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BraedynM2089
BraedynM2089
27.04.2021 • 
Business

On January 1, 2021, the general ledger of TNT Fireworks includes the following account balances: Accounts Debit Credit
Cash $58,700
Accounts Receivable 25,000
Allowance for Uncollectible Accounts $2,200
Inventory 36,300
Notes Receivable (5%, due in 2 years) 12,000
Land 155,000
Accounts Payable 14,800
Common Stock 220,000
Retained Earnings 50,000
Totals $287,000 $287,000

During January 2021, the following transactions occur:

January 1 Purchase equipment for $19,500. The company estimates a residual value of $1,500 and a five-year service life.
January 4 Pay cash on accounts payable, $9,500.
January 8 Purchase additional inventory on account, $82,900.
January 15 Receive cash on accounts receivable, $22,000.
January 19 Pay cash for salaries, $29,800.
January 28 Pay cash for January utilities, $16,500.
January 30 Firework sales for January total $220,000. All of these sales are on account. The cost of the units sold is $115,000.

Information for adjusting entries:

Depreciation on the equipment for the month of January is calculated using the straight-line method.
The company estimates future uncollectible accounts. The company determines $3,000 of accounts receivable on January 31 are past due, and 50% 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.)
Accrued interest revenue on notes receivable for January.
Unpaid salaries at the end of January are $32,600.
Accrued income taxes at the end of January are $9,000.

Required:
a. Prepare a multiple-step income statement for the period ended January 31, 2021.
b. Prepare a classified balance sheet as of January 31, 2021.
c. Record closing entries.

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