Question

On January 1, 2018, the general ledger of ACME Fireworks includes the following account balances:

Accounts	Debit			Credit
Cash	$	27,100
Accounts Receivable		50,200
Allowance for Uncollectible Accounts				$	6,200
Inventory		22,000
Land		66,000
Equipment		25,000
Accumulated Depreciation					3,500
Accounts Payable					30,500
Notes Payable (6%, due April 1, 2019)					70,000
Common Stock					55,000
Retained Earnings					25,100
Totals	$	190,300		$	190,300

During January 2018, the following transactions occur:

January 2	Sold gift cards totaling $12,000. The cards are redeemable for merchandise within one year of the purchase date.
January 6	Purchase additional inventory on account, $167,000.
January 15	Firework sales for the first half of the month total $155,000. All of these sales are on account. The cost of the units sold is $83,800.
January 23	Receive $127,400 from customers on accounts receivable.
January 25	Pay $110,000 to inventory suppliers on accounts payable.
January 28	Write off accounts receivable as uncollectible, $6,800.
January 30	Firework sales for the second half of the month total $163,000. Sales include $17,000 for cash and $146,000 on account. The cost of the units sold is $89,500.
January 31	Pay cash for monthly salaries, $54,000.

The following information is available on January 31, 2018.

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 $5,200 and a two-year service life.

At the end of January, $31,000 of accounts receivable are past due, and the company estimates that 30% of these accounts will not be collected. Of the remaining accounts receivable, the company estimates that 4% will not be collected.

Accrued interest expense on notes payable for January.

Accrued income taxes at the end of January are $15,000.

By the end of January, $5,000 of the gift cards sold on January 2 have been redeemed.

1.) Prepare closing entry for revenue

2.) Prepare closing entry for expenses

Answer 1