Required information [The following information applies to the questions displayed below.] One Product Corporation (OPC) incorporated at the beginning of last year. The balances on its post-closing trial balance prepared on December 31, at the end of its first year of operations, were: Cash Accounts Receivable Allowance for Doubtful Accounts Inventory Prepaid Rent 21,960 8,320 1,075 12,600 Equipment Accumulated Depreciation 1,980 47,800 4,680 Accounts Payable 0 Sales Tax Payable 500 FICA Payable 600 Withheld Income Taxes Payable 500 Salaries and Wages Payable 1,600 Unemployment Tax Payable 300 Deferred Revenue 4,500 Interest Payable 538 Notes Payable (long-term) 23,900 Common Stock Additional Paid-In Capital, Common Retained Earnings Treasury Stock The following information is relevant to the first month of operations in the following year: 18,800 20,117 19,550 4,000 OPC sells its inventory at $150 per unit, plus sales tax of 6 percent. OPC's January 1 inventory balance consists of 180 units at a total cost of $12,600. OPC's policy is to use the FIFO method, recorded using a perpetual inventory system. The $1,980 in Prepaid Rent relates to a payment made in December for January rent this year. The equipment was purchased on July 1 of last year. It has a residual value of $1,000 and an expected life of five years. It is being depreciated using the straight-line method. Employee wages are $4,000 per month. Employees are paid on the 16th for the first half of the month and on the first day of the following month for the second half of each month. Withholdings each pay period include $250 of income taxes and $150 of FICA taxes. These withholdings and the employer's matching contribution are paid monthly on the second day of the following month. In addition, unemployment taxes of $50 are accrued each pay period, and will be paid on March 31. Deferred Revenue is for 30 units ordered and paid for in advance by two customers in late December. One order of 25 units is to be filled in January, and the other will be filled in February. Notes Payable arises from a three-year, 9 percent bank loan received on October 1 last year. The par value on the common stock is $2 per share. Treasury Stock arises from the reacquisition of 500 shares at a cost of $8 per share. January Transactions a. On 1/01, OPC paid employees' salaries and wages that were previously accrued on December 31. b. A truck is purchased on 1/02 for $11,000 cash. It is estimated this vehicle will be used for 50,000 miles, after which it will have no residual value. c. Payroll withholdings and employer contributions for December are remitted on 1/03. d. OPC declares a $0.50 cash dividend on each share of common stock on 1/04, to be paid on 1/10. e. A $1,045 customer account is written off as uncollectible on 1/05. f. On 1/06, recorded sales of 175 units of inventory on account. Sales tax is charged but not yet collected or remitted to the state. g. Sales taxes of $500 that had been collected and recorded in December are paid to the state on 1/07. h. On 1/08, OPC issued 300 shares of treasury stock for $2,400. i. Collections from customers on account, totaling $18,121, are recorded on 1/09. j. On 1/10, OPC distributes the $0.50 cash dividend declared on January 4. The company's stock price is currently $5 per share. k. OPC purchases on account and receives 70 units of inventory on 1/11 for $4,340. 1. The equipment purchased last year for $47,800 is sold on 1/15 for $49,600 cash. Record depreciation for the first half of January prior to recording the equipment disposal. m. Payroll for January 1-15 is recorded and paid on 1/16. Be sure to accrue unemployment taxes and the employer's matching share of FICA taxes. n. Having sold the equipment, OPC pays off the note payable in full on 1/17. The amount paid is $24,536, which includes interest accrued in December and an additional $98 interest through January 17. o. On 1/27, OPC records sales of 30 units of inventory on account. Sales tax is charged but not yet collected or remitted. p. A portion of the advance order from December (25 units) is delivered on 1/29. No sales tax is collected on this transaction because the customer is a U.S. governmental organization that is exempt from sales tax. q. To obtain funds for purchasing new equipment, OPC issued bonds on 1/30 with a total face value of $109,000, stated interest rate of 5 percent, annual compounding, and six-year maturity date. OPC received $98,609 from the bond issuance, which implies a market interest rate of 7 percent. r. On 1/31, OPC records units-of-production depreciation on the vehicle (truck), which was driven 2,000 miles this month. s. OPC estimates that 2% of the ending accounts receivable balance will be uncollectible. Adjust the applicable accounts on 1/31, using the allowance method. t. On 1/31, adjust for January rent expired. u. Accrue January 31 payroll on 1/31, which will be payable on February 1. Be sure to accrue unemployment taxes and the employer's matching share of FICA taxes. v. Accrue OPC's corporate income taxes on 1/31, estimated to be $5,510. Prepare all January journal entries and adjusting entries for items (a)-(v). 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.) No 1 Date January 01 General Journal Salaries and Wages Payable Cash 2 January 02 Vehicles Cash Debit Credit 1,600 1,600 11,000 11,000 3 January 03 FICA Payable 600 Withheld Income Taxes Payable 500 Cash 1,100 4 January 04 Dividends Dividends Payable 5 January 05 Allowance for Doubtful Accounts Accounts Receivable 6 January 06 Accounts Receivable Sales Tax Payable Sales Revenue 7 January 06 Cost of Goods Sold Inventory 8 January 07 Sales Tax Payable Cash 9 January 08 Cash Treasury Stock > > 3,400 x 3,400 x 1,045 1,045 27,825 1,575 26,250 12,250 12,250 500 500 2,400 2,400 10 January 09 Cash 18,121 Accounts Receivable 18,121 11 January 10 Dividends Payable Cash 3,400 x 3,400 x 123 12 January 11 Inventory Accounts Payable 133 13 January 15 Depreciation Expense Accumulated Depreciation-Equipment 14 January 15 Cash Accumulated Depreciation-Equipment Gain on Disposal of PPE Equipment 15 January 16 Salaries and Wages Expense Payroll Tax Expense FICA Payable Withheld Income Taxes Payable Unemployment Tax Payable Cash 16 January 17 Notes Payable (long-term) Interest Payable Interest Expense Cash 17 January 27 Accounts Receivable Sales Tax Payable Sales Revenue 18 January 27 Cost of Goods Sold Inventory 19 January 29 Deferred Revenue Sales Revenue 20 January 29 Cost of Goods Sold Inventory > > 4,340 4,340 390 390 49,600 5,070 5,880 x 47,800 2,000 200 150 x 250 50 1,600 23,900 538 98 24,536 4,770 270 4,500 1,950 1,950 x 3,750 3,750 1,600 x 1,600 21 January 30 Cash 98,609 Discount on Bonds Payable Bonds Payable 10,391 109,000 22 January 31 Depreciation Expense Accumulated Depreciation-Vehicles 440 440 23 January 31 Bad Debt Expense 423 x Allowance for Doubtful Accounts 423 x 24 January 31 Rent Expense Prepaid Rent 25 January 31 Salaries and Wages Expense Payroll Tax Expense Withheld Income Taxes Payable FICA Payable Unemployment Tax Payable Salaries and Wages Payable 26 January 31 Income Tax Expense Income Tax Payable 1,980 1,980 2,000 200 250 300 50 1,600 5,510 5,510 Using the information from the requirements above, complete the 'Analysis' tab. What was OPC's total payroll cost for January? Total Payroll Cost $ 400 x Will the carrying value of the bond increase or decrease after recording interest in February? Increase What is the interest payment OPC will need to pay annually on the bond? Interest Payment $ 5,300 What was the gain or loss was recognized on the issuance of Treasury Stock on January 8? None