Question

Exercise 6-21B Complete the accounting cycle using inventory transactions (LO6-2, 6-3, 6-5, 6-6, 6-7)

[The following information applies to the questions displayed below.]

On January 1, Year 1, the general ledger of a company includes the following account balances:

Accounts	Debit			Credit
Cash	$	23,900
Accounts Receivable		41,500
Allowance for Uncollectible Accounts				$	5,100
Inventory		40,000
Land		76,600
Accounts Payable					27,400
Notes Payable (9%, due in 3 years)					40,000
Common Stock					66,000
Retained Earnings					43,500
Totals	$	182,000		$	182,000

The $40,000 beginning balance of inventory consists of 400 units, each costing $100. During January Year 1, the company had the following inventory transactions:

January		3		Purchase 1,900 units for $205,200 on account ($108 each).
January		8		Purchase 2,000 units for $226,000 on account ($113 each).
January		12		Purchase 2,100 units for $247,800 on account ($118 each).
January		15		Return 150 of the units purchased on January 12 because of defects.
January		19		Sell 6,100 units on account for $915,000. The cost of the units sold is determined using a FIFO perpetual inventory system.
January		22		Receive $885,000 from customers on accounts receivable.
January		24		Pay $650,000 to inventory suppliers on accounts payable.
January		27		Write off accounts receivable as uncollectible, $3,500.
January		31		Pay cash for salaries during January, $124,000.

The following information is available on January 31, Year 1.

1. At the end of January, the company estimates that the remaining units of inventory are expected to sell in February for only $100 each.
2. The company estimates future uncollectible accounts. The company determines $5,000 of accounts receivable on January 31 are past due, and 35% of these accounts are estimated to be uncollectible. The remaining accounts receivable on January 31 are not past due, and 3% of these accounts are estimated to be uncollectible. (Hint: Use the January 31 accounts receivable balance calculated in the general ledger.)
3. Accrued interest expense on notes payable for January. Interest is expected to be paid each December 31.
4. Accrued income taxes at the end of January are $13,300.

Exercise 6-21B Part 3

a. At the end of January, the company estimates that the remaining units of inventory are expected to sell in February for only $100 each.
b. At the end of January, $5,000 of accounts receivable are past due, and the company estimates that 35% of these accounts will not be collected. Of the remaining accounts receivable, the company estimates that 3% will not be collected.
c. Accrued interest expense on notes payable for January. Interest is expected to be paid each December 31.
d. Accrued income taxes at the end of January are $13,300.
  

3. Prepare an adjusted trial balance as of January 31, Year 1.

adjusted trial balance

income statement

balance sheet

inventory turnover ratio

gross profit ration is %

Answer 1