Question

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

Accounts	Debit			Credit
Cash	$	13,200
Accounts Receivable		38,000
Inventory		154,000
Land		87,300
Buildings		140,000
Allowance for Uncollectible Accounts				$	3,800
Accumulated Depreciation					11,600
Accounts Payable					39,700
Common Stock					220,000
Retained Earnings					157,400
Totals	$	432,500		$	432,500

During January 2018, the following transactions occur:

January 1	Borrow $120,000 from Captive Credit Corporation. The installment note bears interest at 5% annually and matures in 5 years. Payments of $2,180 are required at the end of each month for 60 months.
January 4	Receive $33,000 from customers on accounts receivable.
January 10	Pay cash on accounts payable, $31,000.
January 15	Pay cash for salaries, $30,900.
January 30	Firework sales for the month total $206,000. Sales include $67,000 for cash and $139,000 on account. The cost of the units sold is $122,500.
January 31	Pay the first monthly installment of $2,180 related to the $120,000 borrowed on January 1. Round your interest calculation to the nearest dollar.

The following information is available on January 31, 2018.

1. Depreciation on the building for the month of January is calculated using the straight-line method. At the time the building was purchased, the company estimated a service life of 10 years and a residual value of $26,000.
2. The company estimates future uncollectible accounts. The company determines $5,000 of accounts receivable on January 31 are past due, and 50% of these accounts are estimated to be uncollectible. The remaining accounts receivable on January 31 are not past due, and 2% of these accounts are estimated to be uncollectible. (Hint: Use the January 31 accounts receivable ending balance shown in the general ledger to start your calculations.) Record the estimated bad debt expense.
3. Unpaid salaries at the end of January are $28,100. (Recognize that salaries are owed, but have not been paid yet.)
4. Accrue income taxes at the end of January are $10,000. (Recognize that income taxes are due, but have not been paid yet.)

1.		Record each of the transactions listed above in the 'General Journal' tab (these are shown as items 1 - 7) assuming a FIFO perpetual inventory system. The transaction on January 30 requires two entries: one to record sales revenue and one to record cost of goods sold. Review the 'General Ledger' and the 'Trial Balance' tabs to see the effect of the transactions on the account balances.
2.		Record adjusting entries on January 31. in the 'General Journal' tab (these are shown as items 8-11).

3.		Review the adjusted 'Trial Balance' as of January 31, 2018, in the 'Trial Balance' tab.
4.		Prepare a multiple-step income statement for the period ended January 31, 2018, in the 'Income Statement' tab.
5.		Prepare a classified balance sheet as of January 31, 2018, in the 'Balance Sheet' tab.
6.		Record the closing entries in the 'General Journal' tab (these are shown as items 12 and 13).

Answer 1

Date	Accounts Title	Dr	Cr
1-Jan	Cash	$120,000
	Notes payable		$120,000
4-Jan	Cash	$33,000
	Accounts receivable		$33,000
10-Jan	Accounts payable	$31,000
	Cash		$31,000
15-Jan	Salaries expenses	$30,900
	Cash		$30,900
30-Jan	Cash	$67,000
	Accounts receivable	139000
	Sales		$206,000
	Cost of good sold	$122,500
	Inventory		$122,500
31-Jan	Interest expenses (120000*5%*1/12)	500
	Notes payable	1680
	Cash		2180
a	Depreciation expenses	950
	Accumulated Depreciation		$950
	(140000-26000)/10*1/12
b	Bad debt expenses	1480
	Allowance for Uncollectible Accounts		$1,480
	Accounts receivable balance on Jan 31
	(38000-33000)+139000	144000
	Out of this estimated uncollectibleon $5000 its 50%	2500
	Remainaing 139000*2%	2780
	Total	5280
	Less: Allowance for Uncollectible Accounts	3800
	Bad debt expenses	1480
c	Salaries expenses	28100
	Salaries payable		$28,100
d	Income Tax expenses	10000
	Income tax payable		$10,000

Adjusted Trial balance
Accounts	Debit	Credit
Cash (13200+120000+33000-31000+67000-2180-30900)	$169,120
Accounts Receivable	144000
Inventory	$31,500
Land	87,300
Buildings	140,000
Allowance for Uncollectible Accounts		5280
Accumulated Depreciation		12550
Accounts Payable		$8,700
Salaries payable		28100
Income tax payable		10000
Notes payable		118320
Common Stock		220000
Retained Earnings		157400
Sales		$206,000
Cost of good sold	$122,500
Salaries expenses	$59,000
Bad debt expenses	1480
Depreciation expenses	950
Interest expenses	500
Income tax expenses	10000
Total	$766,350	$766,350
Multiple Income statement
For the month ended 31 Jan
Sales		$206,000
Less: cost of good sold		$122,500
Gross profit		$83,500
Less: Operating expenses
Salaries expenses	59000
Bad debt expenses	1480
Depreciation expenses	950	61430
Operating income		$22,070
Interest expenses		-500
Income before taxes		$21,570
Income tax expenses		10000
Net Income		$11,570
Balamce Sheet
For the month ended 31 Jan
Current assets
Cash		$169,120
Accounts Receivable	$144,000
Allowance for Uncollectible Accounts	5280
Net acounts receivable		$138,720
Inventory		$31,500
Total Current assets		$339,340
PP & E
Land		87,300
Buildings	140,000
Accumulated Depreciation	12550	127,450
Total PP & E		214,750
Total Assets		$554,090
Liabilities & stockholder equity
Current Laibilities
Accounts Payable		$8,700
Salaries payable		$28,100
Income tax payable		$10,000
Total Current Laibilities		$46,800
Notes payable		$118,320
Total Liabilities		$165,120
Common Stock	220000
Retained Earnings	$168,970
Total stockholder equity		$388,970
Total Liabilities & stockholder equity		$554,090
Closing Trial balance
Accounts	Debit	Credit
Cash	$169,120
Accounts Receivable	$144,000
Inventory	$31,500
Land	$87,300
Buildings	$140,000
Allowance for Uncollectible Accounts		$5,280
Accumulated Depreciation		$12,550
Accounts Payable		$8,700
Salaries payable		$28,100
Income tax payable		$10,000
Notes payable		$118,320
Common Stock		$220,000
Retained Earnings		$168,970
Total	$571,920	$571,920

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