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In: Accounting

On January 1, 2021, the general ledger of Big Blast Fireworks included the following account balances:...

On January 1, 2021, the general ledger of Big Blast Fireworks included the following account balances:
  

Accounts Debit Credit
Cash $ 24,500
Accounts receivable 43,000
Allowance for uncollectible accounts 2,900
Inventory 43,000
Land 81,100
Accounts payable 28,700
Notes payable (6%, due in 3 years) 43,000
Common stock 69,000
Retained earnings 48,000
Totals $ 191,600 $ 191,600


The $43,000 beginning balance of inventory consists of 430 units, each costing $100. During January 2021, Big Blast Fireworks had the following inventory transactions:

January 3 Purchased 1,150 units for $121,900 on account ($106 each).
January 8 Purchased 1,250 units for $138,750 on account ($111 each).
January 12 Purchased 1,350 units for $156,600 on account ($116 each).
January 15 Returned 165 of the units purchased on January 12 because of defects.
January 19 Sold 3,900 units on account for $624,000. The cost of the units sold is determined using a FIFO perpetual inventory system.
January 22 Received $573,000 from customers on accounts receivable.
January 24 Paid $380,000 to inventory suppliers on accounts payable.
January 27 Wrote off accounts receivable as uncollectible, $2,200.
January 31 Paid cash for salaries during January, $132,000.


The following information is available on January 31, 2021.

  1. At the end of January, the company estimates that the remaining units of inventory are expected to sell in February for only $100 each.
  2. At the end of January, $5,300 of accounts receivable are past due, and the company estimates that 35% of these accounts will not be collected. Of the remaining accounts receivable, the company estimates that 3% will not be collected.
  3. Accrued interest expense on notes payable for January. Interest is expected to be paid each December 31.
  4. Accrued income taxes at the end of January are $13,600.

Requirement

1. Record each of the transactions listed above in the 'General Journal' tab (these are shown as items 1 - 10) assuming a perpetual FIFO inventory system. Review the 'General Ledger' and the 'Trial Balance' tabs to see the effect of the transactions on the account balances.

2. Record adjusting entries on January 31 in the 'General Journal' tab (these are shown as items 11-14).

3. Review the adjusted 'Trial Balance' as of January 31, 2021, in the 'Trial Balance' tab.

4. Prepare a multiple-step income statement for the period ended January 31, 2021, in the 'Income Statement' tab.

5. Prepare a classified balance sheet as of January 31, 2021, in the 'Balance Sheet' tab.

6. Record the closing entries in the 'General Journal' tab (these are shown as items 15-16).

7. Using the information from the requirements above, complete the 'Analysis' tab.

Solutions

Expert Solution

ekkarill92 answered 1 year ago
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