Question

On January 1, 2021, 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 2021, 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 $2,265 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 $2,265 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, 2021. 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. Unpaid salaries at the end of January are $28,100. Accrued income taxes at the end of January are $10,000. $21,757 of the long-term note payable balance will be paid over the next year. The company estimates the amount of their bad debt expense and uncollectible accounts at the end of each month. Out of the total accounts receivable shown on the General Ledger (See General Ledger Tab for total A/R balance) on January 31, the company determines $5,000 is past due, and 50% of these past due amounts are estimated to be uncollectible (Hint: multiply the percentage by the $ amount of the A/R that is past due). The remaining accounts receivable balance on January 31 is current (total A/R minus amount that is past due), and 2% of the current balance is estimated to be uncollectible. For help with e.), see Discussion Board in Webcourses for Chapter 4/5 for Estimating Bad Debt Expense. This is the same question that has been on the HW in the last three chapters.

Answer 1