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One Trick Pony ( OTP ) Incorporated and began operations near the end of the year , resulting in the following post - closing balances
One Trick Pony OTP Incorporated and began operations near the end of the year resulting in the following post closing balances at December : CashAccounts Receivable Allowance for Doubtful Accounts InventoryDeferred Revenue units Accounts Payable Notes Payable long term Common Stock Retained Earnings credit balance The following information is relevant to the first month of operations in the following year OTP will sell inventory at $ per unit OTP's January inventory balance consists of units at a total cost of $ OTP's policy to use the FIFO method recorded using a perpetual inventory system In December OTP received a $ payment for units OTP is to deliver in January this obligation was recorded in Deferred Revenue Rent of $ was unpaid and recorded in Accounts Payable at December OTP's notes payable mature in three years and accrue interest at a annual rate January Transections a Included in OTP's January Accounts Receivable balance is a $ balance due from Jeff Letrotski Jeff is having cash flow problems and cannot pay the $ balance at this time On OTP arranges with Jeff to convert the $ balance to a month note at annual interest Jeff signs the promissory note which indicates the principal and all interest will be due and payable to OTP on July of this year b OTP paid $ insurance premium on covering the month of January the payment is recorded directly as an expense OTP purchased an additional units of inventory from a supplier on account on at a total cost of $ with terms n OTP paid courier $ cash on for same day delivery of the units of inventory e The units that OTP's customer paid for in advance in December are delivered to the customer on On OTP received a purchase allowance of $ on account and then paid the amount necessary to settle the balance owed to the supplier for the purchase of inventory in c Sales of units of inventory occurring during the period of are recorded on The sales terms are n Collected payments on from sales to customers recorded on LOTP paid the first weeks wages to the employees on The total paid is $ Wrote off a $ customer's account balance on OTP uses the allowance method not the direct write off method Paid $ on 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 LOTP recovered $ cash on from the customer whose account had previously been written off on An unrecorded $ utility bill for January arrived on is due on and will be paid then Sales of units of inventory during the period of with terms n are recorded on the sales recorded on units are returned to OTP on : The inventory is not damaged and can be resold OTP charges sales returns to a contra revenue account On : OTP records the $ employee salary that is owed but will be paid February OTP uses the aging method to estimate and adjust for uncollectible accounts on All of OTP's accounts receivable fall into single aging category for which 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 Accrue interest for January on Jeff Letrotski's note on seeM
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