax expense]

Adjusted Trial Balance:

Ivanhoe Company
Adjusted Trial Balance
For the month ended January 31,2022
Account title	Debit	Credit
Cash	$15,610
Inventory	$9,950
Supplies	$560
Interest receivable	$24
Notes receivable	$3,600
Accounts receivable	$23,200
Allowance for doubtful accounts		$1,392
Accounts payable		$10,100
Income tax payable		$1,645
Common stock		$18,900
Retained earnings		$17,070
Sales revenue		$28,000
Interest revenue		$24
Cost of goods sold	$17,170
Card fee expense	$30
Other operating expenses	$3,500
Bad debt expense	$1,142
Supplies expense	$700
Income tax expense	$1,645
Total	$77,131	$77,131

Income Statement:

Ivanhoe Company
Income statement
For the month ended January 31,2022
Sales revenue (27,000+1,000)		$28,000
Cost of goods sold (16,490+680)		($17,170)
Gross profit		$10,830
Operating Expenses:
Card fee expense	$30
Other operating expenses	$3,500
Bad debt expense	$1,142
Supplies expense	$700
Operating expenses		($5,372)
Operating income		$5,458
Non-operating income(expense):
Interest revenue		$24
Income before income tax		$5,482
Income tax expense (5,482 x 30%)		($1,645)
Net income		$3,837

Calculations:

Accounts receivable
Beg.	$21,700	Jan 1	$3,600
Jan 11	$27,000	Jan 3	$800
Jan 24	$300	Jan 17	$21,100
		Jan 24	$300
End.	$23,200
Allowance for doubtful account
Jan 3	$800	Beg.	$750
		Jan 24	$300
		Jan 31 Bad debt expense*	$1,142
		End. (23,200 x 6%)	$1,392
*Bad debt expense = 1,392+800-750-300 = 1,142
Cash
Beg.	$13,660	Jan 21	$15,660
Jan 15	$970	Jan 27	$1,260
Jan 17	$21,100	Jan 31	$3,500
Jan 24	$300
End.	$15,610
Accounts payable
Jan 21	$15,660	Beg.	$8,010
		Jan 8	$17,750
		End.	$10,100
Inventory
Beg.	$9,370	Jan 11	$16,490
Jan 8	$17,750	Jan 15	$680
End.	$9,950