Adria Lopez created Success Systems on October 1, 2013. 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, 2013. Adria Lopez 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
|
$
|
48,392
|
|
|
|
106.1
|
Alex's Engineering Co.
|
|
0
|
|
|
|
106.2
|
Wildcat Services
|
|
0
|
|
|
|
106.3
|
Easy Leasing
|
|
0
|
|
|
|
106.4
|
IFM Co.
|
|
3,010
|
|
|
|
106.5
|
Liu Corp.
|
|
0
|
|
|
|
106.6
|
Gomez Co.
|
|
2,848
|
|
|
|
106.7
|
Delta Co.
|
|
0
|
|
|
|
106.8
|
KC, Inc.
|
|
0
|
|
|
|
106.9
|
Dream, Inc.
|
|
0
|
|
|
|
119
|
Merchandise inventory
|
|
0
|
|
|
|
126
|
Computer supplies
|
|
720
|
|
|
|
128
|
Prepaid insurance
|
|
1,935
|
|
|
|
131
|
Prepaid rent
|
|
915
|
|
|
|
163
|
Office equipment
|
|
8,060
|
|
|
|
164
|
Accumulated depreciation-Office equipment
|
|
|
$
|
380
|
|
167
|
Computer equipment
|
|
21,100
|
|
|
|
168
|
Accumulated depreciation-Computer equipment
|
|
|
|
1,210
|
|
201
|
Accounts payable
|
|
|
|
1,120
|
|
210
|
Wages payable
|
|
|
$
|
700
|
|
236
|
Unearned computer services revenue
|
|
|
|
1,470
|
|
301
|
S. Rey, Capital
|
|
|
|
82,100
|
|
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, A. Lopez 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, Success Systems does not use reversing entries and, therefore, all revenue and expense accounts have zero beginning balances as of January 1, 2014. Its transactions for January through March follow:
|
Jan.
|
4
|
|
The company paid cash to Lyn Addie for five days' work at the rate of $175 per day. Four of the five days relate to wages payable that were accrued in the prior year.
|
|
|
5
|
|
Adria Lopez invested an additional $23,300 cash in the company.
|
|
|
7
|
|
The company purchased $6,700 of merchandise from Kansas Corp. with terms of 1/10, n/30, FOB shipping point, invoice dated January 7.
|
|
|
9
|
|
The company received $2,848 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 $5,340, which is the total price of $6,810 less the advance payment of $1,470.
|
|
|
13
|
|
The company sold merchandise with a retail value of $4,900 and a cost of $3,560 to Liu Corp., invoice dated January 13.
|
|
|
15
|
|
The company paid $660 cash for freight charges on the merchandise purchased on January 7.
|
|
|
16
|
|
The company received $4,030 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 $400 of defective merchandise from its invoice dated January 13. The returned merchandise, which had a $310 cost, is discarded. (The policy of Success Systems 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 $9,500 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 $4,500 cost for $5,990 on credit to KC, Inc., invoice dated January 26.
|
|
|
29
|
|
The company received a $496 credit memorandum from Kansas Corp. concerning the merchandise returned on January 24.
|
|
|
31
|
|
The company paid cash to Lyn Addie for 10 days' work at $175 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 $580 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
|
|
Adria Lopez withdrew $4,710 cash from the company for personal use.
|
|
|
23
|
|
The company sold merchandise with a $2,640 cost for $3,230 on credit to Delta Co., invoice dated February 23.
|
|
|
26
|
|
The company paid cash to Lyn Addie for eight days' work at $175 per day.
|
|
|
27
|
|
The company reimbursed Adria Lopez for business automobile mileage (300 miles at $0.15 per mile).
|
|
Mar.
|
8
|
|
The company purchased $2,820 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 $890 cash for minor repairs to the company's computer.
|
|
|
16
|
|
The company received $5,400 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 $1,120) and March 8.
|
|
|
24
|
|
The company billed Easy Leasing for $9,167 of computing services provided.
|
|
|
25
|
|
The company sold merchandise with a $2,152 cost for $2,880 on credit to Wildcat Services, invoice dated March 25.
|
|
|
30
|
|
The company sold merchandise with a $1,238 cost for $2,370 on credit to IFM Company, invoice dated March 30.
|
|
|
31
|
|
The company reimbursed Adria Lopez for business automobile mileage (600 miles at $0.15 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 $2,085.
|
|
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 $175 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 $1,210.
|
|
f.
|
Depreciation on the office equipment for January 1 through March 31 is $380.
|
|
g.
|
The March 31 amount of merchandise inventory still available totals $624.
|