Answer:
Big Blast Fireworks
a) General Journal to record transactions:
Jan. 3
Debit Inventory $196,000
Credit Accounts Payable $196,000
To record the purchase of 1,750 units at $112 each
Jan. 8
Debit Inventory $216,450
Credit Accounts Payable $216,450
To record the purchase of 1,850 units at $117 each
Jan. 12
Debit Inventory $237,900
Credit Accounts Payable $237,900
To record the purchase of 1,950 units at $122 each
Jan. 15
Debit Accounts Payable $23,790
Credit Inventory $23,790
To record the return of 195 units at $122 each.
Jan. 19
Debit Accounts Receivable $855,000
Credit Sales Revenue $855,000
To record the sale of 5,700 units on account.
Debit Cost of Goods Sold $657,870
Credit Inventory $657,870
To record the cost of sales of 5700 units.
Jan. 22
Debit Cash Account $837,000
Credit Accounts Receivable $837,000
To record cash receipt from customers.
Jan. 24
Debit Accounts Payable $620,000
Credit Cash Account $620,000
Jan. 27
Debit Allowance for Uncollectible Accounts $2,800
Credit Accounts Receivable $2,800
To record the write-off of uncollectible.
Jan. 31
Debit Salaries & Wages Expense $138,000
Credit Cash Account $138,000
To record the payment of cash for salaries
2. Adjusting Entries on January 31, 2021:
Debit Loss on Inventory $3,190
Credit Inventory $3,190
To record the loss in value.
Debit Allowance for Uncollectible Accounts $2,065
Credit Accounts Receivable $2,065
To record the write-off of uncollectible.
Debit Uncollectible Expense $3,722
Credit Allowance for Uncollectible Accounts $3,722
To bring the allowance for uncollectible accounts to $2,957.
Debit Interest on Notes Payable $245
Credit Interest Payable $245
To record accrued interest for the month
3. Adjusted Trial Balance at January 31, 2021:
Debit Credit
Cash $104,700
Accounts Receivable 59,135
Allowance for Uncollectible Accounts 2,957
Beginning Inventory 49,000
Ending Inventory 14,500
Land 90,100
Salaries 138,000
Loss on Inventory 3,190
Uncollectible Expense 3,722
Interest on Notes Payable 245
Cost of Goods Sold 657,870
Sales Revenue 855,000
Accounts Payable 32,260
Notes Payable (6%, due in 3 years) 49,000
Interest on Notes Payable 245
Common Stock 75,000
Retained Earnings 57,000
Totals $1,071,462 $1,071,462
Balance Sheet at January 31, 2021:
Assets:
Cash $104,700
Accounts Receivable 59,135
Less uncollectible allw. -2,957
Inventory 14,500
Land 90,100
Total $265,478
Liabilities:
Accounts Payable 32,260
Notes Payable (6%, due in 3 years) 49,000
Interest on Notes Payable 245 $81,505
Common Stock 75,000
Retained Earnings 108,973 $183,973
Total $265,478
Explanation:
a) Unadjusted Trial Balance at January 1, 2021:
Debit Credit
Cash $ 25,700
Accounts Receivable 46,000
Allowance for Uncollectible Accounts 4,100
Inventory 49,000
Land 90,100
Accounts Payable 25,700
Notes Payable (6%, due in 3 years) 49,000
Common Stock 75,000
Retained Earnings 57,000
Totals $ 210,800 $ 210,800
b) Accounts Receivable
Beginning balance $46,000
Credit Sales $855,000
less write-off -2800
less write-off -2,065
less cash receipts -$837,000
Ending balance $59,135
c) Estimated uncollectible allowance = $2,957 (5% of accounts receivable balance, i.e $59,135)
d) Uncollectible Expense:
Ending balance $2957
Plus write-off 2,800
plus write-off 2,065
Beginning balance -4,100
Uncollectible expense 3,722
e) Cash Account balance:
Beginning balance $25,700
Cash from customers $837,000
Payment to suppliers-$620,000
Salaries -$138,000
Ending balance $104,700
f) Accounts Payable
Beginning balance $25,700
Inventory:
1,750 units for $196,000
1,850 units for $216,450
1,950 units for $237,900
195 units return -$23,790
less payment -$620,000
Ending Balance $32,260
g) Income Statement:
Sales $855,000
less cost of sales -657,870
Gross Income $197,130
Salaries -138,000
Loss on Inventory -3,190
Uncollectible Exp -3,722
Interest on Note -245
Net Income $51,973
Retained Earning 57,000
Ending R/Earnings$108,973
Cost of Goods Sold, using FIFO:
490 units at $100 each $49,000
1,750 units at $112 each $196,000
1,850 units at $117 each $216,450
1,610 units at $122 each $196,420
7,500 units sold $657,870
