Question

On January 1, 2018, the general ledger of Big Blast Fireworks includes the following account balances:

Accounts	Debit			Credit
Cash	$	22,300
Accounts Receivable		37,500
Inventory		32,000
Land		64,600
Allowance for Uncollectible Accounts					3,500
Accounts Payable					31,400
Notes Payable (9%, due in 3 years)					32,000
Common Stock					58,000
Retained Earnings					31,500
Totals	$	156,400		$	156,400

The $32,000 beginning balance of inventory consists of 320 units, each costing $100. During January 2018, Big Blast Fireworks had the following inventory transactions:

January		3		Purchase 1,100 units for $117,700 on account ($107 each).
January		8		Purchase 1,200 units for $134,400 on account ($112 each).
January		12		Purchase 1,300 units for $152,100 on account ($117 each).
January		15		Return 110 of the units purchased on January 12 because of defects.
January		19		Sell 3,700 units on account for $555,000. The cost of the units sold is determined using a FIFO perpetual inventory system.
January		22		Receive $533,000 from customers on accounts receivable.
January		24		Pay $363,000 to inventory suppliers on accounts payable.
January		27		Write off accounts receivable as uncollectible, $2,700.
January		31		Pay cash for salaries during January, $116,000.

The following information is available on January 31, 2018. At the end of January, the company estimates that the remaining units of inventory are expected to sell in February for only $100 each. At the end of January, $4,200 of accounts receivable are past due, and the company estimates that 40% of these accounts will not be collected. Of the remaining accounts receivable, the company estimates that 5% will not be collected. Accrued interest expense on notes payable for January. Interest is expected to be paid each December 31. Accrued income taxes at the end of January are $12,500.

Jounral Entries: 1.)Purchase 1,100 units for $117,700 on account ($107 each). 2.) Purchase 1,200 units for $134,400 on account ($112 each). 3.)  Purchase 1,300 units for $152,100 on account ($117 each). 4.) Return 110 of the units purchased on January 12 because of defects. 5.) Sell 3,700 units on account for $555,000. 6.) Record the cost of the units sold, which is determined using a FIFO perpetual inventory system. 7.) Receive $533,000 from customers on accounts receivable. 8.) Pay $363,000 to inventory suppliers on accounts payable. 9.) Write off accounts receivable as uncollectible, $2,700. 10.) Pay cash for salaries during January, $116,000. 11.) Record the adjusting entry for inventory. 12.) Record the adjusting entry for uncollectible accounts. 13.) Record the adjusting entry for interest. 14.)  Record the adjusting entry for income tax. 15.) Record the closing entry for revenue. 16.) Record the closing entry for expenses. 17.) Record the closing entry for income summary.

Additional: Prepare a multiple-step income statement for the period ended January 31, 2018

Additional: Prepare a classified balance sheet as of January 31, 201

Answer 1

Formula sheet

A	B	C	D	E	F	G
2
3		Journal entries will be as follows:
4		Date	Account	Debit	Credit
5		43103	Inventory (1100*$107)	117700
6			Accounts Payable		=E5
7
8		43108	Inventory (1200*$112)	134400
9			Accounts Payable		=E8
10
11		43112	Inventory (1300*$117)	152100
12			Accounts Payable		=E11
13
14		43115	Account Payable (110*$117)	=110*117
15			Purchase Return		=E14
16
17		43119	Accounts Receivables	=F18
18			Sales Revenue		=555000
19
20			In FIFO method, units received first is sold first.
21			Total units sold	3700
22
23				Units	Cost per unit
24			Units Sold from Beginning Inventory	320	100
25			Units sold from purchase on 3 Jan	1100	107
26			Units sold from purchase on 8 Jan	1200	112
27			Units sold from purchase on 3 Jan	=E21-SUM(E24:E26)	117
28
29			Cost of goods sold	=SUMPRODUCT(E24:E27,F24:F27)
30			Inventory		=E29
31
32		43122	Cash	=F33
33			Accounts Receivable		553000
34
35		43124	Accounts Payable	363000
36			Cash		=E35
37
38		43127	Allowance for doubtful accounts	2700
39			Accounts Receivable		=E38
40
41		43131	Salaries Expense	116000
42			Cash		=E41
43
44			Beginning Inventory	32000
45			Purchases	=E5+E8+E11
46			Purchase Return	=-F15
47			Cost of Goods Available for Sales	=SUM(E44:E46)
48			COGS	=E29
49			Ending Inventory as per Book	=E47-E48
50
51			Ending Inventory units	=(1300-110)-E27
52			Expected Selling Price	100
53			Ending inventory value	=E51*E52	=E51*E52
54
55		11)
56		Adjusting entry for inventory will be as follows:
57		Transaction	Account	Debit	Credit
58		11	Inventory Change	=E49-E53
59			Inventory		=E58
60