Question

On January 1, 2018, the general ledger of a company includes the following account balances:

Accounts	Debit			Credit
Cash	$	90,000
Accounts Receivable		60,000
Allowance for Uncollectible Accounts				$	5,000
Inventory		50,000
Building		90,000
Accumulated Depreciation					30,000
Land		220,000
Accounts Payable					40,000
Notes Payable (8%, due in 3 years)					57,000
Common Stock					120,000
Retained Earnings					258,000
Totals	$	510,000		$	510,000

The company accounts for all inventory transactions using the perpetual FIFO method. Purchases and sales of inventory are recorded using the gross method for cash discounts. The $50,000 beginning balance of inventory consists of 625 units, each costing $80. During January 2018, the company had the following transactions:

During January 2018, the following transactions occur:

January		2		Lent $40,000 to an employee by accepting 6% note due in six months.
January		5		Purchased 5,600 units of inventory on account for $504,000 ($90 each) with terms 1/10, n/30.
January		8		Returned 100 defective units of inventory purchased on January 5.
January		15		Sold 5,400 units of inventory on account for $594,000 ($110 each) with terms 2/10, n/30.
January		17		Customers returned 100 units sold on January 15. These units are placed in inventory to be sold in the future.
January		20		Received cash from customers on accounts receivable. This amount includes $56,000 from 2017 plus amount receivable on sale of 4,900 units sold on January 15.
January		21		Wrote off remaining accounts receivable from 2017.
January		24		Paid on accounts payable. The amount includes the amount owed at the beginning of the period plus the amount owed from purchase of 5,200 units on January 5.
January		28		Paid cash for salaries during January, $48,000.
January		29		Paid cash for utilities during January, $30,000.
January		30		Paid dividends, $9,000.

The following information is available on January 31, 2018.

1. Of the remaining accounts receivable, the company estimates that 10% will not be collected.
2. Accrued interest income on notes receivable for January.
3. Accrued interest expense on notes payable for January.
4. Accrued income taxes at the end of January for $7,000.
5. Depreciation on the building, $4,000.

Answer 1

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