Question

On January 1, 2018, 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, 2019)					65,000
Common Stock					50,000
Retained Earnings					27,100
Totals	$	180,800		$	180,800

During January 2018, 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.

The following information is available on January 31, 2018.

1. 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 $4,500 and a two-year service life.
2. The company estimates future uncollectible accounts. At the end of January, considering the total ending balance of the accounts receivable account shown in the general ledger, $26,000 is now past due (older than 90 days), while the remainder of the balance is current (less than 90 days old). The company estimates that 30% of the past due balance will be uncollectible and only 4% of the current balance will become uncollectible. Please record the estimated bad debt expense.
3. Accrue the interest expense on notes payable for January. (Hint: recognize the expense and add as a liability, since the interest expense has not been paid yet)
4. Accrue income taxes at the end of January are $14,500.  (Hint: recognize the expense and add as a liability, since the income taxes have not been paid yet)
5. By the end of January, $4,500 of the gift cards sold on January 2 have been redeemed.

Answer 1

Journal Entry Adjusting Entry Credit Debit Debit Credit Accounts Title Accounts Title Depreciation expenses Accumulated Depreciation Cash 750 (22500-4500)/2 750 9000/12 S 11,000 Unearned Revenue gift Card $ 11,000 Bad debts expenses(4800+7120) Inventory S1,62,000 15,160 Accounts Payable 1,62,000 Allowance for doubtful debts 15,160 S Interest Expenses(65000*6%)/12 Interest payable Accounts receviable S1,50,000 325 Fire work Sales 1,50,000 $ 325 Cost of Units sold $81,300 Income Tax expenses $14,500 Inventory 81,300 Income Tax Payable 14,500 $ 4,500 Cash $1,26,900 Unearned Gift cards Revenue -Gift Cards S Accounts receviable 1,26,900 4,500 Accounts Payable $1,05,000 Cash 1,05,000 Allowance for doubtful Accounts S 6,300 Accounts receviable 6,300 Accounts receviable S 1,44,000 Cash S 14,000 Fire work Sales $ 1,58,000 Cost of Units sold $ 87,000 Inventory 87,000 Salaries expenses $ 53,500 Cash 53,500

Accounts Receivable Particulars Particulars Amount Amount Opening Fire work Sales | $ Fire work Sales|$ 49,200 Allowance to doubtful accounts $ 1,50,000 Cash 1,44,000 Closing balance $ 6,300 $ 1,26,900 $ 2,10,000 $ 3,43,200 3,43,200 Closing Balance of Accounts Receiveable 49200+150000+144000-6300-126900 = $210000 In this 26000 Value ,30% of provision to be created 26000*30% = 7800 Remaining (210000-26000)184000*4% =184000*4% - = 7360