Question

Oriole Company’s balance sheet at December 31, 2021, is presented below.

Oriole Company Balance Sheet December 31, 2021
Cash		$13,680			Accounts payable		$8,900
Accounts receivable		21,100			Common stock		21,800
Allowance for doubtful accounts		(740)			Retained earnings		13,330
Inventory		9,990
		$44,030					$44,030

During January 2022, the following transactions occurred. Oriole uses the perpetual inventory method.

Jan. 1		Oriole accepted a 4-month, 8% note from Betheny Company in payment of Betheny’s $4,800 account.
3		Oriole wrote off as uncollectible the accounts of Walter Corporation ($500) and Drake Company ($300).
8		Oriole purchased $18,800 of inventory on account.
11		Oriole sold for $25,700 on account inventory that cost $16,020.
15		Oriole sold inventory that cost $730 to Jack Rice for $1,100. Rice charged this amount on his Visa First Bank card. The service fee charged Oriole by First Bank is 3%.
17		Oriole collected $24,400 from customers on account.
21		Oriole paid $17,100 on accounts payable.
24		Oriole received payment in full ($300) from Drake Company on the account written off on January 3.
27		Oriole purchased advertising supplies for $1,540 cash.
31		Oriole paid other operating expenses, $2,910.

Adjustment data:

1.		Interest is recorded for the month on the note from January 1.
2.		Bad debts are expected to be 6% of the January 31, 2022, accounts receivable.
3.		A count of advertising supplies on January 31, 2022, reveals that $510 remains unused.
4.		The income tax rate is 30%. (Hint: Prepare the income statement up to Income before taxes and multiply by 30% to compute the amount; round to whole dollars.)

(You may want to set up T-accounts to determine ending balances.)

Prepare journal entries for the transactions listed above and adjusting entries. (Include entries for cost of goods sold using the perpetual inventory system.) (Round answers to 0 decimal places, e.g. 1,250. Credit account titles are automatically indented when amount is entered. Do not indent manually. Record journal entries in the order presented in the problem.)

Prepare an adjusted trial balance at January 31, 2022. (Round answers to 0 decimal places, e.g. 1,250.)

Prepare an income statement for the month ending January 31, 2022. (Round answers to 0 decimal places, e.g. 1,250.)

Prepare a retained earnings statement for the month ending January 31, 2022. (Round answers to 0 decimal places, e.g. 1,250.)

Prepare a classified balance sheet as of January 31, 2022. (List Current Assets in order of liquidity. Round answers to 0 decimal places, e.g. 1,250.)

Answer 1

Solution:

1. Journal Entries

2. Adjusted Trial Balance

3. Income Statement

4. Balance Sheet

Working Notes:

Owner's Equity