Question

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

Accounts	Debit				Credit
Cash	$	25,700
Accounts Receivable		47,400
Allowance for Uncollectible Accounts					$	4,800
Inventory		20,600
Land		52,000
Equipment		18,000
Accumulated Depreciation						2,100
Accounts Payable						29,100
Notes Payable (6%, due April 1, 2022)						56,000
Common Stock						41,000
Retained Earnings						30,700
Totals	$	163,700			$	163,700

During January 2021, the following transactions occur:

January		2		Sold gift cards totaling $9,200. The cards are redeemable for merchandise within one year of the purchase date.
January		6		Purchase additional inventory on account, $153,000.
January		15		Firework sales for the first half of the month total $141,000. All of these sales are on account. The cost of the units sold is $76,800.
January		23		Receive $126,000 from customers on accounts receivable.
January		25		Pay $96,000 to inventory suppliers on accounts payable.
January		28		Write off accounts receivable as uncollectible, $5,400.
January		30		Firework sales for the second half of the month total $149,000. Sales include $13,000 for cash and $136,000 on account. The cost of the units sold is $82,500.
January		31		Pay cash for monthly salaries, $52,600.

• Depreciation on the equipment for the month of January is calculated using the straight-line method. At the time the equipment was purchased, the company estimated a residual value of $3,600 and a two-year service life.

• The company estimates future uncollectible accounts. The company determines $17,000 of accounts receivable on January 31 are past due, and 30% 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.)

• Accrued interest expense on notes payable for January.

• Accrued income taxes at the end of January are $13,600.

• By the end of January, $3,600 of the gift cards sold on January 2 have been redeemed.

  
2. Record the adjusting entries on January 31 for the above transactions.

Answer 1

Journal Entries For the month of January 31 ,2021

Date	Account Title and Explanation	Debit	Credit
Jan 31, 2021	Depreciation Expences (Equipment A)	$600
	Accumulated Depreciation Equipment		$600
	(To record depreciation expenses )
Jan 31,2021	Bad debts Expanses	$ 7720
	Allowance for uncollectable		$ 7720
	(To record bad debt expenses)
Jan 31, 2021	Intrest Expenses	$280
	Intrest Payable		$280
	(To record accrued interest expense)
Jan 31, 2021	Income Tax Expenses	$13600
	Income Taxes Payable		$13600
	(To record accrued income tax)
Jan 31, 2021	Gift Cards Outstanding Liability	$ 3600
	Gift Sales Revenue		$ 3600
	(To record sales for gift cards on resumption)

Working Note;

A) Depreciation Expenses ;

Equipment Cost = $ 18,000, Salvage Value =$3,600,Service life= 2

Depreciation for January = ($18000 -$3600)/2*1/12=$600

B) Bad debt Expenses ;

Accounts Receivable & allowance for un- collectables

Clossing allowance for bad debts uncollectable;

= $17000*30%+($ 47400-$17000)*5% =$6620

Balance in allowance account = $ 5400- $4800= $ 600

So baddebt exp = $ 6620 + $600 = $7220

At the year ented all books of accounts is closed .It means closing of all general leadger and posting to the Income Statement and Balancesheet.