Reference no: EM13919807

General Ledger Accounting Cycle

On January 1, 2018, the general ledger of Big Blast Fireworks includes the following account balances:

Accounts		Debit		Credit
Cash		$ 21,900
Accounts Receivable		36,500
Inventory		30,000
Land		61,600
Allowance for Uncollectible Accounts				$   3,100
Accounts Payable				32,400
Notes Payable (8%, due in 3 years)				30,000
Common Stock				56,000
Retained Earnings				28,500
Totals		$150,000		$150,000

 The $30,000 beginning balance of inventory consists of 300 units, each costing $100. During January 2018, Big Blast Fireworks had the following inventory transactions:

January 3	Purchase 1,200 units for $126,000 on account ($105 each).
January 8	Purchase 1,300 units for $143,000 on account ($110 each).
January 12	Purchase 1,400 units for $161,000 on account ($115 each).
January 15	Return 100 of the units purchased on January 12 because of defects.
January 19	Sell 4,000 units on account for $600,000. The cost of the units sold is determined using a FIFO perpetual inventory system.
January 22	Receive $580,000 from customers on accounts receivable.
January 24	Pay $410,000 to inventory suppliers on accounts payable.
January 27	Write off accounts receivable as uncollectible, $2,500.
January 31	Pay cash for salaries during January, $128,000

 Required:

1. Record each of the transactions listed above in the 'General Journal' assuming a FIFO perpetual inventory system. Review the 'General Ledger' and the 'Trial Balance' tabs to see the effect of the transactions on the account balances.

2. Record adjusting entries on January 31. in the 'General Journal'

a. At the end of January, the company estimates that the remaining units of inventory are expected to sell in February for only $100 each.

b. At the end of January, $4,000 of accounts receivable are past due, and the company estimates that 40% of these accounts will not be collected. Of the remaining accounts receivable, the company estimates that 4% will not be collected.

c. Accrued interest expense on notes payable for January. Interest is expected to be paid each December 31.

 

d. Accrued income taxes at the end of January are $12,300.