Question

General Journal Entries

One Product Corp. (OPC) incorporated at the beginning of last year. The balances on its postclosing trial balance prepared on December 31, at the end of its first year of operations, were:

Cash	$	19,500
Accounts Receivable		8,250
Allowance for Doubtful Accounts		885
Inventory		12,060
Prepaid Rent		1,600
Equipment		25,000
Accumulated Depreciation		2,400
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
Unearned Revenue		4,500
Interest Payable		495
Note Payable (long-term)		22,000
Common Stock		13,300
Additional Paid-In Capital, Common		19,210
Retained Earnings		4,120
Treasury Stock		4,000

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

  

•	OPC sell its inventory at $150 per unit, plus sales tax of 6%. OPC’s January 1 inventory balance consists of 180 units at a total cost of $12,060. OPC’s policy is to use the FIFO method, recorded using a perpetual inventory system.
•	The $1,600 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.
•	Unearned 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.
•	Note 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

1.	On 1/01, OPC paid employees’ salaries and wages that were previously accrued on December 31.
2.	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.
3.	Payroll withholdings and employer contributions for December are remitted on 1/03.
4.	OPC declares a $0.50 cash dividend on each share of common stock on 1/04, to be paid on 1/10.
5.	A $950 customer account is written off as uncollectible on 1/05.
6.	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.
7.	Sales taxes of $500 which had been collected and recorded in December are paid to the state on 1/07.
8.	On 1/08, OPC issued 300 shares of treasury stock for $2,400.
9.	Collections from customers on account, totaling $8,500, are recorded on 1/09.
10.	On 1/10, OPC distributes the $0.50 cash dividend declared on January 4. The company’s stock price is currently $5 per share.
11.	OPC purchases on account and receives 70 units of inventory on 1/11 for $4,410.
12.	The equipment purchased last year for $25,000 is sold on 1/15 for $23,000 cash. Record depreciation for the first half of January prior to recording the equipment disposal.
13.	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.
14.	Having sold the equipment, OPC pays off the note payable in full on 1/17. The amount paid is $22,585 which includes interest accrued in December and an additional $90 interest through January 17.
15.	On 1/27, OPC records sales of 30 units of inventory on account. Sales tax is charged but not yet collected or remitted.
16.	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 United States governmental organization that is exempt from sales tax.
17.	To obtain funds for purchasing new equipment, OPC issued bonds on 1/30 with a total face value of $90,000, stated interest rate of 5 percent, annual compounding, and six-year maturity date. OPC received $81,420 from the bond issuance, which implies a market interest rate of 7 percent.
18.	On 1/31, OPC records units-of-production depreciation on the vehicle (truck), which was driven 1,900 miles this month.
19.	OPC estimates that 2% of the ending accounts receivable balance will be uncollectible. Adjust the applicable accounts on 1/31, using the allowance method.
20.	On 1/31, adjust for January rent expired.
21.	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.
22.	Accrue OPC’s corporate income taxes on 1/31, estimated to be $3,750. Prepare all January journal entries and adjusting entries for items 1–19. Review the 'General Ledger' and the adjusted 'Trial Balance' Tabs to see the effect of the transactions on the account balances. 1 On 1/01, OPC paid employees’ salaries and wages that were previously accrued on December 31. Record the transaction. 2 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. Record the transaction. 3 Payroll withholdings and employer contributions for December are remitted on 1/03. Record the transaction. 4 OPC declares a $0.50 cash dividend on each share of common stock on 1/04, to be paid on 1/10. Record the transaction. 5 A $950 customer account is written off as uncollectible on 1/05. Record the transaction. 6 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. Record the transaction. 7 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. Record the transaction. 8 Sales taxes of $500 that had been collected and recorded in December are paid to the state on 1/07. Record the transaction. 9 On 1/08, OPC issued 300 shares of treasury stock for $2,400. Record the transaction. 10 Collections from customers on account, totaling $8,500, are recorded on 1/09. Record the transaction. 11 On 1/10, OPC distributes the $0.50 cash dividend declared on January 4. The company’s stock price is currently $5 per share. Record the transaction. 12 OPC purchases on account and receives 70 units of inventory on 1/11 for $4,410. Record the transaction. 13 The equipment purchased last year for $25,000 is sold on 1/15 for $23,000 cash. Record depreciation for the first half of January prior to recording the equipment disposal. Record the transaction. 14 The equipment purchased last year for $25,000 is sold on 1/15 for $23,000 cash. Record depreciation for the first half of January prior to recording the equipment disposal. Record the transaction. 15 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. Record the transaction. 16 Having sold the equipment, OPC pays off the note payable in full on 1/17. The amount paid is $22,585, which includes interest accrued in December and an additional $90 interest through January 17. Record the transaction. 17 On 1/27, OPC records sales of 30 units of inventory on account. Sales tax is charged but not yet collected or remitted. Record the transaction. 18 On 1/27, OPC records sales of 30 units of inventory on account. Sales tax is charged but not yet collected or remitted. Record the transaction. 19 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 United States governmental organization that is exempt from sales tax. Record the transaction. 20 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 United States governmental organization that is exempt from sales tax. Record the transaction. 21 To obtain funds for purchasing new equipment, OPC issued bonds on 1/30 with a total face value of $90,000, stated interest rate of 5 percent, annual compounding, and six-year maturity date. OPC received $81,420 from the bond issuance, which implies a market interest rate of 7 percent. Record the transaction. 22 On 1/31, OPC records units-of-production depreciation on the vehicle (truck), which was driven 1,900 miles this month. Record the transaction. 23 OPC estimates that 2% of the ending accounts receivable balance will be uncollectible. Adjust the applicable accounts on 1/31, using the allowance method. Record the transaction. 24 On 1/31, adjust for January rent expired. Record the transaction. 25 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. Record the transaction. 26 Accrue OPC’s corporate income taxes on 1/31, estimated to be $3,750. Record the transaction.

Answer 1

As per Chegg policy, only first part of the question will be answered.

1. Payment of Salary:

01/01 Salaries and Wages Payable A/c   Dr.    1600

          To Cash A/c                                            1600

(Being salaries and wages due paid)

2.

01/02   Vehicle (Asset) A/c Dr.   10,000

                       To Cash                       10,000

(Being vehicle purchased)

3.

01/03      FICA Payable A/c    Dr.   600

              Withheld Income Tax Payable Dr. 500

                       To Cash                                    1,100

( Being FICA and Withheld IT paid)

4.

01/04    Retained Earnings Dr    3,325   [(Common Stock $13,300 / par value of stock $2) * Dividend 0.5]

                  To Dividend payable           3,325

(Being dividend declared @0.5 per stock)

5.

01/05    Allowance for Doubtful accounts Dr.   885

            Bad debts                                 Dr.    65

                   To Accounts Receivable                  950

(Being bad debts written off against provision and excess booked as loss)

6.

01/06   Accounts Receivable Dr.     27,825

                 To Sales                           26,250   (175 units @150 per unit)

                  To Sales Tax Payable        1,575    (Sale $26,250 * Tax rate 6%)

(Being sales of 175 units on account)

7.

01/06   Accounts Receivable Dr.     27,825

                 To Sales                           26,250   (175 units @150 per unit)

                  To Sales Tax Payable        1,575    (Sale $26,250 * Tax rate 6%)

(Being sales of 175 units on account)

8.

01/07     Sales Tax Payable Dr.    500

                    To Cash                        500

(Being sales tax for December paid)

9.

01/08    Cash                                  Dr.                      2,400

                To Common Stock                                                          600   (300 shares at par value of $2)

                To Additional Paid-In Capital, Common                            1,800   (2400- 600)

(Being 300 shares issued)

10.

01/09    Cash    Dr.       8,500

             To Accounts Receivable      8,500

(Being collections recorded)

11.

01/10    Dividend payable Dr.      3,325

                    To Cash                         3,325

(Being dividend paid)

12. The question is not completely visible (assumed purchase of 70 unit @x rate)

(Date) Purchase A/c   Dr.   70x

                   To Accounts Payable 70x

(Being purchase of 70 units @ x)

13 and 14.

15/01   Depreciation A/c Dr.      200      [(Purchase price 25,000 - Residual value 1,000)/ (5 years * 12 months * 2 for half month)]

                 To Accumulated Depreciation A/c            200

(Being depreciation on Equipment recorded for 15 days)

15/01 Cash                           Dr.           23,000

         Accumulated Depreciation A/c    Dr.            2,600   (2400+200)

                    To Equipment                                        25,000

                    To Profit on sale of Equipment                     600   (Balancing figure)

(Being Equipment sold)

15.

01/15 Salaries and Wages          Dr.    2,000     (4,000/2)

          Employer's FICA Expense Dr.       150     (Employers' equal contribution)

                      To Withheld Income Tax payable   250

                      To FICA Payable                          300 (Employees 150 + Employer's 150)

                      To Salaries and Wages Payable 1,600 (Balancing figure)

(Being salaries and wages due)

01/15   Salaries and Wages A/c           Dr.    50

                     To Unemployment Tax Payable   50

(Being unemployment taxes due)

01/16   Salaries and Wages Payable     Dr.    1,600

                  To Cash                                              1,600

(Being salaries and wages paid)

16.

01/17      Notes Payable Dr.    22,000

              Interest payable Dr.      495

              Interest expense Dr.       90

                    To Cash                      22,585

(Being notes payable setlled)

17.

01/27   Accounts Receivable Dr.     4,770

                 To Sales                           4,500 (30 units @150 per unit)

                  To Sales Tax Payable          270    (Sale $4,500 * Tax rate 6%)

(Being sales of 30 units on account)

18.

01/27   Accounts Receivable Dr.     4,770

                 To Sales                           4,500 (30 units @150 per unit)

                  To Sales Tax Payable          270    (Sale $4,500 * Tax rate 6%)

(Being sales of 30 units on account)

19.

01/29   Unearned Revenue A/c   Dr. 3,750 (25 units * $150) or (Unearned revenue 4,500 /30 * 25)

              To Sales                                3,750

(Being unearned revenue recognised as sale)

20.

01/29   Unearned Revenue A/c   Dr. 3,750 (25 units * $150) or (Unearned revenue 4,500 /30 * 25)

              To Sales                                3,750

(Being unearned revenue recognised as sale)

21.

01/30   Cash                                       Dr.     81,420

                Loss on Issue of Bonds                   8,580            

                5% Bonds Payable                                90,000

(Being 6 year bond issued)

22.

01/31      Depreciation                   Dr.            380   (Value of vehicle 10,000 / Total units 50,000 * used units 1,900)

                    To Accumulated depreciation 380

(Being depreciation on vehicle recorded)

23.

01/31    Bad Debts A/c Dr.    627.90 (2% of 31,395) (Ignoring repeated sales/ line items)

                   To Allowance for Doubtful Accounts   627.90

(Being provision for bad debts created)

24.

01/31     Rent      Dr.   1,600

               To Prepaid Rent 1,600

(Being rent expense adjusted against prepayment)

25.

01/31 Salaries and Wages          Dr.    2,000     (4,000/2)

          Employer's FICA Expense Dr.       150     (Employers' equal contribution)

                      To Withheld Income Tax payable   250

                      To FICA Payable                          300 (Employees 150 + Employer's 150)

                      To Salaries and Wages Payable 1,600 (Balancing figure)

(Being salaries and wages due)

01/31 Salaries and Wages A/c           Dr.    50

                     To Unemployment Tax Payable   50

(Being unemployment taxes due)

02/01 Salaries and Wages Payable     Dr.    1,600

                  To Cash                                              1,600

(Being salaries and wages paid)

26.

01/31   Corporate income tax expense Dr. 3,750

                To Corporate income tax payable 3,750

(Being corporate tax for january accrued)