Problem
Santana Rey created Business Solutions on October 1, 2015. The company has been successful, and its list of customers has grown. To accommodate the growth, the accounting system is modified to set up separate accounts for each customer. The following chart of accounts includes the account number used for each account and any balance as of December 31, 2015. Santana Rey decided to add a fourth digit with a decimal point to the 106 account number that had been used for the single Accounts Receivable account. This change allows the company to continue using the existing chart of accounts.
|
No.
|
Account Title
|
Debit
|
Credit
|
|
101
|
Cash
|
48,522
|
|
|
106.1
|
Alex's Engineering Co.
|
0
|
|
|
106.2
|
Wildcat Services
|
0
|
|
|
106.3
|
Easy Leasing
|
0
|
|
|
106.4
|
IFM Co.
|
3,160
|
|
|
106.5
|
Liu Corp.
|
0
|
|
|
106.6
|
Gomez Co.
|
2,858
|
|
|
106.7
|
Delta Co.
|
0
|
|
|
106.8
|
KC, Inc.
|
0
|
|
|
106.9
|
Dream, Inc.
|
0
|
|
|
119
|
Merchandise inventory
|
0
|
|
|
126
|
Computer supplies
|
780
|
|
|
128
|
Prepaid insurance
|
1,935
|
|
|
131
|
Prepaid rent
|
915
|
|
|
163
|
Office equipment
|
8,080
|
|
|
164
|
Accumulated depreciation-Office equipment
|
|
400
|
|
167
|
Computer equipment
|
21,900
|
|
|
168
|
Accumulated depreciation-Computer equipment
|
|
1,160
|
|
201
|
Accounts payable
|
|
1,240
|
|
210
|
Wages payable
|
|
580
|
|
236
|
Unearned computer services revenue
|
|
1,400
|
|
301
|
S. Rey, Capital
|
|
83,370
|
|
302
|
S. Rey, Withdrawals
|
0
|
|
|
403
|
Computer services revenue
|
|
0
|
|
413
|
Sales
|
|
0
|
|
414
|
Sales returns and allowances
|
0
|
|
|
415
|
Sales discounts
|
0
|
|
|
502
|
Cost of goods sold
|
0
|
|
|
612
|
Depreciation expense-Office equipment
|
0
|
|
|
613
|
Depreciation expense-Computer equipment
|
0
|
|
|
623
|
Wages expense
|
0
|
|
|
637
|
Insurance expense
|
0
|
|
|
640
|
Rent expense
|
0
|
|
|
652
|
Computer supplies expense
|
0
|
|
|
655
|
Advertising expense
|
0
|
|
|
676
|
Mileage expense
|
0
|
|
|
677
|
Miscellaneous expenses
|
0
|
|
|
684
|
Repairs expense-Computer
|
0
|
|
In response to requests from customers, S. Rey will begin selling computer software. The company will extend credit terms of 1/10, n/30, FOB shipping point, to all customers who purchase this merchandise. However, no cash discount is available on consulting fees. Additional accounts (Nos. 119, 413, 414, 415, and 502) are added to its general ledger to accommodate the company's new merchandising activities. Also, Business Solutions does not use reversing entries and, therefore, all revenue and expense accounts have zero beginning balances as of January 1, 2016. Its transactions for January through March follow:
Jan. 4 The company paid cash to Lyn Addie for five days' work at the rate of $145 per day. Four of the five days relate to wages payable that were accrued in the prior year.
5 Santana Rey invested an additional $24,400 cash in the company.
7 The company purchased $7,600 of merchandise from Kansas Corp. with terms of 1/10, n/30, FOB shipping point, invoice dated January 7.
9 The company received $2,858 cash from Gomez Co. as full payment on its account.
11 The company completed a five-day project for Alex's Engineering Co. and billed it $5,350, which is the total price of $6,750 less the advance payment of $1,400.
13 The company sold merchandise with a retail value of $4,700 and a cost of $3,520 to Liu Corp., invoice dated January 13.
15 The company paid $650 cash for freight charges on the merchandise purchased on January 7.
16 The company received $4,060 cash from Delta Co. for computer services provided.
17 The company paid Kansas Corp. for the invoice dated January 7, net of the discount.
20 Liu Corp. returned $700 of defective merchandise from its invoice dated January 13. The returned merchandise, which had a $270 cost, is discarded. (The policy of Business Solutions is to leave the cost of defective products in cost of goods sold.)
22 The company received the balance due from Liu Corp., net of both the discount and the credit for the returned merchandise.
24 The company returned defective merchandise to Kansas Corp. and accepted a credit against future purchases. The defective merchandise invoice cost, net of the discount, was $496.
26 The company purchased $9,100 of merchandise from Kansas Corp. with terms of 1/10, n/30, FOB destination, invoice dated January 26.
26 The company sold merchandise with a $4,600 cost for $5,820 on credit to KC, Inc., invoice dated January 26.
31 The company paid cash to Lyn Addie for 10 days' work at $145 per day.
Feb. 1 The company paid $2,745 cash to Hillside Mall for another three months' rent in advance.
3 The company paid Kansas Corp. for the balance due, net of the cash discount, less the $496 amount in the credit memorandum.
5 The company paid $590 cash to the local newspaper for an advertising insert in today's paper.
11 The company received the balance due from Alex's Engineering Co. for fees billed on January 11.
15 Santana Rey withdrew $4,760 cash from the company for personal use.
23 The company sold merchandise with a $2,480 cost for $3,410 on credit to Delta Co., invoice dated February 23.
26 The company paid cash to Lyn Addie for eight days' work at $145 per day.
27 The company reimbursed Santana Rey for business automobile mileage (600 miles at $0.32 per mile).
Mar. 8 The company purchased $2,760 of computer supplies from Harris Office Products on credit, invoice dated March 8.
9 The company received the balance due from Delta Co. for merchandise sold on February 23.
11 The company paid $950 cash for minor repairs to the company's computer.
16 The company received $5,430 cash from Dream, Inc., for computing services provided.
19 The company paid the full amount due to Harris Office Products, consisting of amounts created on December 15 (of $1,240) and March 8.
24 The company billed Easy Leasing for $9,127 of computing services provided.
25 The company sold merchandise with a $2,192 cost for $2,970 on credit to Wildcat Services, invoice dated March 25.
30 The company sold merchandise with a $1,068 cost for $2,410 on credit to IFM Company, invoice dated March 30.
31 The company reimbursed Santana Rey for business automobile mileage (800 miles at $0.32 per mile).
The following additional facts are available for preparing adjustments on March 31 prior to financial statement preparation:
a. The March 31 amount of computer supplies still available totals $2,115.
b. Three more months have expired since the company purchased its annual insurance policy at a $2,580 cost for 12 months of coverage.
c. Lyn Addie has not been paid for seven days of work at the rate of $145 per day.
d. Three months have passed since any prepaid rent has been transferred to expense. The monthly rent expense is $915.
e. Depreciation on the computer equipment for January 1 through March 31 is $1,160.
f. Depreciation on the office equipment for January 1 through March 31 is $400.
g. The March 31 amount of merchandise inventory still available totals $674.
1. Post the journal entries in part 1 to the accounts in the company's general ledger. (Note: Begin with the ledger's post-closing adjusted balances as of December 31, 2015.) (Record the transactions in the order presented. Do not skip rows.)
2. Prepare a partial work sheet consisting of the first six columns that includes the unadjusted trial balance, the March 31 adjustments (a) through (g), and the adjusted trial balance. Do not prepare closing entries and do not journalize the adjustments or post them to the ledger.