Prepare Closing Entries
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
On January 1, Year 1, the general ledger of a company includes the following account balances:
Accounts | Debit | Credit |
Cash | 60,500 | |
28,600 | ||
Allowance for Uncollectible Accounts | 4,000 | |
Inventory | 38,100 | |
Notes Receivable (5%, due in 2 years) | 33,600 | |
Land | 173,000 | |
Accounts Payable | 16,600 | |
Common Stock | 238,000 | |
75,200 | ||
Totals | 333,800 | 333,800 |
During January Year 1, the following transactions occur:
January | 1 | Purchase equipment for $21,300. The company estimates a residual value of $3,300 and a six-year service life. | ||
January | 4 | Pay cash on accounts payable, $11,300. | ||
January | 8 | Purchase additional inventory on account, $100,900. | ||
January | 15 | Receive cash on accounts receivable, $23,800. | ||
January | 19 | Pay cash for salaries, $31,600. | ||
January | 28 | Pay cash for January utilities, $18,300. | ||
January | 30 | Sales for January total $238,000. All of these sales are on account. The cost of the units sold is $124,000. |
Information for
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 $4,800 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 2% 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 $34,400.
- Accrued income taxes at the end of January are $10,800
Prepare Closing Entries
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