11:20 PM * 39%--I, On January 1, 2018, the general ledger of TNT Fireworks inclu
ID: 2398253 • Letter: 1
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11:20 PM * 39%--I, On January 1, 2018, the general ledger of TNT Fireworks includes the following account balances Accounts Debit Credit $60,200 as Accounts Receivable Inventory Notes Receivable (5%, due in 2 years) Land Allowance for Uncollectible Accounts Accounts Payable Common Stock Retained Earning 28,000 37,800 30,000 170,000 3,700 16,300 235,000 71,000 Totals $326,000 S326,000 During January 2018, the following transactions occur: Purchase equipment for $21,000. The company estimates a residual value of $3,000 and a six-year service life January 1 January 4 Pay cash on accounts payable, $11,000 January 8 Purchase additional inventory on account, $97,900 January 15 Receive cash on accounts receivable, $23,500 January 19 Pay cash for salaries, $31,300 January 28 Pay cash for January utilities, $18,000 January 30 Firework sales for January total $235,000. All of these sales are on account. The cost of the units sold is $122,500 The following information is available on January 31, 2018 a. Depreciation on the equipment for the month of January is calculated using the straight-line method b. At the end of January, $4,500 of accounts receivable are past due, and the company estimates that 50% of these accounts will not be Collected. Of the remaining accounts receivable, the company estimates that 2% will not be collected. The note receivable of $30,000 is considered fully collectible and therefore is not included in the estimate of uncollectible accounts c. Accrued interest revenue on notes receivable for January d. Unpaid salaries at the end of January are $34,100 e. Accrued income taxes at the end of January are $10,500Explanation / Answer
1 st Part 01-01-18 Equipment Dr 21000 Cash 21000 (Assumed paid in cash) 04-01-18 Accounts Payable 11000 Cash 11000 08-01-18 Inventory 97900 Accounts Payable 97900 15-01-18 Cash 23500 Accounts Receivable 23500 19-01-18 Salary Expense 31300 Cash 31300 28-01-18 Utility Expense 18000 Cash 18000 30-01-18 Sales 235000 Accounts Receivable 235000 30-01-18 Cost of Goods Sold 122500 Inventory 122500 2nd Part Adjusting Entries 31-01-18 Depreciation Expense 250 Accumulated Depreciation 250 Annual Depreciation under Straight Line method=(Cost -Residual value)/Useful life 3000 =(15000-3000)/6 Monthly Deprecaition 250 =3000/12 31-01-18 Bad debt Expense 3250 Allowance for uncollectible Account s 3250 Total uncollectible receibvables=4500*50%+235000*2% 6950 Less: Allowance already in books 3700 Additional allowance to be created 3250 31-01-18 Interest Income 125 =30000*5%/12 Accrued Interest 125 31-01-18 Salary Expense 34100 Salary Payable 34100 31-01-18 Income Tax Expense 10500 Income Tax Payable 10500 3rd Part Adjusted Trial Balance Accounts Debit Credit Cash 2400 =60200-21000-11000+23500-31300-18000 Accounts Receivable 239500 =28000-23500+235000 Inventory 13200 =37800+97900-122500 Notes Receivable 30000 Land 170000 Allowance for Uncollectibel accounts 6950 =3700+3250 Accounts Payable 103200 =16300-11000+97900 Common Stock 235000 Retained Earning 71000 Equipment 21000 Salary Expense 65400 =31300+34100 Utility Expense 18000 Interest Income 125 Accrued Interest 125 Salary Payable 34100 Income Tax Expense 10500 Income Tax Payable 10500 Bad debt Expense 3250 Sales 235000 Cost of Goods sold 122500 Depreciation Expense 250 Accumulated Depreciation 250 696125 696125 4th Part Mutistep Income Statement Sales 235000 Less: Cost of goods sold 122500 Gross profit 112500 Add: Interest Income 125 Less: Salary Expense 65400 Utility Expense 18000 Bad debt Expense 3250 Depreciation Expense 250 Net profit before tax 25725 Less: Income Tax Expense 10500 Net profit 15225
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