Question

Sheridan Company’s balance sheet at December 31, 2021, is presented below.

Sheridan Company Balance Sheet December 31, 2021
Cash		$13,500			Accounts payable		$8,300
Accounts receivable		20,600			Common stock		21,900
Allowance for doubtful accounts		(860)			Retained earnings		12,710
Inventory		9,670
		$42,910					$42,910

During January 2022, the following transactions occurred. Sheridan uses the perpetual inventory method.

Jan. 1		Sheridan accepted a 4-month, 8% note from Betheny Company in payment of Betheny’s $3,600 account.
3		Sheridan wrote off as uncollectible the accounts of Walter Corporation ($400) and Drake Company ($200).
8		Sheridan purchased $18,870 of inventory on account.
11		Sheridan sold for $24,200 on account inventory that cost $15,790.
15		Sheridan sold inventory that cost $760 to Jack Rice for $1,000. Rice charged this amount on his Visa First Bank card. The service fee charged Sheridan by First Bank is 3%.
17		Sheridan collected $20,900 from customers on account.
21		Sheridan paid $15,300 on accounts payable.
24		Sheridan received payment in full ($200) from Drake Company on the account written off on January 3.
27		Sheridan purchased advertising supplies for $1,290 cash.
31		Sheridan paid other operating expenses, $2,940.

Adjustment data:

1.		Interest is recorded for the month on the note from January 1.
2.		Bad debts are expected to be 6% of the January 31, 2022, accounts receivable.
3.		A count of advertising supplies on January 31, 2022, reveals that $610 remains unused.
4.		The income tax rate is 30%. (Hint: Prepare the income statement up to Income before taxes and multiply by 30% to compute the amount; round to whole dollars.)

(You may want to set up T-accounts to determine ending balances.)

Prepare journal entries for the transactions listed above and adjusting entries. (Include entries for cost of goods sold using the perpetual inventory system.) AND Prepare an adjusted trial balance at January 31, 2022 AND Prepare an income statement for the month ending January 31, 2022. AND Prepare a retained earnings statement for the month ending January 31, 2022 AND Prepare a classified balance sheet as of January 31, 2022.

Answer 1