Question

Required information [The following information applies to the questions displayed below.] On January 1, 2021, 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, 2022) 70,000 Common Stock 55,000 Retained Earnings 25,100 Totals $ 190,300 $ 190,300

During January 2021, 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.

6. Record closing entries.

Answer 1

Closing entries

Date	Particulars	Debit ($)	Credit ($)
31-Jan-21	Sales	318,000
	Bad debts		6,800
	Salaries		54,000
	Inventory (i.e Cost of goods sold)		173,300
	Income summary		83,900
31-Jan-21	Income summary	83,900
	Retained earnings		83,900
	(To record transfer from profit and loss account to balance sheet)

Note-Closing entry is the journal entry made at the end of accounting period to transfer balances from temporary to permanent accounts.

Journal entries for transaction that took place in January

Date	Particulars	Debit ($)	Credit ($)
2-Jan-21	Cash	12,000
	Gift certificate outstanding		12,000
	(To record sale of gift certificates redeemable in future)
6-Jan-21	Inventory	167,000
	Accounts Payable		167,000
	(To record purchase of inventory on credit)
15-Jan-21	Accounts Receivable	155,000
	Sales		155,000
	(To record sales of first half month)
23-Jan-21	Cash	127,400
	Accounts Receivable		127,400
	(To record receipt from customers)
25-Jan-21	Accounts Payable	110,000
	Cash		110,000
	(To record payment to suppliers)
28-Jan-21	Bad debts	6,800
	Accounts Receivable		6,800
	(To record write off)
30-Jan-21	Accounts Receivable	146,000
	Cash	17,000
	Sales		163,000
	(To record sales of second half month)
31-Jan-21	Salaries	54,000
	Cash		54,000
	(To record payment of salaries)