Question

Required information [The following information applies to the questions displayed below.] On January 1, 2021, the general ledger of ACME Fireworks includes the following account balances: Accounts Debit Credit Cash $ 27,100 Accounts Receivable 50,200 Allowance for Uncollectible Accounts $ 6,200 Inventory 22,000 Land 66,000 Equipment 25,000 Accumulated Depreciation 3,500 Accounts Payable 30,500 Notes Payable (6%, due April 1, 2022) 70,000 Common Stock 55,000 Retained Earnings 25,100 Totals $ 190,300 $ 190,300

During January 2021, the following transactions occur: January 2 Sold gift cards totaling $12,000. The cards are redeemable for merchandise within one year of the purchase date. January 6 Purchase additional inventory on account, $167,000. January 15 Firework sales for the first half of the month total $155,000. All of these sales are on account. The cost of the units sold is $83,800. January 23 Receive $127,400 from customers on accounts receivable. January 25 Pay $110,000 to inventory suppliers on accounts payable. January 28 Write off accounts receivable as uncollectible, $6,800. January 30 Firework sales for the second half of the month total $163,000. Sales include $17,000 for cash and $146,000 on account. The cost of the units sold is $89,500. January 31 Pay cash for monthly salaries, $54,000. 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 $5,200 and a two-year service life. The company estimates future uncollectible accounts. The company determines $31,000 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 4% of these accounts are estimated to be uncollectible. (Hint: Use the January 31 accounts receivable balance calculated in the general ledger.) Accrued interest expense on notes payable for January. Accrued income taxes at the end of January are $15,000. By the end of January, $5,000 of the gift cards sold on January 2 have been redeemed.

Prepare a multiple-step income statement for the period ended January 31, 2021.

Answer 1

Answer
Income statement for th peiod ended January 21, 2021
	Particulars	Amount in $	Amount in $
	Sales	318000
	Less: Cost of sales	177500
	Gross profit		140500
	Less: Operating expenses
	Allowance for Uncollectible account	16968
	Accrued interest on note payable	350
	Salaries	54000
	Accrued Income tax	15000
	Depreciation on equipment	825	87143
	Balance Profit		53357
	Other Income
	Sale of gift cards		7000
	Net profit/loss of January		60357