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 $ 18,620 Accounts Receivable 9,650 Allowance for Doubtful Accounts 900 * Inventories 2,800 Deferred Revenue (30 units) 4,350 Accounts Payable 1,300 Note Payable (long-term) 15,000 Common Stock 5,000 Retained Earnings 4,520 * credit balance. The following information is relevant to the first month of operations in the following year: OTP will sell inventory at $145 per unit. OTP’s January 1 inventory balance consists of 35 units at a total cost of $2,800. OTP’s policy is to use the FIFO method, recorded using a perpetual inventory system. In December, OTP received a $4,350 payment for 30 units OTP is to deliver in January; this obligation was recorded in Deferred Revenue. Rent of $1,300 was unpaid and recorded in Accounts Payable at December 31. OTP’s note payable matures in three years, and accrues interest at a 10% annual rate. January Transactions Included in OTP’s January 1 Accounts Receivable balance is a $1,500 balance due from Jeff Letrotski. Jeff is having cash flow problems and cannot pay the $1,500 balance at this time. On 01/01, OTP arranges with Jeff to convert the $1,500 balance to a six-month note, at 12% 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. OTP paid a $500 insurance premium on 01/02, covering the month of January; the payment is recorded directly as an expense. OTP purchased an additional 150 units of inventory from a supplier on account on 01/05 at a total cost of $9,000, with terms n/30. OTP paid a courier $300 cash on 01/05 for same-day delivery of the 150 units of inventory. The 30 units that OTP’s customer paid for in advance in December are delivered to the customer on 01/06. On 01/07, OTP received a purchase allowance of $1,350 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). Sales of 40 units of inventory occurring during the period of 01/07–01/10 are recorded on 01/10. The sales terms are n/30. Collected payments on 01/14 from sales to customers recorded on 01/10. OTP paid the first 2 weeks’ wages to the employees on 01/16. The total paid is $2,200. Wrote off a $1,000 customer’s account balance on 01/18. OTP uses the allowance method, not the direct write-off method. Paid $2,600 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. OTP recovered $400 cash on 01/26 from the customer whose account had previously been written off on 01/18. An unrecorded $400 utility bill for January arrived on 01/27. It is due on 02/15 and will be paid then. Sales of 65 units of inventory during the period of 01/10–01/28, with terms n/30, are recorded on 01/28. Of the sales recorded on 01/28, 15 units are returned to OTP on 01/30. The inventory is not damaged and can be resold. OTP charges sales returns directly against Sales Revenue. On 01/31, OTP records the $2,200 employee salary that is owed but will be paid February 1. 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 8% is estimated to be uncollectible. (Update the balances of both relevant accounts prior to determining the appropriate adjustment.) Accrue interest for January on the note payable on 01/31. Accrue interest for January on Jeff Letrotski’s note on 01/31 (see a).

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 $ 18,620 Accounts Receivable 9,650 Allowance for Doubtful Accounts 900 * Inventories 2,800 Deferred Revenue (30 units) 4,350 Accounts Payable 1,300 Note Payable (long-term) 15,000 Common Stock 5,000 Retained Earnings 4,520 * credit balance. The following information is relevant to the first month of operations in the following year: OTP will sell inventory at $145 per unit. OTP’s January 1 inventory balance consists of 35 units at a total cost of $2,800. OTP’s policy is to use the FIFO method, recorded using a perpetual inventory system. In December, OTP received a $4,350 payment for 30 units OTP is to deliver in January; this obligation was recorded in Deferred Revenue. Rent of $1,300 was unpaid and recorded in Accounts Payable at December 31. OTP’s note payable matures in three years, and accrues interest at a 10% annual rate. January Transactions Included in OTP’s January 1 Accounts Receivable balance is a $1,500 balance due from Jeff Letrotski. Jeff is having cash flow problems and cannot pay the $1,500 balance at this time. On 01/01, OTP arranges with Jeff to convert the $1,500 balance to a six-month note, at 12% 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. OTP paid a $500 insurance premium on 01/02, covering the month of January; the payment is recorded directly as an expense. OTP purchased an additional 150 units of inventory from a supplier on account on 01/05 at a total cost of $9,000, with terms n/30. OTP paid a courier $300 cash on 01/05 for same-day delivery of the 150 units of inventory. The 30 units that OTP’s customer paid for in advance in December are delivered to the customer on 01/06. On 01/07, OTP received a purchase allowance of $1,350 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). Sales of 40 units of inventory occurring during the period of 01/07–01/10 are recorded on 01/10. The sales terms are n/30. Collected payments on 01/14 from sales to customers recorded on 01/10. OTP paid the first 2 weeks’ wages to the employees on 01/16. The total paid is $2,200. Wrote off a $1,000 customer’s account balance on 01/18. OTP uses the allowance method, not the direct write-off method. Paid $2,600 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. OTP recovered $400 cash on 01/26 from the customer whose account had previously been written off on 01/18. An unrecorded $400 utility bill for January arrived on 01/27. It is due on 02/15 and will be paid then. Sales of 65 units of inventory during the period of 01/10–01/28, with terms n/30, are recorded on 01/28. Of the sales recorded on 01/28, 15 units are returned to OTP on 01/30. The inventory is not damaged and can be resold. OTP charges sales returns directly against Sales Revenue. On 01/31, OTP records the $2,200 employee salary that is owed but will be paid February 1. 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 8% is estimated to be uncollectible. (Update the balances of both relevant accounts prior to determining the appropriate adjustment.) Accrue interest for January on the note payable on 01/31. Accrue interest for January on Jeff Letrotski’s note on 01/31 (see a).

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 Trick Pony (OTP) incorporated and began operations near the end of the year, resulting in the following post-closing balances at December 31:


Cash	$	18,620
Accounts Receivable		9,650
Allowance for Doubtful Accounts		900	*
Inventories		2,800
Deferred Revenue (30 units)		4,350
Accounts Payable		1,300
Note Payable (long-term)		15,000
Common Stock		5,000
Retained Earnings		4,520

* credit balance.

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

OTP will sell inventory at $145 per unit. OTP’s January 1 inventory balance consists of 35 units at a total cost of $2,800. OTP’s policy is to use the FIFO method, recorded using a perpetual inventory system.
In December, OTP received a $4,350 payment for 30 units OTP is to deliver in January; this obligation was recorded in Deferred Revenue. Rent of $1,300 was unpaid and recorded in Accounts Payable at December 31.
OTP’s note payable matures in three years, and accrues interest at a 10% annual rate.

January Transactions

Included in OTP’s January 1 Accounts Receivable balance is a $1,500 balance due from Jeff Letrotski. Jeff is having cash flow problems and cannot pay the $1,500 balance at this time. On 01/01, OTP arranges with Jeff to convert the $1,500 balance to a six-month note, at 12% 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.
OTP paid a $500 insurance premium on 01/02, covering the month of January; the payment is recorded directly as an expense.
OTP purchased an additional 150 units of inventory from a supplier on account on 01/05 at a total cost of $9,000, with terms n/30.
OTP paid a courier $300 cash on 01/05 for same-day delivery of the 150 units of inventory.
The 30 units that OTP’s customer paid for in advance in December are delivered to the customer on 01/06.
On 01/07, OTP received a purchase allowance of $1,350 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).
Sales of 40 units of inventory occurring during the period of 01/07–01/10 are recorded on 01/10. The sales terms are n/30.
Collected payments on 01/14 from sales to customers recorded on 01/10.
OTP paid the first 2 weeks’ wages to the employees on 01/16. The total paid is $2,200.
Wrote off a $1,000 customer’s account balance on 01/18. OTP uses the allowance method, not the direct write-off method.
Paid $2,600 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.
OTP recovered $400 cash on 01/26 from the customer whose account had previously been written off on 01/18.
An unrecorded $400 utility bill for January arrived on 01/27. It is due on 02/15 and will be paid then.
Sales of 65 units of inventory during the period of 01/10–01/28, with terms n/30, are recorded on 01/28.
Of the sales recorded on 01/28, 15 units are returned to OTP on 01/30. The inventory is not damaged and can be resold. OTP charges sales returns directly against Sales Revenue.
On 01/31, OTP records the $2,200 employee salary that is owed but will be paid February 1.
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 8% is estimated to be uncollectible. (Update the balances of both relevant accounts prior to determining the appropriate adjustment.)
Accrue interest for January on the note payable on 01/31.
Accrue interest for January on Jeff Letrotski’s note on 01/31 (see a).

Ch8 GL Problem i
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Choose the appropriate accounts to be reported on the income statement. Select the 'adjusted' from the dropdown, which will
then populate the balances in those accounts from the trial balance. However, you will need to calculate and enter the amount
of the net income or loss for the period.
Adjusted
ONE TRICK PONY
Income Statement
points
For the Month Ended January 31
2$
еВook
$
Print
References
Income from Operations
$
Interest Revenue (Expense), net
(15)
2$
15
< Trial Balance
Statement of Retained Earnings >
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Ch8 GL Problem
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Jan 27
Utilities Expense
400
1
Accounts Payable
400
18
Jan 28
Accounts Receivable
9,425
Sales Revenue
9,425
points
19
Jan 28
Cost of Goods Sold
3,952
Inventory
3,952
eBook
Print
Jan 30
Inventory - Estimated Returns
2,175
References
Accounts Receivable
2,175
Jan 30
Inventory
912
Cost of Goods Sold
912
22
Jan 31
Salaries and Wages Expense
2,200
Salaries and Wages Payable
2,200
23
Jan 31
Bad Debt Expense
852
Allowance for Doubtful Accounts
852
24
Jan 31
Interest Receivable
Interest Revenue
25
Jan 31
Interest Receivable
15
Interest Revenue
15
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