Question

2. Calculate the times interest earned ratio for E-Travel and Pricecheck. Which company is better able to meet interest payments as they become due? E9-21 On January 1, 2021, the general ledger of Freedom Fireworks includes the following account balances: Complete cycle using liability tran (LO9-2, LO Credit Debit $ 11,200 34,000 $ 1,800 Accounts Cash Accounts Receivable Allowance for Uncollectible Accounts Inventory Land Buildings Accumulated Depreciation Accounts Payable Common Stock Retained Earnings Totals 152,000 67,300 120,000 9,600 17,700 200,000 155,400 $384,500 $384,500 During January 2021, the following transactions occur: January 1 BOTTOW $100,000 from Captive Credit Corporation. The installment note bears interest at 7% annually and matures in 5 years. Payments of $1,980 are required at the end of each month for 60 months. January 4 Receive $31,000 from customers on accounts receivable. January 10 Pay cash on accounts payable, $11,000. January 15 Pay cash for salaries, $28,900. January 30 Firework sales for the month total $195,000. Sales include $65,000 for cash and $130,000 on account. The cost of the units sold is $112,500. January 31 Pay the first monthly installment of $1,980 related to the $100,000 borrowed on January 1. Round your interest calculation to the nearest dollar. Required: 1. Record each of the transactions listed above. 2. Record adjusting entries on January 31. A Depreciation on the building for the month of January is calculated using the straight- line method. At the time the building was purchased, the company estimated a service life of 10 years and a residual value of $24,000. e company estimates future uncollectible accounts. The company determines $3,00 of accounts receivable on January 31 are past due, and 50% of these accounts are

requirements 1 and 2

Answer 1

1)

Date	Account title	Debit	credit
Jan 1	Cash	100000
	Note payable		100000
Jan 4	Cash	31000
	Accounts receivable		31000
Jan 10	Accounts payable	11000
	cash		11000
Jan 15	salaries expense	28900
	cash		28900
Jan 30	cash	65000
	Accounts receivable	130000
	Sales revenue		195000
b	cost of goods sold	112500
	Inventory		112500
Jan 31	Note payable	1397
	Interest expense (100000*.07*1/12)	583
	cash		1980

2)

Date	Account title	Debit	credit
A	Depreciation expense	800
	Accumulated depreciation		800
B	Bad debt expense	2300
	Allowance for un-collectible account		2300
C	Salaries and wage expense	26100
	salaries and wage payable		26100
d	Income tax expense	8000
	Income tax payable		8000

**A)Depreciation expense =[cost-salvage value]/useful life

                         = [120000-24000]/10.

                         = 9600 or 9600/12 = 800 per month

B)Estimated Accounts receivable at end =Beginning +sales on account -collections

                              = 34000 + 130000 -31000

                              = 133000

Estimated Un-collectible account at year end = [3000*50%] + [130000*2%]

                                              = 1500+ 2600

                                              = 4100

Bad debt expense = 4100- 1800 credit balance in allowance account

                 = 2300