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Question

On January 1, 2021, the general ledger of Freedom Fireworks includes the following account

balances:

 

AccountsDebit Credit Cash$102,500      Accounts Receivable 36,600      Inventory 153,300      Land 80,300      Buildings 133,000      Allowance for Uncollectible Accounts    $3,100  Accumulated Depreciation     10,900  Accounts Payable     32,000  Bonds Payable     133,000  Discount on Bonds Payable 31,300      Common Stock     213,000  Retained Earnings     145,000  Totals$537,000  $537,000  

 

During January 2021, the following transactions occurred:

January 1 Borrowed $113,000 from Captive Credit Corporation. The installment note bears interest at 6% annually and matures in 5 years. Payments of $2,184.61 are required at the end of each month for 60 months.January 1 Called the bonds at the contractual call price of $113,000. The 6% bonds pay interest semiannually each June 30 and December 31.January 4 Received $32,300 from customers on accounts receivable.January 10 Paid cash on accounts payable, $24,000.January 15 Paid cash for salaries, $30,200.January 30 Firework sales for the month totaled $201,200. Sales included $66,300 for cash and $134,900 on account. The cost of the units sold was $119,000.January 31 Paid the first monthly installment of $2,185 related to the $113,000 borrowed on January 1. Round your interest calculation to the nearest dollar.

 

The following information is available on January 31, 2021.

  1. Depreciation on the building for the month of January is calculated using the straight-line method. At the time the building was purchased, the company estimated a service life of 10 years and a residual value of $26,800.
  2. At the end of January, $4,300 of accounts receivable are past due, and the company estimates that 50% of these accounts will not be collected. Of the remaining accounts receivable, the company estimates that 2% will not be collected. No accounts were written off as uncollectible in January.
  3. Unpaid salaries at the end of January are $27,400.
  4. Accrued income taxes at the end of January are $6,300.


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