Reference no: EM132467360

During January 2021, the following transactions occur:

Point 1: January 2 Sold gift cards totaling $10,400. The cards are redeemable for merchandise within one year of the purchase date.

Point 2: January 6 Purchase additional inventory on account, $159,000.

Point 3: January 15 Firework sales for the first half of the month total $147,000. All of these sales are on account. The cost of the units sold is $79,800.

Point 4: January 23 Receive $126,600 from customers on accounts receivable.

Point 5: January 25 Pay $102,000 to inventory suppliers on accounts payable.

Point 6: January 28 Write off accounts receivable as uncollectible, $6,000.

Point 7: January 30 Firework sales for the second half of the month total $155,000. Sales include $11,000 for cash and $144,000 on account. The cost of the units sold is $85,500.

Point 8: January 31 Pay cash for monthly salaries, $53,200.

The following information is available on January 31.

Question 1: Depreciation on the equipment for the month of January is calculated using the straight-line method. At the time the equipment was purchased, the company estimated a residual value of $4,200 and a two-year service life.

Question 2: The company estimates future uncollectible accounts. The company determines $23,000 of accounts receivable on January 31 are past due, and 30% of these accounts are estimated to be uncollectible. The remaining accounts receivable on January 31 are not past due, and 3% of these accounts are estimated to be uncollectible. (Hint: Use the January 31 accounts receivable balance calculated in the general ledger.)

Question 3: Accrued interest expense on notes payable for January.

Question 4: Accrued income taxes at the end of January are $14,200.

Question 5: By the end of January, $4,200 of the gift cards sold on January 2 have been redeemed (ignore cost of goods sold).