Question

In: Accounting

On January 1, 2021, the general ledger of ACME Fireworks includes the following account balances:

 

On January 1, 2021, the general ledger of ACME Fireworks includes the following account balances:

Accounts Debit   Credit  
Cash $ 26,400            
Accounts Receivable   48,800            
Allowance for Uncollectible Accounts         $ 5,500    
Inventory   21,300            
Land   59,000            
Equipment   21,500            
Accumulated Depreciation           2,800    
Accounts Payable           29,800    
Notes Payable (6%, due April 1, 2022)           63,000    
Common Stock           48,000    
Retained Earnings           27,900    
Totals $ 177,000     $ 177,000    
 

During January 2021, the following transactions occur:

January   2   Sold gift cards totaling $10,600. The cards are redeemable for merchandise within one year of the purchase date.
January   6   Purchase additional inventory on account, $160,000.
January   15   Firework sales for the first half of the month total $148,000. All of these sales are on account. The cost of the units sold is $80,300.
January   23   Receive $126,700 from customers on accounts receivable.
January   25   Pay $103,000 to inventory suppliers on accounts payable.
January   28   Write off accounts receivable as uncollectible, $6,100.
January   30   Firework sales for the second half of the month total $156,000. Sales include $15,000 for cash and $141,000 on account. The cost of the units sold is $86,000.
January   31   Pay cash for monthly salaries, $53,300.

4. Prepare a multiple-step income statement for the period ended January 31, 2021.

Solutions

Expert Solution

ACME FIREWORKS
Income Statement
For the year ended January 31, 2021
Sales Revenue
On Jan. 15 Credit Sales      148,000.00
On Jan. 30 Cash Sales        15,000.00
On Jan. 30 Credit Sales      141,000.00
Total Sales Revenue      304,000.00
Less: Cost of Goods Sold:  
    On Jan. 15        80,300.00
    On Jan. 30        86,000.00
Total Cost of Goods Sold      166,300.00
Gross Profit      137,700.00
Less: Operating Expenses:  
Salaries        53,300.00
Interest Expense on Note              315.00
Total Operating Expenses        53,615.00
Net Operating Income        84,085.00

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