Question

On January 1, 2021, the general ledger of Big Blast Fireworks includes the following account balances: Accounts Debit Credit Cash $ 22,500 Accounts Receivable 38,000 Allowance for Uncollectible Accounts $ 3,700 Inventory 33,000 Land 66,100 Accounts Payable 30,900 Notes Payable (8%, due in 3 years) 33,000 Common Stock 59,000 Retained Earnings 33,000 Totals $ 159,600 $ 159,600 The $33,000 beginning balance of inventory consists of 330 units, each costing $100. During January 2021, Big Blast Fireworks had the following inventory transactions: January 3 Purchase 1,200 units for $129,600 on account ($108 each). January 8 Purchase 1,300 units for $146,900 on account ($113 each). January 12 Purchase 1,400 units for $165,200 on account ($118 each). January 15 Return 115 of the units purchased on January 12 because of defects. January 19 Sell 4,000 units on account for $600,000. The cost of the units sold is determined using a FIFO perpetual inventory system. January 22 Receive $577,000 from customers on accounts receivable. January 24 Pay $407,000 to inventory suppliers on accounts payable. January 27 Write off accounts receivable as uncollectible, $2,800. January 31 Pay cash for salaries during January, $117,000. The following information is available on January 31, 2021. At the end of January, the company estimates that the remaining units of inventory are expected to sell in February for only $100 each. The company estimates future uncollectible accounts. The company determines $4,300 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 5% 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. Interest is expected to be paid each December 31. Accrued income taxes at the end of January are $12,600.

Answer 1