On January 1, 2018, the general ledger of TNT Fireworks includes the following a
ID: 2508790 • 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
Multi step Income statement
for the year ended Jan 31 2018
Depreciation : [cost -residual]/useful life
=[21400-3400]/5=3600 per year or [3600/12 ]= 300 per month
**estimated uncollectible account :[28800 beginning receivable +239000 current sales ]=267800 total sales
[267800-4900]*.03]=7887
4900*.50 = 2450
Total uncollectible = 7887+2450= 10337
LesS:credit balance in allowance (4100)
Bad debt expense 6237
Multi step Income statement
for the year ended Jan 31 2018
sales revenue 239000 less:cost of goods sold (124500) Gross margin 114500 Depreciation equipment 300 salary expense [31700+34500] 66200 Utilities expense 18400 Bad debt expense 6237 Total operating expense (91137) operating income 23363 other income /(expense) Interest revenue [34800*.05*1/12] 145 Income before tax 23508 lesS:Income tax expense (10900) Net Income 12608