On January 1, 2018, the general ledger of TNT Fireworks includes the following a
ID: 2508520 • Letter: O
Question
On January 1, 2018, the general ledger of TNT Fireworks includes the following account balances: Debit 60,600 28,800 38,200 34,800 174,000 Credit Accounts Cash Accounts Receivable Inventory Notes Receivable (5%, due in 2 years) Land Allowance for Uncollectible Accounts Accounts Payable Common Stock Retained Earning 4,100 16,700 239,000 76,600 Totals $336,400 $336,400 During January 2018, the following transactions occur: Purchase equipment for $21,400. The company estimates a residual value of $3,400 and a five-year service life January 1 January 4 Pay cash on accounts payable, $11,400 January 8 Purchase additional inventory on account, $101,900 January 15 Receive cash on accounts receivable, $23,900 January 19 Pay cash for salaries, $31,700 January 28 Pay cash for January utilities, $18,400 January 30 Firework sales for January total $239,000. All of these sales are on account. The cost of the units sold is $124,500 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, $4,900 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 3% will not be collected. The note receivable of $34,800 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 $34,500 e. Accrued income taxes at the end of January are $10,900Explanation / Answer
* Accounts receivable balance on Jan. 31, 2018 = 28800 - 23900 + 239000 = $243900
Allowance for uncollectibe accounts = ($4900 x 50%) + ($239000 x 3%) = $2450 + $7170 = $9620
Date Account Title Debit Credit 2018 Jan. 1 Equipment 21400 Cash 21400 (To record equipment purchased) Jan. 4 Accounts payable 11400 Cash 11400 (To record payment on account) Jan. 8 Inventory 101900 Accounts payable 101900 (To record inventory purchased on account) Jan. 15 Cash 23900 Accounts receivable 23900 (To record collection on account) Jan. 19 Salaries expense 31700 Cash 31700 (To record payment of salaries) Jan. 28 Utilities expense 18400 Cash 18400 (To record utilities paid) Jan. 30 Accounts receivable 239000 Sales revenue 239000 (To record sales on account) Jan. 30 Cost of goods sold 124500 Inventory 124500 (To record cost of goods sold)