Question

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

Accounts	Debit				Credit
Cash	$	102,700
Accounts Receivable		37,000
Inventory		153,500
Land		82,300
Buildings		135,000
Allowance for Uncollectible Accounts					$	3,300
Accumulated Depreciation						11,100
Accounts Payable						34,200
Bonds Payable						135,000
Discount on Bonds Payable		31,500
Common Stock						215,000
Retained Earnings						143,400
Totals	$	542,000			$	542,000

During January 2021, the following transactions occurred:

January		1		Borrowed $115,000 from Captive Credit Corporation. The installment note bears interest at 6% annually and matures in 5 years. Payments of $2,223.27 are required at the end of each month for 60 months.
January		1		Called the bonds at the contractual call price of $115,000. The 7% bonds pay interest semiannually each June 30 and December 31.
January		4		Received $32,500 from customers on accounts receivable.
January		10		Paid cash on accounts payable, $26,000.
January		15		Paid cash for salaries, $30,400.
January		30		Firework sales for the month totaled $210,000. Sales included $66,500 for cash and $143,500 on account. The cost of the units sold was $120,000.
January		31		Paid the first monthly installment of $2,223 related to the $115,000 borrowed on January 1. Round your interest calculation to the nearest dollar.

The following information is available on January 31, 2021.

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 $27,000.
2. At the end of January, $4,500 of accounts receivable are past due, and the company estimates that 50% of these accounts will not be collected. Of the remaining accounts receivable, the company estimates that 3% will not be collected. No accounts were written off as uncollectible in January.
3. Unpaid salaries at the end of January are $27,600.
4. Accrued income taxes at the end of January are $6,500.

Prepare the journal entries for transactions. (If no entry is required for a particular transaction/event, select "No journal entry required" in the first account field.)

Answer 1

01/01/2021		Cash account Dr.			1,15,000
			To Loan (captive credit corporation)	1,15,000
		( 115000 borrowed from captive CC for 5 years @ 6%PA)
01/01/2021		Bonds payable			1,35,000
		Loss on bonds			15,000
			To Discount on bonds payable		35,000
			To cash account			1,15,000
		(Bonds called back)
04/01/2021		Cash account Dr.			32,500
			To Accounts receivables/debtors	32,500
		(cash collected from debtors)
10/01/2021		Accounts payables/creditors Dr.	26,000
			To cash account			26,000
		(cash paid to creditors)
15/01/2021		Salaries account Dr.			30,400
			To cash account			30,400
		(Salaries paid)
30/01/2021		Cash account Dr.			66,500
		Account Receivables Dr.		1,43,500
			To Sales account			2,10,000
31/01/2021		Loan (captive credit corporation) Dr.	2223
			To Cash account			2223
		(Monthly installment paid)
		Interest expense Dr.			575
			To Loan (captive credit corporation)	575
31/01/2021		Depreciation account Dr.		900
			To Accumulated depreciation		900
		(Dep charged for jan 21)
		cal : (135,000-27000)/10/12
31/01/2021		uncollectable account Dr.		3264
			To allowance for uncollectable		3264
		(Provision for uncollectable created)
		Accounts receivable
		opening			37000
		add			143500
		less			-32500
		closing			148000
		less past due		-4500
		balance			143500
		3% of balance		4305
		50% of 4500		2259
		Allowance in balance sheet	6564
		Already created		3300
		Created in jan		3264
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