Title: Errors in Retained Earnings Calculation
Mandatory Great Adventure Accounting Cycle Chapter #7
6
Required information Exercise 7-21B: Complete the accounting cycle using long-term asset transactions (LO7-4, 7-7)
Part 6 of 7
[The following information applies to the questions displayed below.]
3.57 points
On January 1, Year 1, the general ledger of a company includes the following account balances:
Accounts Debit Credit
Cash $60,500
Accounts Receivable $28,600
Allowance for Uncollectible Accounts $38,100
Inventory $33,600
Notes Receivable 5t, due in 2 years $173,000
Land $4,000
Accounts Payable $16,600
Common Stock $238,000
Retained Earnings $75,200
Totals $333,800 $333,800
During January Year 1, the following transactions occur:
January 1: Purchase equipment for $21,300. The value service life.
January 4: Pay cash on accounts payable, $11,300.
January 15: Purchase additional inventory on account, $100,900.
January 15: Receive cash on accounts receivable, $23,800.
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 adjusting entries:
a. Depreciation on the equipment for the month of January is calculated using the straight-line method.
b. 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.)
c. Accrued interest revenue on notes receivable for January.
d. Unpaid salaries at the end of January are $34,400.
e. Accrued income taxes at the end of January are $10,800.
Exercise 7-21B Part 6
6. Record closing entries. If no entry is required for a particular transaction/event, select "No Journal Entry Required" in the first account field.
@Answer Is net complete.
Month: January
General Journal
Debit Credit
January 31:
Interest Revenue $140
Sales Revenue $238,000
January 31:
Retained Earnings $139,490
Depreciation Expense $250
Bad Debt Expense $3,160
Salaries Expense $66,000
Income Tax Expense $10,800
Utilities Expense $18,300
