Question

On January 1, 2018, the general ledger of a company includes the following account balances: Credit Debit $ 78,000 48,000 $ 5,000 38,000 78,000 Accounts Cash Accounts Receivable Allowance for Uncollectible Accounts Inventory Building Accumulated Depreciation Land Accounts Payable Notes Payable (8%, due in 3 years) Common Stock Retained Earnings Totals 18,000 208,000 28,000 42,000 108,000 249,000 $ 450,000 $ 450,000 The company accounts for all inventory transactions using the perpetual FIFO method. Purchases and sales of inventory are recorded using the gross method for cash discounts. The $38,000 beginning balance of inventory consists of 380 units, each costing $100. During January 2018, the company had the following transactions

Answer 1

Company Journal Enteries Date Particulars 2.1.2018 Note Receivable a/c To Cash (Advance to employee) Dr. Debit in $ Credit in $ 28000 28000 Dr. 473000 5.1.2018 Inventory a/c To Accounts Payable (Inventory on account) 473000 12100 8.1.2018 Accounts Payable a/c Dr. To Inventory (Inventory returned) 110 x 110 12100 Dr. 533000 15.1.2018 Accounts Receivable a/c To Sales (Sales on account) 533000 447200 447200 Cost of goods sold a/c Dr. To Inventory (To record cost of goods sold) (380 x 100 ) + ( 3720 x 110) 39000 17.1.2018 Sales Returns and Allowances a/c Dr. To Accounts Receivable (Goods returned by customer) 300 x 130 39000 33000 Inventory a/c Dr. To Cost of goods sold (To record inventory received back) 300 x 110 33000 20.1.2018 Cash a/c Dr. 489900 Sales Discount a/c Dr. 9100 To Accounts Receivable (Cash received from debtors) 44000 + (3500 x 130 ) ( 3500 x 130 ) x 0.02 499000 4000 21.1.2018 Allowance for Uncollectibles a/c Dr. To Accounts Receivable (Uncollectibles written off) 48000 - 44000 4000 457000 24.1.2018 Accounts Payable a/c Dr. To Cash (Creditors paid)after discount period 457000 Dr. 36000 28.1.2018 Salaries Expense a/c To Cash (Salaries paid) 36000 Dr. 18000 29.1.2018 Utilities Expense a/c To Cash (Utilities paid) 18000 Dr. 4000 30.1.2018 Dividends a/c To Cash (Dividends paid) 4000

Adjusting Enteries Date Particulars Debit in $ Credit in $ 31.1.2018 Bad Debts Expense a/c Dr. 3900 To Allowance for Doubtful accounts 3900 (Bad Debts estimated) 48000 +533000 - 39000 - 499000 - 4000 = 39000 x 10% 140 31.1.2018 Interest Receivable a/c Dr. To Interest Revenue (Revenue earned) 28000 x 6% x 1/12 140 280 31.1.2018 Interest Expense a/c Dr. To Interest Payable (Interest accrued) 42000 x 8% x 1/12 280 Dr. 5800 31.1.2018 Income Tax Expense a/c To Income Tax Payable (Income Tax accrued) 5800 Dr. 2800 31.1.2018 Depreciation Expense a/c To Accum. Depre - Build (To record depreciation) 2800

Worksheet For the period ending 31.1.2018 Particulars Cash Note Receivable Interest Receivable Accounts Receivable Allowance for Uncollectibles Inventory Building Accumulated Depreciation Land Accounts Payable Interest Payable Income Tax Payable Notes Payable Common Stock Retained Earnings Dividends Interest Revenue Sales Sales Returns and Allowances Sales Discount Cost of goods sold Salaries Expense Utilities Expense Bad Debts Expense Interest Expense Income Tax Expense Depreciation Expense Totals Unadjusted Adjustments Adjusted Debit in $ Credit in $ Debit in $ Credit in $ Debit in $ Credit in $ 24900 24900 28000 28000 140 140 39000 39000 1000 3900 4900 84700 84700 78000 78000 18000 2800 20800 208000 208000 31900 31900 280 280 5800 5800 42000 42000 108000 108000 249000 249000 4000 4000 140 140 533000 533000 39000 39000 9100 9100 414200 414200 36000 36000 18000 18000 3900 3900 280 280 5800 5800 2800 2800 982900 987900 12920 12920 995820 995820 533000 -39000 -9100 484900 -414200 70700 Statement of Income For the period ending 31.1.2018 Sales Sales Returns and Allowances Sales Discount Net Sales Cost of goods sold Gross Profit Salaries Expense Utilities Expense Bad Debts Expense Depreciation Expense Operating Income Non Operating Items: Interest Revenue Interest Expense 36000 18000 3900 2800 60700 10000 140 -280 -140 9860 -5800 4060 Income Tax Expense Net Income Statement of Retained Earnings For the period ending 31.1.2018 Beginning Balance Net Income 249000 4060 253060 -4000 249060 Dividends

Amounts in $ Amounts in $ Balance sheet As at 31.1.2018 Assets Current Assets Cash Note Receivable Interest Receivable Accounts Receivable Allowance for Uncollectibles Inventory Amounts in $ Amounts in $ Liabilities Current Liabilities 24900 Accounts Payable 28000 Interest Payable 140 Income Tax Payable 39000 -4900 Non Current Liabilities 84700 171840 Notes Payable 31900 280 5800 37980 42000 Non Current Assets Building Accumulated Depreciation Land Total Assets 78000 -20800 Shareholders Equity 57200 Common Stock 208000 Retained Earnings 437040 Total Liabilities & Equity 108000 249060 357060 437040 Inventory Turnover Ratio = Cost of goods sold / Avg. Inventory = 414200 / ( 38000 + 84700)/2 = 414200 / 61350 = 6.75 Inventory is not handled efficiently Gross Profit Ratio = Gross Profit/ Net Sales = 70700 / 484900 = 14.58%