Question

I need help with A, B, & C. Not sure how to calculate these numbers.

On January 1, 2021, the general ledger of ACME Fireworks includes the following account balances: Debit Credit Accounts $ 25,600 Cash Accounts Receivable 47,200 Allowance for Uncollectible Accounts 4,700 20,500 51,000 17,500 Inventory Land Accumulated Depreciation 2,000 Accounts Payable Notes Payable (6%, due April 1, 2022) Common Stock Retained Earnings 29,000 55,000 40,000 31,100 Totals $161,800 $161,800 During January 2021, the following transactions occur: 2 Sold gift cards totaling $9,000. The cards are redeemable for merchandise within one year of the purchase date. 6 Purchase additional inventory on account, $152,000. January January January 15 Firework sales for the first half of the month total $140,000. All of these sales are on account. The cost of the units sold is $76,300. January 23 Receive $125,900 from customers on accounts receivable January 25 Pay $95,000 to inventory suppliers on accounts payable January 28 Write off accounts receivable as uncollectible, $5,300 January 30 Firework sales for the second half of the month total $148,000. Sales include $10,000 for cash and $138,000 on account. The cost of the units sold is $82,000. January 31 Pay cash for monthly salaries, $52,500. The following information is available on January 31 a. 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 $3,700 and a two-year service life. b. The company estimates future uncollectible accounts. The company determines $16,000 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 4% of these accounts are estimated to be uncollectible. (Hint: Use the January 31 accounts receivable balance calculated in the general ledger) c. Accrued interest expense on notes payable for January. d. Accrued income taxes at the end of January are $13,500. e. By the end of January, $3,500 of the gift cards sold on January 2 have been redeemed (ignore cost of goods sold). General Ledger Account Cash Accounts Receivable No. Date Debit Credit Balance No. Date Debit Credit Balance 47,200 Jan 01 25,600 Jan 01 Jan 02 9,000 187,200 1 34,600 Jan 15 140,000 125,900 Jan 23 125,900 160,500 5 Jan 23 61,300 Jan 25 95,000 6 65,500 7 Jan 28 5,300 56,000 75,500 Jan 30 10,000 Jan 30 138,000 194,000 10 52,500 Jan 31 23,000 Allowance for Uncollectible Accounts Inventory Debit No. Date Debit Credit Balance No. Date Credit Balance Jan 01 lan 01 A 700 20.500

Answer 1

(a) Depreciation = (Original Value - Salvage Value) / Useful Life
= ($17500 - $3700) / 2 = $6900 for year

Depreciation for January = $6900 / 12 = $575

(b)
Past Due Accounts Receivable = $16000
Allowance for Doubtful debts = $16000 x 30% = $4800

Accounts Receivable not past due = $47200 - $16000 = $31200
Allowance for Doubtful debts = $31200 x 4% = $1248

Allowance for Doubtful Debts as on January 31 = $4800 + $1248 = $6048

Bad Debt Expense = Ending Balance of Allowance - Beginning Balance of allowance
= $6048 - $4700 = $1348

(c) Accrued Interest = $55000 x 6% x 1/12 = $275