On January 1 2018 the general ledger of ACME Fireworks inclu

On January 1, 2018, the general ledger of ACME Fireworks includes the following account balances Credit Debit 27,000 50,000 Accounts Cash Accounts Receivable Allowance for Uncollectible Accounts Inventory Land Equipment Accumulated Depreciation Accounts Payable Notes Payable (6%, due April 1, 2019) Common Stock Retained Earnings $ 6,100 21,900 65,000 24,500 3,400 30,400 69,000 54,000 25,500 Totals $188,400 $188,400 During January 2018, the following transactions occur: January 2 Sold gift cards totaling $11,800. The cards are redeemable for merchandise within one year of the purchase date January 6 Purchase additional inventory on account, $166,000 January 15 Firework sales for the first half of the month total $154,000. All of these sales are on account. The cost of the units sold is $83,300 January 23 Receive $127,300 from customers on accounts receivable January 25 Pay $109,000 to inventory suppliers on accounts payable January 28 Write off accounts receivable as uncollectible, S6,700 January 30 Firework sales for the second half of the month total $162,000. Sales include $10,000 for cash and $152,000 on account. The cost of the units sold is $89,000 January 31 Pay cash for monthly salaries, $53,900 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. At the time the equipment was purchased, the company estimated a residual value of $5,300 and a two-year service life b. At the end of January, $30,000 of accounts receivable are past due, and the company estimates that 30% of these accounts will not be collected. Of the remaining accounts receivable, the company estimates that 5% will not be collected c. Accrued interest expense on notes payable for January d. Accrued income taxes at the end of January are $14,900 e. By the end of January, $4,900 of the gift cards sold on January 2 have been redeemed

Solution

Adjusting entries:

Working:

Date	General Journal	Debit	Credit
Jan. 2	Cash	11800
	Unearned revenue		11800
	(To record gift cards sold)
Jan. 6	Inventory	166000
	Accounts payable		166000
	(To record purchase of inventory on account)
Jan. 15	Accounts receivable	154000
	Sales revenue		154000
	(To record sales on account)
Jan. 15	Cost of goods sold	83300
	Inventory		83300
	(To record cost of sales)
Jan. 23	Cash	127300
	Accounts receivable		127300
	(To record collections on account)
Jan. 25	Accounts payable	109000
	Cash		109000
	(To record payment on account)
Jan. 28	Allowance for uncollectible accounts	6700
	Accounts receivable		6700
	(To record uncollectible accounts)
Jan. 30	Cash	10000
	Accounts receivable	152000
	Sales revenue		162000
	(To record sales)
Jan. 30	Cost of goods sold	89000
	Inventory		89000
	(To record cost of sales)
Jan. 31	Salaries expense	53900
	Cash		53900
	(To record payment of monthly salaries)