Exercise 6-21B Complete the accounting cycle using inventory transactions (LO6-2, 6-3, 6-5, 6-6, 6-7)
[The following information applies to the questions displayed below.]
On January 1, Year 1, the general ledger of a company includes the following account balances:
Accounts | Debit | Credit | ||||
Cash | $ | 24,100 | ||||
Accounts Receivable | 42,000 | |||||
Allowance for Uncollectible Accounts | $ | 2,500 | ||||
Inventory | 41,000 | |||||
Land | 78,100 | |||||
Accounts Payable | 29,700 | |||||
Notes Payable (12%, due in 3 years) | 41,000 | |||||
Common Stock | 67,000 | |||||
Retained Earnings | 45,000 | |||||
Totals | $ | 185,200 | $ | 185,200 | ||
The $41,000 beginning balance of inventory consists of 410 units, each costing $100. During January Year 1, the company had the following inventory transactions:
January | 3 | Purchase 2,000 units for $218,000 on account ($109 each). | ||
January | 8 | Purchase 2,100 units for $239,400 on account ($114 each). | ||
January | 12 | Purchase 2,200 units for $261,800 on account ($119 each). | ||
January | 15 | Return 155 of the units purchased on January 12 because of defects. | ||
January | 19 | Sell 6,400 units on account for $960,000. The cost of the units sold is determined using a FIFO perpetual inventory system. | ||
January | 22 | Receive $950,000 from customers on accounts receivable. | ||
January | 24 | Pay $680,000 to inventory suppliers on accounts payable. | ||
January | 27 | Write off accounts receivable as uncollectible, $2,000. | ||
January | 31 | Pay cash for salaries during January, $125,000. |
The following information is available on January 31, Year 1.
Exercise 6-21B Part 3
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, $5,100 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 5% 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
$13,400.
3. Prepare an adjusted trial balance as of January 31, Year 1.
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