Exercise 6-21 Complete the accounting cycle using inventory transactions (LO6-2, 6-3, 6-5, 6-6, 6-7)

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On January 1, 2021, the general ledger of Big Blast Fireworks includes the following account balances:

Accounts	Debit			Credit
Cash	$	23,500
Accounts Receivable		40,500
Allowance for Uncollectible Accounts				$	4,700
Inventory		38,000
Land		73,600
Accounts Payable					28,400
Notes Payable (9%, due in 3 years)					38,000
Common Stock					64,000
Retained Earnings					40,500
Totals	$	175,600		$	175,600

The $38,000 beginning balance of inventory consists of 380 units, each costing $100. During January 2021, Big Blast Fireworks had the following inventory transactions:

January		3		Purchase 1,700 units for $180,200 on account ($106 each).
January		8		Purchase 1,800 units for $199,800 on account ($111 each).
January		12		Purchase 1,900 units for $220,400 on account ($116 each).
January		15		Return 140 of the units purchased on January 12 because of defects.
January		19		Sell 5,500 units on account for $825,000. The cost of the units sold is determined using a FIFO perpetual inventory system.
January		22		Receive $797,000 from customers on accounts receivable.
January		24		Pay $580,000 to inventory suppliers on accounts payable.
January		27		Write off accounts receivable as uncollectible, $3,300.
January		31		Pay cash for salaries during January, $122,000.

The following information is available on January 31, 2021.

1. At the end of January, the company estimates that the remaining units of inventory are expected to sell in February for only $100 each.
2. The company estimates future uncollectible accounts. The company determines $4,800 of accounts receivable on January 31 are past due, and 40% of these accounts are estimated to be uncollectible. The remaining accounts receivable on January 31 are not past due, and 5% of these accounts are estimated to be uncollectible. (Hint: Use the January 31 accounts receivable balance calculated in the general ledger.)
3. Accrued interest expense on notes payable for January. Interest is expected to be paid each December 31.
4. Accrued income taxes at the end of January are $13,100.

Exercise 6-21 Part 6

6. Record closing entries. (If no entry is required for a transaction/event, select "No journal entry required" in the fi