C$8-3($Algo$)$ Recording Daily and Adjusting Entries Using FIFO in a Perpetual Inventory System $($Chapters $3,4,6,7,$ and $8)($LO $3-3,4-2,4-3,4-4,6-3,6-4,6-6,7-3,8-2,8-3)($General Ledger$)$

One Trick Pony $($OTP$)$ incorporated and began operations near the end of the year, resulting in the following post$-$closing balances at December $31$:

Cash $ $28,340$

Accounts Receivable $12,310$

Allowance for Doubtful Accounts $980*$

Inventory $2,000$

Deferred Revenue $(40$ units$)5,600$

Accounts Payable $1,170$

Notes Payable $($long$-$term$)24,000$

Common Stock $6,200$

Retained Earnings $4,700$

$*$ credit balance.

The following information is relevant to the first month of operations in the following year:

OTP will sell inventory at $$140$ per unit. OTP$$s January $1$ inventory balance consists of $50$ units at a total cost of $$2,000.$ OTP$$s policy is to use the FIFO method, recorded using a perpetual inventory system.

In December, OTP received a $$5,600$ payment for $40$ units OTP is to deliver in January; this obligation was recorded in Deferred Revenue. Rent of $$1,400$ was unpaid and recorded in Accounts Payable at December $31.$

OTP$$s notes payable mature in three years, and accrue interest at a $10\%$ annual rate.

January Transactions

Included in OTP$$s January $1$ Accounts Receivable balance is a $$2,400$ balance due from Jeff Letrotski. Jeff is having cash flow problems and cannot pay the $$2,400$ balance at this time. On $01/01,$ OTP arranges with Jeff to convert the $$2,400$ balance to a six$-$month note, at $10\%$ annual interest. Jeff signs the promissory note, which indicates the principal and all interest will be due and payable to OTP on July $1$ of this year.

OTP paid a $$560$ insurance premium on $01/02,$ covering the month of January; the payment is recorded directly as an expense.

OTP purchased an additional $200$ units of inventory from a supplier on account on $01/05$ at a total cost of $$8,000,$ with terms n$/30.$

OTP paid a courier $$400$ cash on $01/05$ for same$-$day delivery of the $200$ units of inventory.

The $40$ units that OTP$$s customer paid for in advance in December are delivered to the customer on $01/06.$

On $01/07,$ OTP received a purchase allowance of $$1,200$ on account, and then paid the amount necessary to settle the balance owed to the supplier for the $1/05$ purchase of inventory $($in c$).$

Sales of $60$ units of inventory occurring during the period of $01/0701/10$ are recorded on $01/10.$ The sales terms are n$/30.$

Collected payments on $01/14$ from sales to customers recorded on $01/10.$

OTP paid the first $2$ weeks$$ wages to the employees on $01/16.$ The total paid is $$2,880.$

Wrote off a $$950$ customer$$s account balance on $01/18.$ OTP uses the allowance method, not the direct write$-$off method.

Paid $$2,800$ on $01/19$ for December and January rent. See the earlier bullets regarding the December portion. The January portion will expire soon, so it is charged directly to expense.

OTP recovered $$430$ cash on $01/26$ from the customer whose account had previously been written off on $01/18.$

An unrecorded $$300$ utility bill for January arrived on $01/27.$ It is due on $02/15$ and will be paid then.

Sales of $70$ units of inventory during the period of $01/1001/28,$ with terms n$/30,$ are recorded on $01/28.$

Of the sales recorded on $01/28,10$ units are returned to OTP on $01/30.$ The inventory is not damaged and can be resold. OTP charges sales returns to a contra$-$revenue account.

On $01/31,$ OTP records the $$2,880$ employee salary that is owed but will be paid February $1.$

OTP uses the aging method to estimate and adjust for uncollectible accounts on $01/31.$ All of OTP$$s accounts receivable fall into a single aging category, for which $10\%$ is estimated to be uncollectible. $($Update the balances of both relevant accounts prior to determining the appropriate adjustment.$)$

Accrue interest for January on the notes payable on $01/31.$

Accrue interest for January on Jeff Letrotski$$s note on $01/31($see a$).$