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On January 1, 2021, the general ledger of ACME Fireworks includes the following account balances:

Accounts	Debit				Credit
Cash	$	26,200
Accounts Receivable		48,400
Allowance for Uncollectible Accounts					$	5,300
Inventory		21,100
Land		57,000
Equipment		20,500
Accumulated Depreciation						2,600
Accounts Payable						29,600
Notes Payable (6%, due April 1, 2022)						61,000
Common Stock						46,000
Retained Earnings						28,700
Totals	$	173,200			$	173,200

During January 2021, the following transactions occur:

January		2		Sold gift cards totaling $10,200. The cards are redeemable for merchandise within one year of the purchase date.
January		6		Purchase additional inventory on account, $158,000.
January		15		Firework sales for the first half of the month total $146,000. All of these sales are on account. The cost of the units sold is $79,300.
January		23		Receive $126,500 from customers on accounts receivable.
January		25		Pay $101,000 to inventory suppliers on accounts payable.
January		28		Write off accounts receivable as uncollectible, $5,900.
January		30		Firework sales for the second half of the month total $154,000. Sales include $17,000 for cash and $137,000 on account. The cost of the units sold is $85,000.
January		31		Pay cash for monthly salaries, $53,100.

• 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 $4,300 and a two-year service life.

• The company estimates future uncollectible accounts. The company determines $22,000 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 3% of these accounts are estimated to be uncollectible. (Hint: Use the January 31 accounts receivable balance calculated in the general ledger.)

• Accrued interest expense on notes payable for January.

• Accrued income taxes at the end of January are $14,100.

• By the end of January, $4,100 of the gift cards sold on January 2 have been redeemed.

  
2. Record the adjusting entries on January 31 for the above transactions. (If no entry is required for a particular transaction/event, select "No Journal Entry Required" in the first account field.)

Answer 1

ACME Fireworks Journal Enteries Date Particulars 2.1.2021 Cash a/c To Unearned Revenue (Sold gift cards) Dr. Debit in $ Credit in $ 10200 10200 158000 6.1.2021 Inventory a/c Dr. To Accounts Payable (Inventory purchased on account) 158000 Dr. 146000 15.1.2021 Accounts Receivable a/c To Sales Revenue (Sales on account) 146000 79300 Cost of goods sold a/c Dr. To Inventory (To record cost of goods sold) 79300 126500 23.1.2021 Cash a/c Dr. To Accounts Receivable (Cash from debtors) 126500 Dr. 101000 25.1.2021 Accounts Payable a/c To Cash (Cash paid to Creditors) 101000 600 5300 28.1.2021 Bad debts Expense a/c Dr. Allowance for Uncollectible Accounts a/c Dr. To Accounts Receivable (Uncollectibles written off) 5900 Dr. Dr. 17000 137000 30.1.2021 Cash a/c Accounts Receivable a/c To Sales Revenue (Sales made) 154000 85000 Cost of goods sold a/c Dr. To Inventory (To record cost of goods sold) 85000 Dr. 53100 31.1.2021 Salaries Expense a/c To Cash (Salaries paid) 53100

Adjusting Enteries Date Particulars 31.1.2021 Depreciation Expense a/c Dr. To Accum. Depre - Equip (To record Depreciation) ( 20500 - 4300 )/2 = 8100 / 12 = 675 Debit in $ Credit in $ 675 675 12570 12570 31.1.2021 Bad debts Expense a/c Dr. To Allowance for Uncollectible Accounts (To record bad debts ) 22000 x 30% = 6600 +5970 = 12570 199000 x 3% = 5970 305 31.1.2021 Interest Expense a/c Dr. To Interest Payable (Interest accrued) 61000 x 6% x 1/12 305 Dr. 14100 31.1.2021 Income Tax Expense a/c To Income Tax Payable (Income Tax accrued) 14100 Dr. 4100 31.1.2021 Unearned Revenue a/c To Sales Revenue (Revenue recognized) 4100

Worksheet For the Month Ending 31.1.2021 675 Particulars Cash Accounts Receivable Allowance for Uncollectible Accounts Inventory Land Equipment Accumulated Depreciation Accounts Payable Unearned Revenue Interest Payable Income Tax Payable Notes Payable (6%, due April 1, 2019) Common Stock Retained Earnings Sales Revenue Cost of goods sold Salaries Expense Depreciation Expense Bad debts Expense Interest Expense Income Tax Expense Totals Unadjusted Adjustments Adjusted Debit in $ Credit in $ Debit in $ Credit in $ Debit in $ Credit in $ 25800 25800 199000 199000 12570 12570 14800 14800 57000 57000 20500 20500 2600 3275 86600 86600 10200 4100 6100 305 305 14100 14100 61000 61000 46000 46000 28700 28700 300000 4100 304100 164300 164300 53100 53100 675 675 600 12570 13170 305 305 14100 14100 535100 535100 31750 31750 562750 562750

Statement of Income For the Month Ending 31.1.2021 Sales Revenue Cost of goods sold Gross Margin 304100 -164300 139800 53100 675 13170 Salaries Expense Depreciation Expense Bad debts Expense Operating Income Non Operating Items: Interest Expense 66945 72855 -305 72550 -14100 58450 Income Tax Expense Net Income Statement of Retained Earnings For the Month Ending 31.1.2021 Beginning 28700 Net Income 58450 87150

Amounts in $ Amounts in $ Balance sheet As at 31.1.2021 Assets Amounts in $ Amounts in $ Liabilities Current Assets Current Liabilities Cash 25800 Accounts Payable Accounts Receivable 199000 Unearned Revenue Allowance for Uncolle -12570 Interest Payable Inventory 14800 227030 Income Tax Payable 86600 6100 305 14100 107105 Non Current Liabilities 57000 Notes Payable 61000 Non Current Assets Land Equipment Accumulated Depreci 20500 -3275 17225 Shareholders Equity Common Stock Retained Earnings 301255 Total Liabilities & Equity 46000 87150 133150 301255 Total Assets