Question

On January 1, 2021, the general ledger of 3D Family Fireworks includes the following account balances: Debit Credit Accounts Cash $27,500 15,400 Accounts Receivable Allowance for Uncollectible Accounts S 4,400 Supplies Notes Receivable (6%, due in 2 years) 4,300 22,000 Land 80,700 Accounts Payable Common Stock 9,300 102,000 Retained Earnings 34,200 $149,900 $149,900 Totals During January 2021, the following transactions occur 2 Provide services to customers for cash, $53,100 January 6 Provide services to customers on account, $90,400. 15 Write off accounts receivable as uncollectible, $4,100. January January January 20 Pay cash for salaries, $33,200 January 22 Receive cash on accounts receivable, $88,000 January 25 Pay cash on accounts payable, $7,300 January 30 Pay cash for utilities during January, $15,500. The following information is available on January 31, 2021. a. The company estimates future uncollectible accounts. The company determines $4,700 of accounts receivable on January 31 are past due, and 20% of these accounts are estimated to be uncollectible. The remaining accounts receivable on January 31 are not past due, and 5% of these accounts are estimated to be uncollectible. (Hint: Use the January 31 accounts receivable balance calculated in the general ledger.) b. Supplies at the end of January total $850. C. Accrued interest revenue on notes receivable for January. Interest is expected to be received each December 31. d. Unpaid salaries at the end of January are $35,300.

Answer 1

3D Family Fireworks Journal Enteries Particulars Debit in $ Credit in $ Date Cash a/c 2.1.2021 Dr. 53100 To Service Revenue 53100 (Services provided for cash) Accounts Receivable a/c 90400 6.1.2021 Dr. To Service Revenue 90400 (Services provided on account) 15.1.2021 Allowance for uncollectible accounts 4100 To Accounts Receivable 4100 (Uncollectibles written off) 20.1.2021 Salary Expense a/c Dr. 33200 To Cash 33200 (Salary paid in cash) 22.1.2021 Cash a/c 88000 Dr To Accounts Receivable 88000 (Cash received from debtors) 25.1.2021 ACCounts Payable a/c Dr. 7300 To Cash 7300 (Creditors paid) 30.1.2021 Utilities Expense a/c Dr. 15500 To Cash 15500 (Utilities paid in cash) Adjusting Enteries Debit in $ Credit in $ Particulars Date 31.1.2021 Bad Debts a/c Dr. 1090 To Allowance for uncollectible accounts 1090 (Bad debts estimated) 4700 x 20% =940 + 450 1390-300 1090 15400 90400-4100-88000-4700 9000 x 5% = 450 Allowance for Uncollectibles 4400 4100 300 31.1.2021 Supplies Expense a/c 3450 Dr. To Supplies 3450 (Supplies Expensed) 4300-850 3450 31.1.2021 Interest Receivable a/c Dr 110 To Interest Income 110 (Interest Revenue accrued) 22000 x 6% x 1 /12 = 110 31.1.2021 Salary Expense a/c Dr. 35300 To Salary Payable 35300 (Salary accrued)

Worksheet For the period ending 31.1.2021 Unadjusted Adjustments Debit in $ Credit in $ Debit in $ Credit in $ Debit in $ Credit in $ Adjusted Particulars Cash 112600 112600 Accounts Receivable 13700 13700 Allowance for uncollectible accounts 300 1090 1390 Interest Receivable 110 110 Supplies 4300 3450 850 22000 Notes Receivable 6% 22000 Land 80700 80700 Accounts Payable 2000 2000 Salary Payable 35300 35300 Common Stock 102000 102000 Retained Earnings 34200 34200 Service Revenue 143500 143500 Interest Income 110 110 Salary Expense 33200 35300 68500 Utilities Expense 15500 15500 Bad Debts 1090 1090 Supplies Expense 3450 3450 Totals 28200 9! 1850 318500

Statement of Income For the period ending 31.1.2021 Service Revenue 143500 Interest Income 110 Total Revenue 143610 Less: Salary Expense 68500 Utilities Expense 15500 Bad Debts 1090 Supplies Expense 3450 88540 Net Income 55070 Statement of Retained Earnings For the period ending 31.1.2021 Beginning 34200 Net Income 55070 89270

Balance sheet As at 31.1.2021 Amounts in $ Amounts in $ Liabilities Amounts in $ Amounts in $ Assets Current Liabilities Current Assets Accounts Payable Cash 112600 2000 Accounts Receivable Salary Payable 13700 35300 37300 Allowance for uncollectible accounts -1390 Interest Receivable 110 Supplies 125870 850 Shareholders Equity Non Current Assets Notes Receivable 6% 22000 Common Stock 102000 80700 Retained Earnings Land 89270 191270 228570 Total Liabilities & Equity Total Assets 228570 Receivables Turnover = Service Revenue/Avg. Receivables 143500 / (11000+ 12310) /2 = 143500/ 11655 = 12.31 t Days in Receivables 365/12.31 - 29.65 Days Industry days in receivables is 365/5.3 68.86 Days as compared to 29.65 Days of 3D...So 3D is collecting receivables more efficiently Ratio of allo ance for uncollectibles Accounts Recei bl. 1.1.2021 4400 15400 0.2857 - 31,1.2021 1390/13700 0.1015 Company is improving.