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) Common Stock Retained Earnings credit balance. $ 39,260 16,410 450* 3,500 6,400 The following information is relevant to the first month of operations in the following year: 1,670 36,000 OTP will sell inventory at $160 per unit. OTP's January 1 inventory balance consists of 50 units at a total cost of $3,500. OTP's policy is to use the FIFO method, recorded using a perpetual inventory system. 9,900 4,750 In December, OTP received a $6,400 payment for 40 units OTP is to deliver in January; this obligation was recorded in Deferred Revenue. Rent of $1,200 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. Requirement January Transactions a. Included in OTP's January 1 Accounts Receivable balance is a $3,600 balance due from Jeff Letrotski. Jeff is having cash flow problems and cannot pay the $3,600 balance at this time. On 01/01, OTP arranges with Jeff to convert the $3,600 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. General Journal b. OTP paid a $340 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 $10,000, with terms n/30. d. OTP paid a courier $400 cash on 01/05 for same-day delivery of the 200 units of inventory. General Ledger 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 $1,600 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 $4,030. j. Wrote off a $820 customer's account balance on 01/18. OTP uses the allowance method, not the direct write-off method. k. Paid $2,400 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 $340 cash on 01/26 from the customer whose account had previously been written off on 01/18. m. An unrecorded $170 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 $4,030 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). Trial Balance Income Statement Statement of Retained Earnings Balance Sheet Analysis General Journal tab - 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. Trial Balance tab - Review the adjusted Trial Balance' as of January 31. Income Statement tab - Prepare an income statement for the period ended January 31 in the 'Income Statement' Tab. Statement of Retained earnings Prepare a statement of retained earning in the 'Statement of Retained earnings' Tab. Balance Sheet tab - Prepare a classified balance sheet as of January 31 in the 'Balance Sheet' Tab. Analysis tab - Using the information from the requirements above, complete the 'Analysis' tab. 1200
One Trick Pony (OTP) incorporated and began operations near the end of the year, resulting in the following post-closing balances at December 31 : The following information is relevant to the first month of operations in the following year: - OTP will sell inventory at $160 per unit. OTP's January 1 inventory balance consists of 50 units at a total cost of $3,500. OTP's policy is to use the FFO method, recorded using a perpetual inventory system. - In December, OTP recelved a $6,400 payment for 40 units OTP is to deliver in January, this obligation was recorded in Deferred Revenue. Rent of $1,200 was unpoid and recorded in Accounts Payable at December 31 . - Orp's notes payoble mature in three years, and accrue interest at a 10% annual rate. January Transactions a. Included in OTP's January 1 Accounts Recelvable balance is a $3,600 balance due from Jeff Letrotski. Jeff is having cash flow problems and cannot pay the $3,600 balance at this time. On O1V1, OTP arranges with Jeff to convert the $3,600 balance to a saxmonth note, ot 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 $340 insurance premium on 0102 , covering the month of January, the payment is recorded directly as an expense. c. Orp purchased an additional 200 units of inventory from a supplier on account on 0 ro5 at a total cost of $10,000, with terms N30. d. OTP paid a courier $400 cash on OVO5 for same-day delivery of the 200 units ofinventory. e. The 40 units that OTP's customer paid for in advance in December are delivered to the customer on OvO6. { On 0 V 07 , OTP received a purchase allowance of $1,600 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). 9. Sales of 50 units of imventory occurring during the period of 0107-0170 are recorded on 0170. The saless terms are n/30. h. Collected payments on ovi4 from sales to customers recorded on 0140 . LOrp paid the first 2 weeks" wages to the employees on 0176 . The total paid is $4,030. 1. Wrote off a $820 customer's account bafonce on 0tit8. OTP usos the allowance method, not the direct write-off method. k. Paid $2,400 on 0179 for December and Janyary 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 $340 cash on OV26 from the customer whose account had previously been written off on 0y18. m An unrecorded $170 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 01/100128, with terms n/30, are recerded on 0128 , o. Or the sales recorded on O1/28, 10 units are retumed to OTP on O1/30. The inventory is not damaged and can be resold. OTP charges sales returns to a contra-reverue account p. On 01/31, OTP records the 54,030 emplayee salary that is owed but will be paid February 1. 9. OrP uses the aging method to estimate and adjust for uncollectible accounts on OV31. All of OTP's accounts recelvable fall into a single aging category, for which 10s is estimated to be uncollectble. (Update the balances of both relevant accounts prior to determining the oppropriate adjustment.) c. Accrue interest for January on the notes payable on 0131 5. Accrue interest for January on Jeff Letrotskis note on 0131 (see a) General Journal fab-Prepare all January jeurnat entries and adjusting entries for itemis (a) to (s). Aeview the 'General Ledger' and the adjusted 'Trial Balance' Tabs to see the effect of the pransactiens on the ackount balances. Trial Balance tab - Review the adjusted Triat Balance' as of January 31. Income Statement tab - Prepere an inceine staternent for the period ended Jaguary 31 in the 'Inceche Statement' Tab. Statement of Retalned earnings - Prepare a statement of retained earning in the "5tatement of Retained earnings' Zab. Ealance Sheet tab - Prepare a classified balance sheet as of January 31 in the 'balance Shect' Tab. Analysis tab - Using the information from thet reguirements above, complete the "Analysis' tab. a. Included in OTP's January 1 Accounts Receivable balance is a $3,600 balance due from Jeff Letrotski. Jeff is having cash flow problems and cannot pay the $3,600 balance at this time. On 0v01, OTP arranges with Jeff to convert the $3,600 balance to a sixmonth note, at 10% annual interest. Jeff signs the promissory note, which indicates the principal and all interest will be due and payabie to OTP on July 1 of this year. b. OTP paid a $340 insurance premium on 0102, 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 0105 at a total cost of $10,000, with terms n/30. d. OTP paid a courier $400 cash on 0105 for same-day dellvery 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 recelved a purchase allowance of $1,600 on account, and then paid the amount necessary to settie the balance owed to the supplier for the 1/05 purchase of inventory (in c). g. Sales of 60 units of inventory occurting during the period of 01/0701/10 are recorded on 01/10. The sales terms are n/3 / h. Collected payments on 01/14 from sales to customers recorded on 01/10. 1. OTP paid the first 2 weeks' wages to the employees on 01716 . The total paid is $4,030. 1. Wrote off a $820 customer's account balance on OV18. OTP uses the allowance method, not the direct write-off method. k. Paid $2,400 on 01/9 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 $340 cash on 01/26 from the custorger whose account had previously been written off on 01/18. m. An unrecorded $170 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 01/1001/28, with terms n/30, are recorded on 01/28. 0 . 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. OrP charges sales returns to a contra-revenue account. p. On 0V31, OTP records the $4,030 employee salary that is owed but will be paid February 1. 4. 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 0131. 5. Accrue interest for January on Jeff Letrotski's note on 01/31 (see a) For the month ended January 31 , indicate the (i) gross profit percentage, (ii) number of units in ending inventory, and (iii) cost per unit of ending inventory. If OTP had used the percentage of sales method (using 2% of Net Sales) rather than the aging method, what amounts would OTC's January financial statements have reported for (1) Bad Debt Expense and (ii) Accounts Recelvable, net? One Trick Pony (OTP) incorporated and began operations near the end of the year, resulting in the following post-closing balances at December 31 : The following information is relevant to the first month of operations in the following year: - OTP will sell inventory at $160 per unit. OTP's January 1 inventory balance consists of 50 units at a total cost of $3,500. OTP's policy is to use the FFO method, recorded using a perpetual inventory system. - In December, OTP recelved a $6,400 payment for 40 units OTP is to deliver in January, this obligation was recorded in Deferred Revenue. Rent of $1,200 was unpoid and recorded in Accounts Payable at December 31 . - Orp's notes payoble mature in three years, and accrue interest at a 10% annual rate. January Transactions a. Included in OTP's January 1 Accounts Recelvable balance is a $3,600 balance due from Jeff Letrotski. Jeff is having cash flow problems and cannot pay the $3,600 balance at this time. On O1V1, OTP arranges with Jeff to convert the $3,600 balance to a saxmonth note, ot 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 $340 insurance premium on 0102 , covering the month of January, the payment is recorded directly as an expense. c. Orp purchased an additional 200 units of inventory from a supplier on account on 0 ro5 at a total cost of $10,000, with terms N30. d. OTP paid a courier $400 cash on OVO5 for same-day delivery of the 200 units ofinventory. e. The 40 units that OTP's customer paid for in advance in December are delivered to the customer on OvO6. { On 0 V 07 , OTP received a purchase allowance of $1,600 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). 9. Sales of 50 units of imventory occurring during the period of 0107-0170 are recorded on 0170. The saless terms are n/30. h. Collected payments on ovi4 from sales to customers recorded on 0140 . LOrp paid the first 2 weeks" wages to the employees on 0176 . The total paid is $4,030. 1. Wrote off a $820 customer's account bafonce on 0tit8. OTP usos the allowance method, not the direct write-off method. k. Paid $2,400 on 0179 for December and Janyary 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 $340 cash on OV26 from the customer whose account had previously been written off on 0y18. m An unrecorded $170 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 01/100128, with terms n/30, are recerded on 0128 , o. Or the sales recorded on O1/28, 10 units are retumed to OTP on O1/30. The inventory is not damaged and can be resold. OTP charges sales returns to a contra-reverue account p. On 01/31, OTP records the 54,030 emplayee salary that is owed but will be paid February 1. 9. OrP uses the aging method to estimate and adjust for uncollectible accounts on OV31. All of OTP's accounts recelvable fall into a single aging category, for which 10s is estimated to be uncollectble. (Update the balances of both relevant accounts prior to determining the oppropriate adjustment.) c. Accrue interest for January on the notes payable on 0131 5. Accrue interest for January on Jeff Letrotskis note on 0131 (see a) General Journal fab-Prepare all January jeurnat entries and adjusting entries for itemis (a) to (s). Aeview the 'General Ledger' and the adjusted 'Trial Balance' Tabs to see the effect of the pransactiens on the ackount balances. Trial Balance tab - Review the adjusted Triat Balance' as of January 31. Income Statement tab - Prepere an inceine staternent for the period ended Jaguary 31 in the 'Inceche Statement' Tab. Statement of Retalned earnings - Prepare a statement of retained earning in the "5tatement of Retained earnings' Zab. Ealance Sheet tab - Prepare a classified balance sheet as of January 31 in the 'balance Shect' Tab. Analysis tab - Using the information from thet reguirements above, complete the "Analysis' tab. a. Included in OTP's January 1 Accounts Receivable balance is a $3,600 balance due from Jeff Letrotski. Jeff is having cash flow problems and cannot pay the $3,600 balance at this time. On 0v01, OTP arranges with Jeff to convert the $3,600 balance to a sixmonth note, at 10% annual interest. Jeff signs the promissory note, which indicates the principal and all interest will be due and payabie to OTP on July 1 of this year. b. OTP paid a $340 insurance premium on 0102, 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 0105 at a total cost of $10,000, with terms n/30. d. OTP paid a courier $400 cash on 0105 for same-day dellvery 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 recelved a purchase allowance of $1,600 on account, and then paid the amount necessary to settie the balance owed to the supplier for the 1/05 purchase of inventory (in c). g. Sales of 60 units of inventory occurting during the period of 01/0701/10 are recorded on 01/10. The sales terms are n/3 / h. Collected payments on 01/14 from sales to customers recorded on 01/10. 1. OTP paid the first 2 weeks' wages to the employees on 01716 . The total paid is $4,030. 1. Wrote off a $820 customer's account balance on OV18. OTP uses the allowance method, not the direct write-off method. k. Paid $2,400 on 01/9 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 $340 cash on 01/26 from the custorger whose account had previously been written off on 01/18. m. An unrecorded $170 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 01/1001/28, with terms n/30, are recorded on 01/28. 0 . 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. OrP charges sales returns to a contra-revenue account. p. On 0V31, OTP records the $4,030 employee salary that is owed but will be paid February 1. 4. 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 0131. 5. Accrue interest for January on Jeff Letrotski's note on 01/31 (see a) For the month ended January 31 , indicate the (i) gross profit percentage, (ii) number of units in ending inventory, and (iii) cost per unit of ending inventory. If OTP had used the percentage of sales method (using 2% of Net Sales) rather than the aging method, what amounts would OTC's January financial statements have reported for (1) Bad Debt Expense and (ii) Accounts Recelvable, net
