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C8-3 (Algo) Recording Daily and Adjusting Entries Using FIFO in a Perpetual Inventory System (Chapters 3, 4, 6, 7, and 8) (LO 3-3, 4-2, 4-3, 4-4, 6-3, 6-4, 6-6, 7-3, 8-2, 8-3) (General Ledger) 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 $2,500. OTP's policy is to use the FIFO 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 \$1,270 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. Journal entry worksheet OTP recovered $440 cash on 01/26 from the customer whose account had previously been written off on 01/18. Record the collection of the amount due. Note: Enter debits before credits. Journal entry worksheet 7825 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 Note: Enter debits before credits. Journal entry worksheet The 40 units that OTP's customer paid for in advance in December are delivered to the customer on 01/06. Record the sales transaction. Note: Enter debits before credits. Journal entry worksheet An unrecorded $130 utility bill for January arrived on 01/27. It is due on 02/15 and will be paid then. Record the transaction. Note: Enter debits before credits. Journal entry worksheet Collected payments on 01/14 from sales to customers recorded on 01/10. Record the transaction. Note: Enter debits before credits. 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 $260 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 ). 9. 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 $4,060. j. Wrote off a $950 customer's account balance on 01/18. OTP uses the allowance method, not the direct write-off method. k. Paid $2,540 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 $440 cash on 01/26 from the customer whose account had previously been written off on 01/18. m. An unrecorded $130 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. 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 $4,060 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) f. 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). Journal entry worksheet Accrue interest for January on the notes payable on 01/31. Record the transaction. Note: Enter debits before credits. Journal entry worksheet OTP recovered $440 cash on 01/26 from the customer whose account had previously been written off on 01/18. Record the transaction to restore the account. Note: Enter debits before credits. Journal entry worksheet Sales of 60 units of inventory occurring during the period of 01/0701/10 are recorded on 01/10. The sales terms are n/30. Record the sales transaction. Note: Enter debits before credits. Journal entry worksheet OTP paid the first 2 weeks' wages to the employees on 01/16. The total paid is $4,060. Record the transaction. Note: Enter debits before credits. Journal entry worksheet Paid $2,540 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. Record the transaction. Note: Enter debits before credits. Journal entry worksheet 1 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. Record the transaction. Note: Enter debits before credits. Journal entry worksheet 5 7 8 25 OTP paid a courier $400 cash on 01/05 for same-day delivery of the 200 units of inventory. Record the transaction. Note: Enter debits before credits. Journal entry worksheet On 01/07, OTP paid the amount necessary to settle the balance owed to the supplier for the 1/05 purchase of inventory (in c ). Record the transaction. Note: Enter debits before credits. Journal entry worksheet 113 ... 25 Sales of 70 units of inventory during the period of 01/1001/28, with terms n/30, are recorded on 01/28. Record the sales transaction. Note: Enter debits before credits. Journal entry worksheet 1 16 18 19 ... 25 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. Record the return of the units to inventory. Note: Enter debits before credits. Journal entry worksheet 118 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.) Record the transaction. Note: Enter debits before credits. Journal entry worksheet OTP recovered $440 cash on 01/26 from the customer whose account had previously been written off on 01/18. Record the collection of the amount due. Note: Enter debits before credits. Journal entry worksheet Wrote off a $950 customer's account balance on 01/18. OTP uses the allowance method, not the direct write-off method. Record the transaction. Note: Enter debits before credits. Journal entry worksheet On 01/07, OTP received a purchase allowance of $1,200 on account. Record the transaction. Note: Enter debits before credits. Journal entry worksheet Sales of 70 units of inventory during the period of 01/1001/28, with terms n/30, are recorded on 01/28. Record the cost of the units sold. Note: Enter debits before credits. Journal entry worksheet OTP paid a $260 insurance premium on 01/02, covering the month of January; the payment is recorded directly as an expense. Record the transaction. Note: Enter debits before credits. Journal entry worksheet 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. Record the sales return transaction. Note: Enter debits before credits. Journal entry worksheet On 01/31, OTP records the $4,060 employee salary that is owed but will be paid February 1. Record the transaction. Note: Enter debits before credits. Journal entry worksheet Accrue interest for January on Jeff Letrotski's note on 01/31 (see 1). Record the transaction. Note: Enter debits before credits. Journal entry worksheet 15 6 7 8 9 25 Sales of 60 units of inventory occurring during the period of 01/0701/10 are recorded on 01/10. The sales terms are n/30. Record the cost of the units sold. Note: Enter debits before credits. Journal entry worksheet The 40 units that OTP's customer paid for in advance in December are delivered to the customer on 01/06. Record the cost of the units sold. Note: Enter debits before credits

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