Question

On January 1, 2018, the general ledger of a company includes the following account balances Debit Credit Accounts Cash Accounts Receivable Allowance for Uncollectible Accounts Inventory Building Accumulated Depreciation Land Accounts Payable Notes Payable (6%, due in 3 years) Common Stock Retained Earnings $ 81,000 54,000 $ 8,000 41,000 81,000 21,000 211,000 31,000 45,000 111,000 252,000 468,000 Totals $ 468,000 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 $30,000 beginning balance of inventory consists of 300 units, each costing $100 During January 2018, the company had the following transactions During January 2018, the following transactions occur: January 2 Lent $31,000 to an employee by accepting 6% note due in six months. January 5 Purchased 4,900 units of inventory on account for $539,000 ($110 each) with terms 1/10, n/30 January 8 Returned 120 defective units of inventory purchased on January 5. January 15 Sold 4,700 units of inventory on account for $611,000 ($130 each) with terms 2/10, n/30 January 17 Customers returned 300 units sold on January 15. These units are placed in inventory to be sold in the future January 20 Received cash from customers on accounts receivable. This amount includes $47,000 from 2017 plus amount receivable on sale of 4,100 units sold on January 15 January 21 Wrote off remaining accounts receivable from 2017. January 24 Paid on accounts payable. The amount includes the amount owed at the beginning of the period plus the amount owed from purchase of 4,500 units on January 5 January 28 Paid cash for salaries during January, $39,000 January 29 Paid cash for utilities during January, $21,000 January 30 Paid dividends, $7,000. The following information is available on January 31, 2018 a. Of the remaining accounts receivable, the company estimates that 10% will not be collected b. Accrued interest income on notes receivable for January C. Accrued interest expense on notes payable for January d. Accrued income taxes at the end of January for $6,100 e. Depreciation on the building, $3,100

Answer 1

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Date	Account	Debit	Credit
Jan 2	Note Receivable	$    31,000
Jan 2	Cash		$ 31,000
Jan 5	Inventory	$ 539,000
Jan 5	Accounts Payable		$539,000
Jan 8	Accounts Payable	$    13,200
Jan 8	Inventory		$ 13,200
Jan 15	Accounts Receivable	$ 611,000
Jan 15	Sale		$611,000
Jan 15	Cost of Goods Sold	$ 517,000		4700*110
Jan 15	Inventory		$517,000
Jan 17	Sales Return and Allowance	$    39,000		300*130
Jan 17	Accounts Receivable		$ 39,000
Jan 17	Inventory	$    33,000		300*110
Jan 17	Cost of Goods Sold		$ 33,000
Jan 20	Cash	$ 569,340
Jan 20	Sales Discount	$    10,660		(4100*130)*2%
Jan 20	Accounts Receivable		$580,000	47000+(4100*130)
Jan 21	Allowance for Uncollectible Accounts	$      7,000
Jan 21	Accounts Receivable		$    7,000
Jan 24	Accounts Payable	$ 526,000		31000+(4500*110)
Jan 24	Cash		$526,000
Jan 28	Salaries Expense	$    39,000
Jan 28	Cash		$ 39,000
Jan 29	Utilities Expense	$    21,000
Jan 29	Cash		$ 21,000
Jan 30	Dividends	$      7,000
Jan 30	Cash		$    7,000
Adjusting Entries:
a	Bad Debt Expense	$      2,900
	Allowance for Uncollectible Accounts		$    2,900
	Beginning Balance, Accounts Receivable	$    54,000
	Add: Credit Sale	$ 611,000
	Less: Collection	$-580,000
	Less: Sales Return	$ -39,000
	Less: Write off	$    -7,000
	Ending Balance, Unadjusted	$    39,000
	Estimated Uncollectible 10%	$      3,900
	Beginning Balance, Allowance	$      8,000
	Less: Write Off	$      7,000
	Less: Ending Balance	$      3,900
	Bad Debt Expense to be recorded	$      2,900
b	Interest Receivable	$         155		31000*6%*1/12
	Interest Revenue		$        155
c	Interest Expense	$         225		45000*6%*1/12
	Interest Payable		$        225
d	Income Tax Expense	$      6,100
	Income Tax Payable		$    6,100
e	Depreciation Expense	$      3,100
	Accumulated Depreciation		$    3,100

Closing Entries:
f	Sales Revenue	$ 611,000
	Interest Revenue	$         155
	Income Summary		$611,155
g	Income Summary	$ 605,985
	Sales Return and Allowance		$ 39,000
	Cost of Goods Sold		$484,000
	Sales Discount		$ 10,660
	Salaries Expense		$ 39,000
	Utilities Expense		$ 21,000
	Bad Debt Expense		$    2,900
	Interest Expense		$        225
	Depreciation Expense		$    3,100
	Income Tax Expense		$    6,100
h	Income Summary	$      5,170
	Retained Earning
i	Retained Earning	$      7,000
	Dividends		$    7,000

	Beginning		Jan Normal		Unadjusted		Adjustments		Adjusted		Post Closing
	Debit	Credit	Debit	Credit	Debit	Credit	Debit	Credit	Debit	Credit	Debit	Credit
Cash	$     81,000			$    54,660	$     26,340				$     26,340		$ 26,340	$           -
Accounts Receivable	$     54,000			$    15,000	$     39,000				$     39,000		$ 39,000	$           -
Allowance for Uncollectible Accounts		$     8,000	$    7,000			$        1,000		$    2,900		$        3,900	$          -	$    3,900
Inventory	$     41,000		$ 41,800		$     82,800				$     82,800		$ 82,800	$           -
Interest Receivable					$              -		$       155		$           155		$       155	$           -
Note Receivable			$ 31,000		$     31,000				$     31,000		$ 31,000	$           -
Building	$     81,000				$     81,000				$     81,000		$ 81,000	$           -
Accumulated Depreciation		$   21,000				$     21,000		$    3,100		$     24,100	$          -	$ 24,100
Land	$   211,000				$   211,000				$   211,000		$211,000	$           -
Accounts Payable		$   31,000	$        200			$     30,800				$     30,800	$          -	$ 30,800
Interest Payable						$              -		$       225		$           225	$          -	$        225
Income Tax Payable						$              -		$    6,100		$        6,100	$          -	$    6,100
Notes Payable		$   45,000				$     45,000				$     45,000	$          -	$ 45,000
Common Stock		$ 111,000				$   111,000				$   111,000	$          -	$111,000
Retained Earning		$ 252,000				$   252,000				$   252,000		$250,170
Dividends			$    7,000		$        7,000				$        7,000
Sales				$ 611,000		$   611,000				$   611,000
Interest Revenue						$              -		$       155		$           155
Sales Return and Allowance			$ 39,000		$     39,000				$     39,000
Cost of Goods Sold			$484,000		$   484,000				$   484,000
Sales Discount			$ 10,660		$     10,660				$     10,660
Salaries Expense			$ 39,000		$     39,000				$     39,000
Utilities Expense			$ 21,000		$     21,000				$     21,000
Bad Debt Expense					$              -		$    2,900		$        2,900
Interest Expense					$              -		$       225		$           225
Depreciation Expense					$              -		$    3,100		$        3,100
Income Tax Expense					$              -		$    6,100		$        6,100
Total	$   468,000	$ 468,000	$680,660	$ 680,660	$1,071,800	$1,071,800	$ 12,480	$ 12,480	$1,084,280	$1,084,280	$471,295	$471,295
Income Statement:
Sales		$ 611,000
Less: Sales Return and Allowance		$   39,000
Less: Sales Discount		$   10,660
Net Sales		$ 561,340
Less: Cost of Goods Sold		$ 484,000
Gross Margin		$   77,340
Less: Operating Expense
Salaries Expense	$     39,000
Utilities Expense	$     21,000
Bad Debt Expense	$        2,900
Depreciation Expense	$        3,100
Total Operatng Expense		$   66,000
Net Operating Income		$   11,340
Less: Other Expense and Revenue
Interest Expense	$         -225
Interest Revenue	$           155
		$         -70
Income Before Tax		$   11,270
Less:Income Tax Expense		$     6,100
Net Income		$     5,170
Statement of Retained Earning:
Beginning Balance		$ 252,000
Add: Net Income		$     5,170
Less: Dividends		$     7,000
Ending		$ 250,170
Balance Sheet:
Current Assets:
Cash		$   26,340
Accounts Receivable	$     39,000
Allowance for Uncollectible Accounts	$      -3,900	$   35,100
Inventory		$   82,800
Interest Receivable		$         155
Note Receivable		$   31,000
Total Current Assets		$ 175,395
Building	$     81,000
Accumulated Depreciation	$    -24,100	$   56,900
Land		$ 211,000
Total Assets		$ 443,295
Current Liabilities:
Accounts Payable		$   30,800
Interest Payable		$         225
Income Tax Payable		$     6,100
Total Current Liabilities		$   37,125
Notes Payable		$   45,000
Total Liabilities		$   82,125
Equity:
Common Stock		$ 111,000
Retained Earning		$ 250,170
Total Equity		$ 361,170
Total Liabilities and Equity		$ 443,295

		CO	Ind
Gross Profit Ratio	77340/561340	13.78%	10.00%	Better
Inventory Turnover	484000/61900	7.82	12.00	Lower is not better
COGS/Inventory
Avg Inventory	(82800+41000)/2	$     61,900
It means selling low vlume with high profit