Question

On January 1, 2018, the general ledger of Big Blast Fireworks includes the following account balances:
  

Accounts	Debit			Credit
Cash	$	24,700
Accounts Receivable		43,500
Inventory		44,000
Land		82,600
Allowance for Uncollectible Accounts					3,100
Accounts Payable					28,200
Notes Payable (9%, due in 3 years)					44,000
Common Stock					70,000
Retained Earnings					49,500
Totals	$	194,800		$	194,800

The $44,000 beginning balance of inventory consists of 440 units, each costing $100. During January 2018, Big Blast Fireworks had the following inventory transactions:

  

January 3	Purchase 1,250 units for $133,750 on account ($107 each).
January 8	Purchase 1,350 units for $151,200 on account ($112 each).
January 12	Purchase 1,450 units for $169,650 on account ($117 each).
January 15	Return 170 of the units purchased on January 12 because of defects.
January 19	Sell 4,200 units on account for $630,000. The cost of the units sold is determined using a FIFO perpetual inventory system.
January 22	Receive $617,000 from customers on accounts receivable.
January 24	Pay $420,000 to inventory suppliers on accounts payable.
January 27	Write off accounts receivable as uncollectible, $2,300.
January 31	Pay cash for salaries during January, $133,000.

The following information is available on January 31, 2018.

1. At the end of January, the company estimates that the remaining units of inventory are expected to sell in February for only $100 each.
2. The company estimates future uncollectible accounts. The company determines $5,400 of accounts receivable on January 31 are past due, and 40% 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.)
3. Accrued interest expense on notes payable for January. Interest is expected to be paid each December 31.
4. Accrued income taxes at the end of January are $13,700.

General General Income Trial Balance Balance Sheet Analysis Requirement Journal Ledger Statement If no entry is required for a transaction/event, select "No journal entry required" in the first account field. View transaction list Journal entry worksheet 4. 2 3 6 7 8 16 1 5 Purchase 1,250 units for $133,750 on account ($107 each). Note: Enter debits before credits. Date Account Title Debit Credit Jan 03 133,750 133,750 Record entry Clear entry View general journal LC Journal entry worksheet 6 9 10 11 16 1 7 Prepare the adjusting entry for inventory. Note: Enter debits before credits Date Account Title Debit Credit Jan 31 View general journal Record entry Clear entry CO Journal entry worksheet 8 9 10 11 12 13 16 1 Prepare the adjusting entry for uncollectible accounts. Note: Enter debits before credits. Credit Date Debit Account Title Jan 31 Record entry Clear entry View general journal Journal entry worksheet 10 12 13 16 1 11 Prepare the adjusting entry for interest. Note: Enter debits before credits. Date Account Title Debit Credit Jan 31 Record entry Clear entry View general journal Journal entry worksheet 10 11 12 13 14 16 1 9 Prepare the adjusting entry for income tax. Note: Enter debits before credits. Date Account Title Debit Credit Jan 31 Record entry Clear entry View general journal Journal entry worksheet

Answer 1

Big Blast Fireworks Journal Enteries Debit in $ Credit in $ Particulars Date 3.1.2018 Inventory a/c 133750 Dr To Accounts Payable 133750 |(Inventory on account) Inventory a/c 151200 8.1.2018 Dr Accounts Payable 151200 (Inventory on account) 12.1.2018 Inventory a/c Dr 169650 Accounts Payable 169650 (Inventory on account) 15.1.2018 Accounts Payable a/c 19890 Dri Inventory 19890 (Goods returned) 19.1.2018 Accounts Receivable a/c Dr. 630000 To Sales 630000 (Sales on account) Cost goods sold a/c Dr 464670 464670 Inventory (To record cost f goods sold 22.1.2018 Cash a/c Dr 617000 To Accounts Receivable 617000 (Cash received from debtors) 24.1.2018 Accounts Payable a/c 420000 Dr. To Cash 420000 (Cash paid to creditors) 27.1.2018 Allowance for Uncollectible Accounts 2300 To Accounts Receivable 2300 (Accounts Receivable written off) 31.1.2018 Salaries a/c Dr 133000 To Cash 133000 (Salaries paid) Adjusting Enteries Particulars Debit in $ Credit in $ Date 31.1.2018 Cost of goods sold a/c 2040 Dri To Inventory 2040 (Loss on inventory) 31.1.2018 Bad Debts a/c Dr. 1910 Allowance for Uncollectible Accounts 1910 (Bad debts recorded) 5400 x 40%= 2160+2710 4870 43500+630000-617000- 2300 54200 x 5 % - 2710-800 = 1910 3100-2300 = 800 Allowance for Uncollectible Accounts 31.1.2018 Interest Expense a/c 330 Dr. To Interest Payable 330 000 x 9% x 1/12 (Interest accrued) 31.1.2018 Income Tax Expense a/c Dr. 13700 Payable 13700 (Income tax accrued)

FIFO Perpetual Purchase Cost of goods sold Units per unit cost Balance Units Total Total Units Total Date per unit cost per unit cost 1.1.2018 440 100 44000 44000 3.1.2018 1250 107 133750 440 100 133750 1250 107 44000 8.1.2018 1350 112 151200 440 100 133750 1250 107 1350 112 151200 12.1.2018 1450 117 169650 440 100 44000 1250 107 133750 151200 350 112 1450 117 169650 19890 44000 15.1.2018 170 117 440 100 133750 1250 107 1350 112 151200 149760 1280 117 19.1.2018 440 100 44000 120 117 14040 1250 107 133750 1350 112 151200 1160 117 135720 31.1.2018 120 117 1404 120 17 2040 120 100 12000 Purchase 454600 Ending Inv. COGS 484560 12000

Worksheet For the month ending 31.1.2018 Adjustment Debit in $ Credit in $ Debit in $ Credit in $ Debit in $ Credit in $ Unadjusted Adjusted Particulars Cash 88700 88700 Accounts Receivable 54200 54200 Allowance for Uncollectible Accounts 800 1910 2710 14040 Inventory 2040 12000 Land 82600 82600 Accounts Payable 42910 42910 Interest Payable 330 330 Income Tax Payable 1370 700 Notes Payable (9%, due in 3 years) 44000 44000 Common Stock 70000 70000 Retained Earnings 49500 49500 Sales 630000 630000 Cost of goods sold 464670 2040 466710 Salaries 133000 133000 Bad Debts 1910 1910 Interest Expense 330 330 Income Tax Expense Totals 13700 13700 5315 33 1798 798 53150

Statement of Income For the month ending 31.1.2018 Sales 630000 Cost of goods sold Gross Margin -466710 163290 Salaries 133000 Bad Debts 1910 Interest Expense 330 135240 28050 Income Tax Expense -13700 Net Income 14350 Statement of Retained Earnings For the month ending 31.1.2018 Beginning 49500 Net Income 14350 63850

Balance sheet As at 31.1.2018 Amounts in $ Amounts in $ Liabilities Amounts in $ Amounts in $ Assets Current Liabilities Current Assets Accounts Payable Cash 42910 88700 Interest Payable Accounts Receivable 54200 330 Allowance for Uncolle Income Tax Payable -2710 13700 56940 Inventory 12000 152190 Non Current Liabilities Notes Payable (9%, due in 3 years) Non Current Assets 44000 Land 82600 Shareholders Equity Common Stock 70000 Retained Earnings 63850 133850 234790 Total Liabilities & Equity Total Assets 234790