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

 

Accounts	Debit				Credit
Cash	$	26,600
Accounts Receivable		49,200
Allowance for Uncollectible Accounts					$	5,700
Inventory		21,500
Land		61,000
Equipment		22,500
Accumulated Depreciation						3,000
Accounts Payable						30,000
Notes Payable (6%, due April 1, 2022)						65,000
Common Stock						50,000
Retained Earnings						27,100
Totals	$	180,800			$	180,800

 

During January 2021, the following transactions occur:

 

January		2		Sold gift cards totaling $11,000. The cards are redeemable for merchandise within one year of the purchase date.
January		6		Purchase additional inventory on account, $162,000.
January		15		Firework sales for the first half of the month total $150,000. All of these sales are on account. The cost of the units sold is $81,300.
January		23		Receive $126,900 from customers on accounts receivable.
January		25		Pay $105,000 to inventory suppliers on accounts payable.
January		28		Write off accounts receivable as uncollectible, $6,300.
January		30		Firework sales for the second half of the month total $158,000. Sales include $14,000 for cash and $144,000 on account. The cost of the units sold is $87,000.
January		31		Pay cash for monthly salaries, $53,500.

Answer 1

Credit Debit $11,000 $11,000 $1,62,000 $1,62,000 3 $1,50,000 $1,50,000 $81,300 $81,300 $1,26,900 $1,26,900 Transation for Jan 2021 Sr. No. Date Particulars 1 2 -Jan-21 Cash Deferred Revenue (To Record sale of gift card) 2 6-Jan-21 inventory Accounts Payable (To Record purchase of inventory) 15-Jan-21 Accounts Receivable Sales (To Record sales) 4 15-Jan-21 Cost of Good Sold inventory (To Record cost of good sold) 23-Jan-21 Cash Accounts Receivable (To Record collection from accounts receivable) 6 25-Jan-21 Accounts Payable Cash (To Record payment supplier) 7 28-Jan-21 Allowance for Uncollectible Accounts Accounts Receivable (To Record write off of accounts receivable) 8 30-Jan-21 Accounts Receivable Cash Sales (To Record sales) 9 30-Jan-21 Cost of Good Sold inventory (To Record cost of good sold) 10 31-Jan-21 Salary Expense Cash ( To Record salary expense) $1,05,000 $1,05,000 $6,300 $6,300 $1,44,000 $14,000 $1,58,000 $87,000 $87,000 $53,500 $53,500

| Credit Debit $750 $750 $15,760 $15,760 Adjusting Entry Date Particulars 11 31-Jan-21 Depreciation Accumulated Depreciation (To Record depreciation on equipment) 12 31-Jan-21 Bad Debt Expense Allowance for Uncollectible Accounts (To Record estimated uncollectible accounts) 13 31-Jan-21 Interest Expense Accrued Interest Expense ( To Record accrued interest expense on notes) 14 31-Jan-21 Income Tax Provision for Income Tax (To Record income tax provision) 15 31-Jan-21 Deferred Revenue Sales (To Record redemption of gift card) $325 $325 $14,500 $14,500 $4,500 $4,500

Working Depreciation Cost Less: Salvage Value Net Useful life in years) Per Year Depreciation ($18000/2] Depreciation for January ($9000/12] $22,500 ($4,500) $18,000 $9,000 $750 Allowance for Uncollectible Accounts Opening Balance in Accounts Receivable $49,200 Add: Sales for First half Add: Sales for Second half Less: Collection Received Less: Write off as Uncollectible Closing Balance of Accounts Receivable $1,50,000 $1,44,000 ($1,26,900) ($6,300) $2,10,000 Estimate for Uncollectible Amount On $26000 @ 30% Remaining @ 4% [($210000-$26000)x4%] Closing Balance in Allowance for Uncollectible Account Less: Balance in Uncollectible account (before adjusting entry) [-($5700-$6300)] Entry for the month $7,800 $7,360 $15,160 $600 $15,760 $65,000 Interest on Notes Payable Amount rate Interest yearly ($65000*6%] Interest for January ($3900/12] 6% $3,900 $325

Ans ACME Fireworks Trial Balance Entry Adjustment January 1, 2021 Debit Credit Debit Credit $26,600 $1,51,900 $1,58,500 $49,200 $2,94,000 $1,33,200 $5,700 $6,300 $15,760 $21,500 $1,62,000 $1,68,300 $61,000 $22,500 $3,000 $750 $30,000 $1,05,000 $1,62,000 $65,000 $4,500 $11,000 Particulars Cash Accounts Receivable Allowance for Uncollectible Accounts Inventory Land Equipment Accumulated Depreciation Accounts Payable Notes Payable Deferred Revenue Accrued Interest Expense Provision for Income Tax Common Stock Retained Earnings Sales Salary Expense Cost of Good Sold Bad Debt Expense Income Tax Interest Expense Depreciation Adjusted Trail Balance January 31, 2021 Debit Credit $20,000 $2,10,000 $15,160 $15,200 $61,000 $22,500 $3,750 $87,000 $65,000 $6,500 $325 $14,500 $50,000 $27,100 $3,12,500 $53,500 $1,68,300 $15,760 $14,500 $325 $750 $325 $14,500 $50,000 $27,100 $3,12,500 $53,500 $1,68,300 $15,760 $14,500 $325 $750 | $1,80,800 $1,80,800 $9,76,835 $9,76,835 $5,81,835 $5,81,835

Amount $3,12,500 ($1,68,300) $1,44,200 Acme Fireworks Income Statement For the year month 31st January 2021 Particulars Amount Sales Less: Cost of Good Sold Gross Profit Less: Operating Expense Salary Expense $53,500 Bad Debt Expense $15,760 Depreciation $750 Total Operating Expense Operating Income Other Expense Interest Expense Net Income Before Tax Less: Income Tax Net Income ($70,010) $74,190 ($325) $73,865 ($14,500) $59,365 Acme Fireworks Statement of Retained Earnings For the year month 31st January 2021 Particulars Beginning Balance Add: Income for the month Ending Balance Amount $27,100 $59,365 $86,465

Assets Cash Accounts Receivable Less: Allowance for Uncollectible Accounts Acme Fireworks Classified Balance Sheet January 31, 2021 Amount Amount Liabilities $20,000 Accounts Payable $2,10,000 Deferred Revenue ($15,160) Accrued Interest Expense $1,94,840 Provision for Income Tax $15,200 $2,30,040 Total Current Liabilities Notes Payable $61,000 Total Liabilities Amount $87,000 $6,500 $325 $14,500 inventory Total Current Assets $1,08,325 $65,000 $1,73,325 Non Current Assets Land Equipment Less: Accumulated Depreciation $22,500 ($3,750) $18,750 Shareholders' Equity Common Stock Retained Earnings Total Shareholders' Equity $50,000 $86,465 $1,36,465 Total Assets $3,09,790 Total Liabilities and Shareholder's Equity $3,09,790

Answer 2

	Date	General Journal	Debit	Credit
1	Jan. 2	Cash	$       11,000
		Deferred Revenue/ Unearned revenue		$        11,000
		(To record sale of gift cards)
2	Jan. 6	Inventory	$     162,000
		Accounts Payable		$      162,000
		(To record inventory purchased on account)
3	Jan. 15	Account Receivable	$     150,000
		Sales Revenue		$      150,000
		(To record sales made on account)
4	Jan. 15	Cost Of Goods Sold	$       81,300
		Inventory		$        81,300
		( To record Cost of goods sold)
5	Jan. 23	Cash	$     126,900
		Accounts receivables		$      126,900
		( To record receivables collected)
6	Jan. 25	Accounts Payable	$     105,000
		Cash		$      105,000
		(To record accounts payable paid)
7	Jan. 28	Allowance for uncollectible accounts	$          6,300
		Accounts receivables		$          6,300
		(To record write off account receivables)
8	Jan. 30	Cash	$       14,000
		Account Receivable	$     144,000
		Sales Revenue		$      158,000
		(To record sales made on account and on cash)
9	Jan. 30	Cost Of Goods Sold	$       87,000
		Inventory		$        87,000
		( To record Cost of goods sold)
10	Jan. 31	Salaries Expense	$       53,500
		Cash		$        53,500
		(To record salary expense)