Question

On January 1, 2021, the general ledger of ACME Fireworks includes the following account balances: Accounts Debit Credit Cash 25,100 Accounts Receivable Allowance for Uncollectible Accounts 46, 200 4,200 Inventory Land 20,000 46,000 15,000 Equipment Accumulated Depreciation Accounts Payable Notes Payable (6%, due April 1, 2022) Common Stock 1,500 28,500 50,000 35,000 33,100 Retained Earnings $152,300 $152,300 Totals During January 2021, the following transactions occur: 2 Sold gift cards totaling $8,000. The cards are redeemable for merchandise within one year of the purchase January date 6 Purchase additional inventory on account, $147,000. January January 15 Firework sales for the first half of the month total $135,000. All of these sales are on account. The cost of the units sold is $73, 800 January 23 Receive $125,400 from customers on accounts receivable January 25 Pay $90,000 to inventory suppliers on accounts payable. January 28 Write off accounts receivable as uncollectible, $4,800 January 30 Firework sales for the second half of the month total $143,000. Sales include $11,000 for cash and $132,000 on account. The cost of the units sold is $79,500 January 31 Pay cash for month ly salaries, $52,000. a. Depreciation on the equipment for the month of January is calculated using the straight-line method. At the time the equipment was purchased, the company estimated a residual value of $3,000 and a two-year service life. b. The company estimates future uncollectible accounts. The company determines $11,000 of accounts receivable on January 31 are past due, and 30% 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.) c. Accrued interest expense on notes payable for January. d. Accrued income taxes at the end of January are $13,000 e. By the end of January, $3,000 of the gift cards sold on January 2 have been redeemed. 2. Record the adjusting entries on January 31 for the above transactions.

3.Prepare an adjusted trial balance as of January 31, 2021.

4. Prepare a multiple-step income statement for the period ended January 31, 2021.

5. Prepare a classified balance sheet as of January 31, 2021.

* Need help on questions 3,4, and 5.

Answer 1

Transation for Jan 2021 Particulars 2-Jan-21 Cash Debit Credit Date Sr.No. $8,000 1 Gift Card Liability (To Record sale of gift card) $8,000 6-Jan-21 inventory $1,47,000 2. Accounts Payable (To Record purchase of inventory) $1,47,000 15-Jan-21 Accounts Receivable Sales (To Record sales) 15-Jan-21 Cost of Good Sold inventory $1,35,000 3 $1,35,000 $73,800 4 $73,800 (To Record cost of good sold) 23-Jan-21 Cash $1,25,400 Accounts Receivable (To Record collection from accounts receivable) $1,25,400 25-Jan-21 Accounts Payable $90,000 6 Cash (To Record payment supplier) $90,000 28-Jan-21 Allowance for Uncollectible Accounts $4,800 7 Accounts Receivable (To Record write off of accounts receivable) $4,800 30-Jan-21 Accounts Receivable $1,32,000 $11,000 Cash Sales (To Record sales) $1,43,000 30-Jan-21 Cost of Good Sold $79,500 inventory (To Record cost of good sold) $79,500 31-Jan-21 Salary Expense $52,000 10 $52,000 Cash (To Record salary expense)

Adjusting Entry Date Particulars Debit Credit $500 31-Jan-21 Depreciation Accumulated Depreciation To Record depreciation on equipment) $500 31-Jan-21 Bad Debt Expense $12,500 Allowance for Uncollectible Accounts (To Record estimated uncollectible accounts) $12,500 $250 31-Jan-21 Interest Expense Accrued Interest Expense (To Record accrued interest expense on notes) $250 $13,000 31-Jan-21 Income Tax Provision for Income Tax (To Record $13,000 ome tax provision) $3,000 31-Jan-21 Gift Card Liability Sales To Record redemption of gift card) $3,000 Working 1 Depreciation $15,000 ($3,000) $12,000 Cost Less: Salvage Value Net Useful life (in years) Per Year Depreciation [$12000/2] Depreciation for January [$6000/12] 2. $6,000 $500 Allowance for Uncollectible Accounts 2. $46,200 Opening Balance in Accounts Receivable $1,35,000 $1,32,000 ($1,25,400) ($4,800) $1,83,000 Add: Sales for First half Add: Sales for Second half Less: Collection Received Less : Write off as Uncollectible Closing Balance of Accounts Receivable Estimate for Uncollectible Amount On $11000 @ 30% Remaining@ 5% [($183000-$11000) x5%] Closing Balance in Allowance for Uncollectible Account Add: Debit Balance in Uncollectible account (before adjusting entry) [-($4200-$4800)] Entry for the month $3,300 $8,600 $11,900 $600 $12,500

Interest on Notes Payable 3 $50,000 Amount rate 6% $3,000 $250 Interest yearly [$50000*6%] Interest for January [$3000/12]

ACME Fireworks Adjusted Trail Balance Trial Balance Entry Adjustment January 1, 2021 Credit January 31, 2021 Particulars Debit Debit Credit Debit Credit $25,100 $46,200 $1,44,400 $2,67,000 $4,800 $1,47,000 $1,42,000 $1,30,200 $12,500 $1,53,300 $27,500 $1,83,000 Cash Accounts Receivable Allowance for Uncollectible Accounts inventory Land $4,200 $11,900 $20,000 $46,000 $15,000 $13,700 $46,000 $15,000 Equipment Accumulated Depreciation Accounts Payable Notes Payable Common Stock Retained Earnings Salary Expense Cost of Good Sold Gift Card Liability Bad Debt Expense $1,500 $28,500 $50,000 $35,000 $33,100 $2,000 $85,500 $50,000 $35,000 $33,100 $500 $1,47,000 $90,000 $52,000 $1,53,300 $3,000 $12,500 $13,000 $52,000 $1,53,300 $8,000 $5,000 $12,500 $13,000 Income Tax Provision for Income Tax Sales Interest Expense Accrued Interest Expense $13,000 $2,81,000 $13,000 $2,81,000 $250 $250 $250 $250 Depreciation $500 $500 $8,87,750 $5,16,750 $1,52,300 $1,52,300 $8,87,750| $5,16,750

Acme Fireworks 4 Income Statement For the year ended 31st January 2021 Particulars Sales Amount Amount $2,81,000 ($1,53,300) $1,27,700 Less: Cost of Good Sold Gross Profit Less: Operating Expense Salary Expense Bad Debt Expense $52,000 $12,500 $500 Depreciation Total Operating Expense Operating Income Other Expense Interest Expense Net Income Before Tax Less: Income Tax ($65,000) $62,700 ($250) $62,450 ($13,000) $49,450 Net Income Acme Fireworks 5 Classified Balance Sheet January 31, 2021 Liabilities $27,500 Accounts Payable Gift Card Liability Accrued Interest Expense Assets Amount Amount Amount $85,500 $5,000 $250 $13,000 Cash Accounts Receivable Less: Allowance for Uncollectible Accou $1,83,000 ($11,900) $1,71,100 Provision for Income Tax $13,700 $2,12,300 Total Current Liabilities inventory Total Current Assets $1,03,750 $50,000 $1,53,750 Notes Payable $46,000 Total Liabilities Non Current Assets Land Shareholders' Equity $13,000 Common Stock Retained Earnings Total Shareholders' Equity Equipment Less: Accumulated Depreciation $15,000 ($2,000) $35,000 $82,550 $1,17,550 $2,71,300 Total Liabilities and Shareholder's Equity $2,71,300 Total Assets