Question

On January 1, 2018, the general ledger of TNT Fireworks includes the following ending account balances:

Accounts	Debit			Credit
Cash	$	60,700
Accounts Receivable		29,000
Inventory		38,300
Notes Receivable (5%, due in 2 years)		36,000
Land		175,000
Allowance for Uncollectible Accounts					4,200
Accounts Payable					16,800
Common Stock					240,000
Retained Earning					78,000
Totals	$	339,000		$	339,000

  
During January 2018, the following transactions occur:

January 1	Purchase equipment for $21,500. The company estimates a residual value of $3,500 and a five-year service life.
January 4	Pay cash on accounts payable, $11,500.
January 8	Purchase additional inventory on account, $102,900.
January 15	Receive cash on accounts receivable, $24,000
January 19	Pay cash for salaries, $31,800.
January 28	Pay cash for January utilities, $18,500.
January 30	Firework sales for January total $240,000. All of these sales are on account. The cost of the units sold is $125,000.

The following information is available on January 31, 2018.

Depreciation on the equipment for the month of January is calculated using the straight-line method.

The company estimates future uncollectible accounts. At the end of January, considering the total ending balance of the accounts receivable account, $5,000 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 50% of the past due balance will be uncollectible and only 2% of the current balance will become uncollectible. (Hint: Use the January 31 accounts receivable balance calculated in the general ledger.)

Accrued interest revenue on notes receivable for January.

Unpaid salaries at the end of January are $34,600.

Accrued income taxes at the end of January are $11,000

Answer 1

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Date	Account	Debit	Credit
Jan 1	Equipment	$   21,500
	Accounts Payable		$   21,500
Jan 4	Accounts Payable	$   11,500
	Cash		$   11,500
Jan 8	Inventory	$ 102,900
	Accounts Payable		$ 102,900
Jan 15	Cash	$   24,000
	Accounts Receivable		$   24,000
Jan 19	Salaries Expenses	$   31,800
	Cash		$   31,800
Jan 28	Utilities Expense	$   31,800
	Cash		$   31,800
Jan 30	Accounts Receivable	$ 240,000
	Sale		$ 240,000
	Cost of Goods Sold	$ 125,000
	Inventory		$ 125,000
Adjusting:
Jan 31	Depreciation Expense	$         300
	Accumulated Depreciation		$         300
	(21500-3500)/60 Months
Jan 31	Bad Debt Expense	$      3,100
	Allowance for uncollectible Accounts		$      3,100
	(See working below)
Jan 31	Interest Receivable	$         150
	Interest Revenue		$         150
	(36000*5%/12)
Jan 31	Salaries Expense	$   34,600
	Salaries Payable		$   34,600
Jan 31	Income Tax Expense	$   11,000
	Income Tax Payable		$   11,000
Working:
	Beginning Balance		$      4,200
	Desired ending Balance
	5000*50%	$      2,500
	(245000-5000)*2%	$      4,800	$      7,300
	Bad debt expense to be recorded		$      3,100
	Accounts Receivable Balance on 31st Jan	$ 245,000
	(29000-24000+240000)