Question

On January 1, 2021, the general ledger of Grand Finale Fireworks includes the following account balances: Accounts Debit Credit Cash $ 42,700 Accounts Receivable 44,500 Supplies 7,500 Equipment 64,000 Accumulated Depreciation $ 9,000 Accounts Payable 14,600 Common Stock, $1 10,000 par value Additional Paid-in 80,000 Capital Retained Earnings 45,100 Totals $ 158,700 $158,700 During January 2021, the following transactions occur: January 2 Issue an additional 2,000 shares of $1 par value common stock for $40,000. January 9 Provide services to customers on account, $14,300. January 10 Purchase additional supplies on account, $4,900. January 12 Purchase 1,000 shares of treasury stock for $18 per share. January 15 Pay cash on accounts payable, $16,500. January 21 Provide services to customers for cash, $49, 100. January 22 Receive cash on accounts receivable, $16,600. January 29 Declare a cash dividend of $0.30 per share to all shares outstanding on January 29. The dividend is payable on February 15. (Hint: Grand Finale Fireworks had 10,000 shares outstanding on January 1, 2021, and dividends are not paid on treasury stock.) January 30 Resell 600 shares of treasury stock for $20 per share. January 31 Pay cash for salaries during January, $42,000. The following information is available on January 31, 2021. a. Unpaid utilities for the month of January are $6,200. b. Supplies at the end of January total $5,100. c. Depreciation on the equipment for the month of January is calculated using the straightline method. At the time the equipment was purchased, the company estimated a service life of three years and a residual value of $10,000. d. Accrued income taxes at the end of January are $2,000.

Answer 1

Credit Debit $40,000 $2,000 $38,000 $14,300 $14,300 $4,900 $4,900 $18,000 $18,000 $16,500 $16,500 Step 1 Transation for Jan 2021 Sr. No. Date Particulars 1 2 -Jan-21 Cash Common Stock Additional Paid-in Capital (To record issue of common stock) 9-Jan-21 Accounts Receivable Service Revenue (To record service revenue) 3 10-Jan-21 Supplies Accounts Payable (To record purchase of supplies) 12-Jan-21 Treasury Stock Cash (To record purchase of treasury stock) 15-Jan-21 Accounts Payable Cash (To record payment to account payable) 21-Jan-21 Cash Service Revenue (To record service revenue) 7 22-Jan-21 Cash Accounts Receivable (To Record collection of accounts receivable) 29-Jan-21 Retained Earnings Dividend payable (To record declaration of dividend) 30-Jan-21 Cash Common Stock Paid in Capital Treasury Stock (To record reissue of treasuy stock) 31-Jan-21 Salary Expense Cash (To Record salary expense) $49,100 $49,100 $16,600 $16,600 $3,300 $3,300 $12,000 $600 $11,400 10 $42,000 $42,000

Credit Debit $6,200 $6,200 $7,300 $7,300 $1,500 Step 2 Adjusting Entry Date Particulars 31-Jan-21 Utilities Expense Accounts Payable (To record accrual of utilities expense) 31-Jan-21 Supplies Expense Supplies (To record supplies expense) 31-Jan-21 Depreciation Accumulated Depreciation (To Record depreciation on equipment) 31-Jan-21 income Tax Income Tax Payable (To Record income tax provision) Working Supplies Expense Beginning Supplies as on Jan 1, 2021 Add: Purchase Less: Ending Supplies as in Jan 31, 2021 Supplies Expense $1,500 $2,000 $2,000 $7,500 $4,900 (55,100) $7,300 2 Depreciation Cost Less: Salvage Value Net Useful life in years) Per Year Depreciation ($54000/3] Depreciation for January ($18000/12] $64,000 ($10,000) $54,000 $18,000 $1,500

Step 3 Grand Finale Fireworks Trial Balance Entry Adjustment January 1, 2021 Debit Credit Debit Credit $42,700 $117,700 $76,500 $44,500 $14,300 $16,600 $7,500 $4,900 $7,300 $64,000 $0 $9,000 $1,500 $16 $11,100 $2,000 $3,300 $10,000 $2,600 $80,000 $38,000 $11,400 Particulars Cash Accounts Receivable Supplies Equipment Accumulated Depreciation Accounts Payable Income Tax Payable Dividend Payable Common Stock Additional Paid-in Capital Paid in Capital Treasury Stock Treasury Stock Retained Earnings Service Revenue Salary Expense Utilities Expense Supplies Expense Depreciation Income Tax $14,600 Adjusted Trail Balance January 31, 2021 Debit Credit $83,900 $42,200 $5,100 $64,000 $10,500 $9,200 $2,000 $3,300 $12,600 $118,000 $11,400 $18,000 $41,800 $63,400 $42,000 $6,200 $7,300 $1,500 $2,000 $0 $45,100 $63,400 $42,000 $6,200 $7,300 $1,500 $2,000 $158,700 $158,700 $233,700 $233,700 $272,200 $272,200

Amount $63,400 Step 4 Grand Finale Fireworks Income Statement For the year 31st January 2021 Particulars Amount Service Revenue Less: Operating Expense Salary Expense $42,000 Utilities Expense $6,200 Supplies Expense $7,300 Depreciation $1,500 Total Operating Expense Net Income Before Tax Less: Income Tax Net Income ($57,000) $6,400 ($2,000) $4,400 Step 5 Grand Finale Fireworks Statement of Retained Earnings For the year 31st January 2021 Particulars Beginning Balance Add: Net Income Amount $45,100 $4,400 $49,500 ($3,300) $46,200 Less: Dividend Ending Balance

Step 6 Assets Cash Accounts Receivable Supplies Total Current Assets Grand Finale Fireworks Classified Balance Sheet January 31, 2021 Amount Amount Liabilities $83,900 Accounts Payable $42,200 Dividend Payable $5,100 Income Tax Payable $131,200 Total Current Liabilities Amount $9,200 $3,300 $2,000 $14,500 Non Current Assets Equipment Less: Accumulated Depreciation $64,000 ($10,500) Shareholders' Equity Common Stock $53,500 Additional Paid-in Capital Paid in Capital Treasury Stock Retained Earnings Less: Treasury Stock Total Shareholders' Equity $12,600 $118,000 $11,400 $46,200 ($18,000) $170,200 Total Assets $184,700 Total Liabilities and Shareholder's Equity $184,700

Step 7 Credit Debit $63,400 $63,400 $59,000 Closing Entry Date Particulars 31-Jan-21 Service Revenue Income Summary (To close the revenue account) 31-Jan-21 Income Summary Salary Expense Utilities Expense Supplies Expense Depreciation Income Tax (To close the expense account) 31-Jan-21 Income Summary Retained Earnings (To close the inocme summary account) 31-Jan-21 Retained Earnings Dividend (To close the dividend account) $42,000 $6,200 $7,300 $1,500 $2,000 $4,400 $4,400 $3,300 $3,300