On January 1, 2021, the general ledger of Freedom Fireworks includes the following account balances:
Accounts Debit Credit
Cash $101,200
Accounts receivable 34,000
Inventory 152,000
Land 67,300
Buildings 120,000
Allowance for uncollectible accounts $1,800
Accumulated depreciation 9,600
Accounts payable 17,700
Bonds payable 120,000
Discount on bonds payable 30,000
Common stock 200,000
Retained earnings 155,400
Totals $504,500 $504,500
During January 2021, the following transactions occurred:
January 1 Borrowed $100,000 from Captive Credit Corporation. The installment note bears interest at 7% annually and matures in 5 years. Payments of $1,980 are required at the end of each month for 60 months.
January 1 Called the bonds at the contractual call price of $100,000. The 6% bonds pay interest semiannually each June 30 and December 31.
January 4 Received $31,000 from customers on accounts receivable.
January 10 Paid cash on accounts payable, $11,000.
January 15 Paid cash for salaries, $28,900.
January 30 Firework sales for the month totalled $195,000. Sales included $65,000 for cash and $130,000 on account. The cost of the units sold was $112,500.
January 31 Paid the first monthly installment of $1,980 related to the $100,000 borrowed on January 1. (Round your interest calculation to the nearest dollar.)
The following information is available on January 31, 2021.
Depreciation on the building for the month of January is calculated using the straight-line method. At the time the building was purchased, the company estimated a service life of ten years and a residual value of $24,000.
At the end of January, $3,000 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. No accounts were written off as uncollectible in January.
Unpaid salaries at the end of January are $26,100.
Accrued income taxes at the end of January are $5,000.
Required:
a. Record each of the transactions listed above.
b. Record adjusting entries on January 31.
c. Prepare a multiple-step income statement for the period ended January 31, 2021.
d. Prepare a classified balance sheet as of January 31, 2021
Answers: 3
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On January 1, 2021, the general ledger of Freedom Fireworks includes the following account balances:...
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