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: Cash22,000Accounts Receivable8,300Allowance for Doubtful Accounts1,055Inventory12,240Prepaid Rent1,940Equipment45,400Accumulated Depreciation4,440Accounts Payable0Sales Tax Payable500FICA Payable600Withheld Income Taxes Payable500Salaries and Wages Payable1,600Unemployment Tax Payable300Deferred Revenue4,500Interest Payable533Notes Payable (long-term)23,700Common Stock18,200Additional Paid-In Capital, Common20,022Retained Earnings17,930Treasury Stock4,000 The following information is relevant to the first month of operations in the following year: 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 $12,240. OPC’s policy is to use the FIFO method, recorded using a perpetual inventory system.The $1,940 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 On 1/01, OPC paid employees’ salaries and wages that were previously accrued on December 31.A truck is purchased on 1/02 for $10,000 cash. It is estimated this vehicle will be used for 50,000 miles, after which it will have no residual value.Payroll withholdings and employer contributions for December are remitted on 1/03.OPC declares a $0.50 cash dividend on each share of common stock on 1/04, to be paid on 1/10.A $1,035 customer account is written off as uncollectible on 1/05.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.Sales taxes of $500 that had been collected and recorded in December are paid to the state on 1/07.On 1/08, OPC issued 300 shares of treasury stock for $2,400.Collections from customers on account, totaling $18,021, are recorded on 1/09.On 1/10, OPC distributes the $0.50 cash dividend declared on January 4. The company’s stock price is currently $5 per share.OPC purchases on account and receives 70 units of inventory on 1/11 for $3,920.The equipment purchased last year for $45,400 is sold on 1/15 for $46,800 cash. Record depreciation for the first half of January prior to recording the equipment disposal.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.Having sold the equipment, OPC pays off the note payable in full on 1/17. The amount paid is $24,330, which includes interest accrued in December and an additional $97 interest through January 17.On 1/27, OPC records sales of 30 units of inventory on account. Sales tax is charged but not yet collected or remitted.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.To obtain funds for purchasing new equipment, OPC issued bonds on 1/30 with a total face value of $107,000, stated interest rate of 5 percent, annual compounding, and six-year maturity date. OPC received $96,800 from the bond issuance, which implies a market interest rate of 7 percent.On 1/31, OPC records units-of-production depreciation on the vehicle (truck), which was driven 2,000 miles this month.OPC estimates that 2% of the ending accounts receivable balance will be uncollectible. Adjust the applicable accounts on 1/31, using the allowance method.On 1/31, adjust for January rent expired.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.Accrue OPC’s corporate income taxes on 1/31, estimated to be $5,740.Prepare all January journal entries and adjusting entries for items (a)–(v).

Journal entries are the starting point of preparing financial statements. So, they must be recorded as per set accounting standards without any errors. Otherwise, the errors will get transferred to subsequent ledgers and statements, impacting the actual financial statements.In the books of One Product Corporation Journal entries Date Particulars Debit in $ Credit in $ January 1 Salary& Wages Payable a/c Dr 1,600 To Cash a/c 1,600 January 2 Truck a/c Dr 10,000 To Cash a/c 10,000 January 3 FICA Payable a/c Dr 600 Withheld Income Taxes Payable a/c Dr 500 To Cash a/c 1,100 January 4 Dividend a/c Dr 9,556 To Dividend Payable a/c [18,200 + 20,022]/2 x 0.50 9,556 January 5 Bad Debt a/c Dr 1,035 To Account Receivable a/c 1,035 January 6 Account Receivable a/c Dr 27,825 To Sales a/c (175 x 150) 26,250 To Sales Tax Payable a/c (6%) 1,575 January 7 Sales Tax Payable a/c Dr 500 To Cash a/c 500 January 8 Cash a/c (300 x $8) Dr 2,400 To Treasury Stock a/c 2,400 January 9 Cash a/c Dr 18,021 To Accounts Receivable a/c 18,021 January 10 Dividend Payable A/c Dr 9,556 To Cash a/c 9,556 January 11 Inventory (70 units) a/c Dr 3,920 To Accounts Payable a/c 3,920 January 15 Depreciation A/c Dr [45,400 -1,000]/5/12/2 370 To Accumulated Depreciation a/c 370 January 15 Cash a/c Dr 46,800 Accumulated Depreciation a/c Dr (4,440 + 370) 4,810 To Equipment a/c 45,400 To Profit on Sale of Equipment a/c 6,210 January 16 Salary and Wages a/c Dr 2,050 To Cash a/c 1,600 To Withheld Income tax payable a/c 250 To FICA payable a/c 150 To Unemployment taxes payable a/c 50 January 17 Note Payable a/c Dr 23,700 Interest payable a/c Dr 533 Interest Expense a/c Dr 97 To Cash a/c 24,330 January 27 Account Receivable a/c Dr 4,770 To Sales a/c (30 x150) 4,500 To Sales Tax Payable a/c (6%) 270 January 29 Deferred revenue a/c Dr 3,750 To Sales a/c (25 x 150) 3,750 To Sales Tax Payable a/c (0%) 0 January 30 Cash a/c Dr 96,800 Discount a/c Dr 10,200 To Bond Payable a/c 107,000 January 31 Depreciation a/c Dr 400 To Accumulated Depreciation a/c [10,000/50,000 x 2000] 400 January 31 Rent a/c Dr 1,940 To Prepaid rent a/c 1,940 January 31 Salary& Wages a/c Dr 2,050 To Cash a/c 1,600 To Withheld Income tax payable a/c 250 To FICA payable a/c 150 To Unemployment taxes payable a/c 50 January 31 Corporate income tax a/c Dr 5,740 To Income tax payable a/c 5,740 January 31 Allowance for doubtful debts a/c Dr 437 To accounts receivables a/c [8,300 + 27,825 + 4,770 - 1.035 - 18,021] x 2% 437

Answered: journal

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

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	22,000
Accounts Receivable	8,300
Allowance for Doubtful Accounts	1,055
Inventory	12,240
Prepaid Rent	1,940
Equipment	45,400
Accumulated Depreciation	4,440
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	533
Notes Payable (long-term)	23,700
Common Stock	18,200
Additional Paid-In Capital, Common	20,022
Retained Earnings	17,930
Treasury Stock	4,000

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

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 $12,240. OPC’s policy is to use the FIFO method, recorded using a perpetual inventory system.
The $1,940 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

On 1/01, OPC paid employees’ salaries and wages that were previously accrued on December 31.
A truck is purchased on 1/02 for $10,000 cash. It is estimated this vehicle will be used for 50,000 miles, after which it will have no residual value.
Payroll withholdings and employer contributions for December are remitted on 1/03.
OPC declares a $0.50 cash dividend on each share of common stock on 1/04, to be paid on 1/10.
A $1,035 customer account is written off as uncollectible on 1/05.
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.
Sales taxes of $500 that had been collected and recorded in December are paid to the state on 1/07.
On 1/08, OPC issued 300 shares of treasury stock for $2,400.
Collections from customers on account, totaling $18,021, are recorded on 1/09.
On 1/10, OPC distributes the $0.50 cash dividend declared on January 4. The company’s stock price is currently $5 per share.
OPC purchases on account and receives 70 units of inventory on 1/11 for $3,920.
The equipment purchased last year for $45,400 is sold on 1/15 for $46,800 cash. Record depreciation for the first half of January prior to recording the equipment disposal.
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.
Having sold the equipment, OPC pays off the note payable in full on 1/17. The amount paid is $24,330, which includes interest accrued in December and an additional $97 interest through January 17.
On 1/27, OPC records sales of 30 units of inventory on account. Sales tax is charged but not yet collected or remitted.
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.
To obtain funds for purchasing new equipment, OPC issued bonds on 1/30 with a total face value of $107,000, stated interest rate of 5 percent, annual compounding, and six-year maturity date. OPC received $96,800 from the bond issuance, which implies a market interest rate of 7 percent.
On 1/31, OPC records units-of-production depreciation on the vehicle (truck), which was driven 2,000 miles this month.
OPC estimates that 2% of the ending accounts receivable balance will be uncollectible. Adjust the applicable accounts on 1/31, using the allowance method.
On 1/31, adjust for January rent expired.
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.
Accrue OPC’s corporate income taxes on 1/31, estimated to be $5,740.

Prepare all January journal entries and adjusting entries for items (a)–(v).

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