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 Accounts Receivable Allowance for Doubtful Accounts Inventory Deferred Revenue (40 units) Accounts Payable Notes Payable (long-term) $ 41,210 12,950 370* 2,000 6,000 1,920 24,000 19,800 4,070 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 $150 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 $6,000 payment for 40 units OTP is to deliver in January; this obligation was recorded in Deferred Revenue. Rent of $1,220 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 a. 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. b. OTP paid a $180 insurance premium on 01/02, covering the month of January; the payment is recorded directly as an expense. c. 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. d. OTP paid a courier $400 cash on 01/05 for same-day delivery of the 200 units of inventory. e. The 40 units that OTP's customer paid for in advance in December are delivered to the customer on 01/06. f. 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). g. Sales of 60 units of inventory occurring during the period of 01/07-01/10 are recorded on 01/10. The sales terms are n/30. h. Collected payments on 01/14 from sales to customers recorded on 01/10. i. OTP paid the first 2 weeks' wages to the employees on 01/16. The total paid is $4,940. j. Wrote off a $1,010 customer's account balance on 01/18. OTP uses the allowance method, not the direct write-off method. k. Paid $2,440 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. 1. OTP recovered $450 cash on 01/26 from the customer whose account had previously been written off on 01/18. m. An unrecorded $120 utility bill for January arrived on 01/27. It is due on 02/15 and will be paid then. n. Sales of 70 units of inventory during the period of 01/10-01/28, with terms n/30, are recorded on 01/28. o. 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. p. On 01/31, OTP records the $4,940 employee salary that is owed but will be paid February 1. q. 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.) r. Accrue interest for January on the notes payable on 01/31. s. Accrue interest for January on Jeff Letrotski's note on 01/31 (see a). Prepare all January journal entries and adjusting entries for items (a) to (s). Review the 'General Ledger' and the adjusted 'Trial Balance' Tabs to see the effect of the transactions on the account balances. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) View transaction list View journal entry worksheet No Date General Journal 1 January 01 Notes Receivable (short-term) Accounts Receivable Debit Credit 2,400 2,400 2 January 02 Insurance Expense Cash 180 180 3 January 05 Inventory 8,000 Accounts Payable 8,000 4 January 05 Inventory Cash 400 400 5 January 06 Deferred Revenue Sales Revenue 6,000 6,000 6 January 06 Cost of Goods Sold Inventory 7 January 07 Accounts Payable 1,200 Sales Returns and Allowances 1,200 8 January 07 Accounts Payable Cash 9 January 10 Accounts Receivable Sales Revenue 10 January 10 Cost of Goods Sold Inventory 11 January 14 Cash Accounts Receivable 12 January 16 Salaries and Wages Expense Cash 13 January 18 Allowance for Doubtful Accounts 1,010 Accounts Receivable 1,010 14 January 19 Rent Expense Accounts Payable Cash 2,440 15 January 26 Accounts Receivable 450 Allowance for Doubtful Accounts 450 16 January 26 Cash Accounts Receivable 17 January 27 Utilities Expense Accounts Payable 450 450 120 120 18 January 28 Accounts Receivable Sales Revenue 19 January 28 Cost of Goods Sold Inventory 20 January 30 Sales Revenue Accounts Receivable 21 January 30 Inventory Cost of Goods Sold 22 January 31 Salaries and Wages Expense Salaries and Wages Payable 23 January 31 Bad Debt Expense Allowance for Doubtful Accounts 24 January 31 Interest Expense Interest Payable 25 January 31 Interest Receivable Interest Revenue < Requirement General Ledger >