Question

On January 1, 2018, the general ledger of TNT Fireworks includes the following account balances: Accounts Debit Credit Cash $ 60,000 Accounts Receivable 27,600 Allowance for Uncollectible Accounts 3,500 Inventory 37,600 Notes Receivable (5%, due in 2 years) 27,600 Land 168,000 Accounts Payable 16,100 Common Stock 233,000 Retained Earning 68,200 Totals $ 320,800 $ 320,800 During January 2018, the following transactions occur: January 1. Purchase equipment for $20,800. The company estimates a residual value of $2,800 and a five-year service life. January 4. Pay cash on accounts payable, $10,800. January 8. Purchase additional inventory on account, $95,900. January 15. Receive cash on accounts receivable, $23,300 January 19. Pay cash for salaries, $31,100. January 28. Pay cash for January utilities, $17,800. January 30. Firework sales for January total $233,000. All of these sales are on account. The cost of the units sold is $121,500. Information for adjusting entries: 1. Depreciation on the equipment for the month of January is calculated using the straight-line method. 2. At the end of January, $4,300 of accounts receivable are past due, and the company estimates that 50% of these accounts will not be collected. Of the remaining accounts receivable, the company estimates that 2% will not be collected. The note receivable of $27,600 is considered fully collectible and therefore is not included in the estimate of uncollectible accounts. 3. Accrued interest revenue on notes receivable for January. 4. Unpaid salaries at the end of January are $33,900. 5. Accrued income taxes at the end of January are $10,300.

1. Record each of the transactions listed above.

2. Record the adjusting entries on January 31 for the above transactions.

3. Prepare an adjusted trial balance as of January 31, 2018.

4. Prepare a multiple-step income statement for the period ended January 31, 2018

5. Prepare a classified balance sheet as of January 31, 2018.

6. Record closing entries.

Answer 1

as per policy only first four parts will be addressed.

Part 1

Date	General Journal	debit	credit
Jan-01	equipment	20,800
	cash		20,800
Jan-04	accounts payable	10,800
	cash		10,800
Jan-08	inventory	95,900
	accounts payable		95,900
Jan-15	cash	23,300
	accounts receivable		23,300
Jan-19	salaries expense	31,100
	cash		31,100
Jan-28	utilities expense	17,800
	cash		17,800
Jan-30	accounts receivable	233000
	sales revenue		233000
Jan-30	cost of goods sold	121500
	inventory		121500

Part 2

Date	General Journal	debit	credit
Jan-31	depreciation expense	300
	accumulated depreciation		300
	(20800-2800)/60 months
Jan-31	bad debt expense	5640
	allowance for uncollectible accounts		5640
	(4300*50%)+(233000*3%)-3500
	(27600-23300+233000-4300) = 233000
Jan-31	interest receivable	115
	interest revenue (27600*5%*1/12)		115
Jan-31	salaries expense	33900
	salaries payable		33900
Jan-31	income tax expense	10300
	income tax payable		10300

Part 3

TNT FIREWORKS

Adjusted Trial Balance

January 31, 2018

	debit	credit
cash	2800
accounts receivable	237300
interest receivable	115
inventory	12000
notes receivable	27600
land	168000
equipment	20800
allowance for uncollectible accounts		9140
accumulated depreciation		300
accounts payable		101200
salaries payable		33900
income tax payable		10300
common stock		233000
retained earnings		68200
sales revenue		233000
interest revenue		115
cost of goods sold	121500
salaries expenses	65,000
utilities expenses	17,800
bad debt expenses	5640
depreciation expenses	300
income tax expenses	10300
	689155	689155

salaries = 31100+33900=65000

accounts payable = 16100+95900-10800=101200

allowance for uncollectible accounts=3500+5640 =9140

inventory = 37600+95900-121500 = 12000

Accounts Receivable = 27600+233000-23300 =237300

cash = 60000-20800-10800+23300-31100-17800 = 2800

Part 4

TNT FIREWORKS

Multiple­Step Income Statement

For the month ended January 31, 2018

sales revenue	233000
cost of goods sold	121500
gross profit		111500
Expenses:
salaries expenses	65,000
utilities expenses	17,800
bad debt expenses	5,640
depreciation expenses	300
total operating expenses		88,740
operating income		22,760
interest revenue		115
income before taxes		22,875
income after taxes		10300
net income		12,575