Question

On January 1, 2021, the general ledger of 3D Family Fireworks includes the following account balances: Credit $ 25, 900 14, 600 $ 2, 800 Accounts Cash Accounts Receivable Allowance for Uncollectible Accounts Supplies Notes Receivable (5%, due in 2 years) Land Accounts Payable Common Stock Retained Earnings Totals 3,500 30,000 78,000 9,800 106,000 33, 400 $152,000 $152,000 During January 2021, the following transactions occur January 2 Provide services to customers for cash, $45, 100. January 6 Provide services to customers on account, $82, 400. January 15 Write off accounts receivable as uncollectible, $2,400. 20 Pay cash for salaries, $32, 400. 22 Receive cash on accounts receivable, $80,000. January 25 Pay cash on accounts payable, $6,500. January 30 Pay cash for utilities during January, $14, 700. The following information is available on January 31, 2021. a. The company estimates future uncollectible accounts. The company determines $6,000 of accounts receivable on January 31 are past due, and 20% of these accounts are estimated to be uncollectible. The remaining accounts receivable on January 31 are not past due, and 5% of these accounts are estimated to be uncollectible. (Hint: Use the January 31 accounts receivable balance calculated in the general ledger.) b. Supplies at the end of January total $750. c. Accrued interest revenue on notes receivable for January. Interest is expected to be received each December 31. d. Unpaid salaries at the end of January are $34,500.

Answer 1

3D Family Fireworks Journal Enteries Date Particulars 2.1.2021 Cash a/c Dr. To Service Revenue (Services provided for cash) Debit in $ Credit in $ 45100 45100 82400 6.1.2021 Accounts Receivable a/c Dr. To Service Revenue (Services provided on account) 82400 2400 15.1.2021 Allowance for uncollectible accounts To Accounts Receivable (Uncollectibles written off) 2400 Dr. 32400 20.1.2021 Salary Expense a/c To Cash (Salary paid in cash) 32400 80000 22.1.2021 Cash a/c Dr. To Accounts Receivable (Cash received from debtors) 80000 6500 25.1.2021 Accounts Payable a/c Dr. To Cash (Creditors paid) 6500 Dr. 14700 30.1.2021 Utilities Expense a/c To Cash (Utilities paid in cash) 14700

Dr. Adjusting Enteries Date Particulars Debit in $ Credit in $ 31.1.2021 Bad Debts a/c 1310 To Allowance for uncollectible accounts 1310 (Bad debts estimated ) 6000 x 20% = 1200 + 510 = 1710 - 400 = 1310 14600 - 4400 = 10200 x 5% = 510 Allowance for Uncollectibles = 2800 - 2400 = 400 2750 31.1.2021 Supplies Expense a/c Dr. To Supplies (Supplies Expensed ) 3500 - 750 = 2750 2750 125 31.1.2021 Interest Receivable a/c Dr. To Interest Income (Interest Revenue accrued) 30000 x 5% x 1/12 = 125 125 Dr. 34500 31.1.2021 Salary Expense a/c To Salary Payable (Salary accrued) 34500

Worksheet For the period ending 31.1.2021 Particulars Cash Accounts Receivable Allowance for uncollectible accounts Interest Receivable Supplies Notes Receivable 6% Land Accounts Payable Salary Payable Common Stock Retained Earnings Service Revenue Interest Income Salary Expense Utilities Expense Bad Debts Supplies Expense Totals Unadjusted Adjustments Adjusted Debit in $ Credit in $ Debit in $ Credit in $ Debit in $ Credit in $ 97400 97400 14600 14600 400 1310 1710 125 125 3500 2750 750 30000 30000 78000 78000 3300 3300 34500 34500 106000 106000 33400 33400 127500 127500 125 125 32400 34500 66900 14700 14700 1310 1310 2750 270600 270600 38685 38685 306535 306535 2750

127500 125 127625 Statement of Income For the period ending 31.1.2021 Service Revenue Interest Income Total Revenue Less: Salary Expense 66900 Utilities Expense 14700 Bad Debts 1310 Supplies Expense 2750 Net Income 85660 41965 Statement of Retained Earnings For the period ending 31.1.2021 Beginning 33400 Net Income 41965 75365

Amounts in $ Amounts in $ Balance sheet As at 31.1.2021 Assets Current Assets Cash Accounts Receivable Allowance for uncollectible accounts Interest Receivable Supplies Amounts in $ Amounts in $ Liabilities Current Liabilities 97400 Accounts Payable 14600 Salary Payable -1710 125 750 111165 3300 34500 37800 Non Current Assets Notes Receivable 6% Shareholders Equity 30000 Common Stock 78000 Retained Earnings 219165 Total Liabilities & Equity 106000 75365 Land 181365 219165 Total Assets Receivables Turnover = Service Revenue / Avg. Receivables = 127500 / ( 14600 - 2800 + 14600 - 1710 )/2 = 127500 / 12345 = 10.33 Days in Receivables = 365 / 10.33 = 35.33 Days Company recovers receivables in 35.33 Days in comparison to 84 days in industry Ratio of allowance for uncollectibles to Accounts Receivable 1.1.2021 = 2800 / 14600 = 19.18% 31.1.2021 = 1710 / 14600 = 11.71% Company is improving.