Question

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

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

AccountsDebit
Credit


Cash$102,100







Accounts Receivable
35,800







Inventory
152,900







Land
76,300







Buildings
129,000







Allowance for Uncollectible Accounts



$2,700



Accumulated Depreciation




10,500



Accounts Payable




27,600



Bonds Payable




129,000



Discount on Bonds Payable
30,900







Common Stock




209,000



Retained Earnings




148,200



Totals$527,000

$527,000




 
During January 2021, the following transactions occurred:

January
1
Borrowed $109,000 from Captive Credit Corporation. The installment note bears interest at 6% annually and matures in 5 years. Payments of $2,107.28 are required at the end of each month for 60 months.
January
1
Called the bonds at the contractual call price of $109,000. The 5% bonds pay interest semiannually each June 30 and December 31.
January
4
Received $31,900 from customers on accounts receivable.
January
10
Paid cash on accounts payable, $20,000.
January
15
Paid cash for salaries, $29,800.
January
30
Firework sales for the month totaled $200,400. Sales included $65,900 for cash and $134,500 on account. The cost of the units sold was $117,000.
January
31
Paid the first monthly installment of $2,107 related to the $109,000 borrowed on January 1. Round your interest calculation to the nearest dollar.

 
The following information is available on January 31, 2021.

  1. 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 $26,400.

  2. At the end of January, $3,900 of accounts receivable are past due, and the company estimates that 50% of these accounts will not be collected. Of the remaining accounts receivable, the company estimates that 3% will not be collected. No accounts were written off as uncollectible in January.

  3. Unpaid salaries at the end of January are $27,000.

  4. Accrued income taxes at the end of January are $5,900.


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