Question

Santana Rey created Business Solutions on October 1, 2019. 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, 2019. 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	$	48,472
106.1	Alex’s Engineering Co.		0
106.2	Wildcat Services		0
106.3	Easy Leasing		0
106.4	IFM Co.		3,110
106.5	Liu Corp.		0
106.6	Gomez Co.		2,788
106.7	Delta Co.		0
106.8	KC, Inc.		0
106.9	Dream, Inc.		0
119	Merchandise inventory		0
126	Computer supplies		600
128	Prepaid insurance		2,016
131	Prepaid rent		875
163	Office equipment		8,010
164	Accumulated depreciation—Office equipment				$	230
167	Computer equipment		21,000
168	Accumulated depreciation—Computer equipment					1,230
201	Accounts payable					1,240
210	Wages payable					780
236	Unearned computer services revenue					1,370
307	Common stock					74,661
318	Retained earnings					7,360
319	Dividends		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. Its transactions for January through March follow:

Jan.		4		The company paid cash to Lyn Addie for five days’ work at the rate of $195 per day. Four of the five days relate to wages payable that were accrued in the prior year.
		5		Santana Rey invested an additional $24,000 cash in the company in exchange for more common stock.
		7		The company purchased $7,000 of merchandise from Kansas Corp. with terms of 1/10, n/30, FOB shipping point, invoice dated January 7.
		9		The company received $2,788 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 $5,390, which is the total price of $6,760 less the advance payment of $1,370. The company debited Unearned Computer Services Revenue for $1,370.
		13		The company sold merchandise with a retail value of $4,100 and a cost of $3,390 to Liu Corp., invoice dated January 13.
		15		The company paid $680 cash for freight charges on the merchandise purchased on January 7.
		16		The company received $4,100 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		The company gave a price reduction (allowance) of $700 to Liu Corp., and credited Liu's accounts receivable for that amount.
		22		The company received the balance due from Liu Corp., net of the discount and the allowance.
		24		The company returned defective merchandise to Kansas Corp. and accepted a credit against future purchases (debited accounts payable). The defective merchandise invoice cost, net of the discount, was $486.
		26		The company purchased $9,300 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 $5,890 on credit to KC, Inc., invoice dated January 26.
		31		The company paid cash to Lyn Addie for 10 days’ work at $195 per day.
Feb.		1		The company paid $2,625 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 $486 credit from merchandise returned on January 24.
		5		The company paid $540 cash to Facebook for an advertisement to appear on February 5 only.
		11		The company received the balance due from Alex’s Engineering Co. for fees billed on January 11.
		15		The company paid a $4,760 cash dividend.
		23		The company sold merchandise with a $2,500 cost for $3,270 on credit to Delta Co., invoice dated February 23.
		26		The company paid cash to Lyn Addie for eight days’ work at $195 per day.
		27		The company reimbursed Santana Rey $288 cash for business automobile mileage. The company recorded the reimbursement as "Mileage Expense."
Mar.		8		The company purchased $2,790 of computer supplies from Harris Office Products on credit with terms of n/30, FOB destination, invoice dated March 8.
		9		The company received the balance due from Delta Co. for merchandise sold on February 23.
		11		The company paid $790 cash for minor repairs to the company’s computer.
		16		The company received $5,440 cash from Dream, Inc., for computing services provided.
		19		The company paid the full amount due of $4,030 to Harris Office Products, consisting of amounts created on December 15 (of $1,240) and March 8.
		24		The company billed Easy Leasing for $9,107 of computing services provided.
		25		The company sold merchandise with a $2,072 cost for $2,900 on credit to Wildcat Services, invoice dated March 25.
		30		The company sold merchandise with a $1,118 cost for $2,370 on credit to IFM Company, invoice dated March 30.
		31		The company reimbursed Santana Rey $160 cash for business automobile mileage. The company recorded the reimbursement as "Mileage Expense."

The following additional facts are available for preparing adjustments on March 31 prior to financial statement preparation:

1. The March 31 amount of computer supplies still available totals $2,185.
2. Prepaid Insurance coverage of $672 expired during this 3-month period.
3. Lyn Addie has not been paid for seven days of work at the rate of $195 per day.
4. Prepaid rent of $2,625 expired during this 3-month period.
5. Depreciation on the computer equipment for January 1 through March 31 is $1,230.
6. Depreciation on the office equipment for January 1 through March 31 is $230.
7. The March 31 amount of merchandise inventory still available totals $534.

Required:
1. Prepare journal entries to record each of the January through March transactions.

Answer 1

Date	Account Titles	Debit	Credit
January 2020		$	$
4	Wages Payable	780
	Wages Expense	195
	Cash		975
5	Cash	24,000
	Common Stock		24,000
7	Merchandise Inventory	7,000
	Accounts Payable		7,000
9	Cash	2,788
	Gomez Co.		2,788
11	Unearned Computer Services Revenue	1,370
	Alex's Engineering Co.	5,390
	Computer Services Revenue		6,760
13	Liu Corp.	4,100
	Sales		4,100
13	Cost of Goods Sold	3,390
	Merchandise Inventory		3,390
15	Merchandise Inventory	680
	Cash		680
16	Cash	4,100
	Computer Services Revenue		4,100
17	Accounts Payable	7,000
	Merchandise Inventory		70
	Cash		6,930
20	Sales Returns and Allowances	700
	Liu Corp		700
22	Cash	3,366
	Sales Discounts	34
	Liu Corp.		3,400
24	Accounts Payable	486
	Merchandise Inventory		486
26	Merchandise Inventory	9,300
	Accounts Payable		9,300
26	KC Inc.	5,890
	Sales		5,890
26	Cost of Goods Sold	4,600
	Merchandise Inventory		4,600
31	Wages Expense	1,950
	Cash		1,950
February 2020
1	Prepaid Rent	2,625
	Cash		2,625
3	Accounts Payable	8,814
	Merchandise Inventory		93
	Cash		8,721
5	Advertising Expense	540
	Cash		540
11	Cash	5,390
	Alex's Engineering Co.		5,390
15	Dividends	4,760
	Cash		4,760
23	Delta Co.	3,270
	Sales		3,270
23	Cost of Goods Sold	2,500
	Merchandise Inventory		2,500
26	Wages Expense	1,560
	Cash		1,560
27	Mileage Expense	288
	Cash		288
March 2020
8	Computer Supplies	2,790
	Accounts Payable		2,790
9	Cash	3,237.30
	Sales Discounts	32.70
	Delta Co.		3,270
11	Repairs Expense: Computer	790
	Cash		790
16	Cash	5,440
	Computer Service Revenue		5,440
19	Accounts Payable	4,030
	Cash		4,030
24	Easy Leasing	9,107
	Computer Services Revenue		9,107
25	Wildcat Services	2,900
	Sales		2,900
25	Cost of Goods Sold	2,072
	Merchandise Inventory		2,072
30	IFM Company	2,370
	Sales		2,370
30	Cost of Goods Sold	1,118
	Merchandise Inventory		1,118
31	Mileage Expense	160
	Cash		160
Adjusting Entries
March 2020
31	Computer Supplies Expense	1,205
	Computer Supplies		1,205
31	Insurance Expense	672
	Prepaid Insurance		672
31	Wages Expense	1,365
	Wages Payable		1,365
31	Rent Expense	2,625
	Prepaid Rent		2,625
31	Depreciation Expense: Computer Equipment	1,230
	Accumulated Depreciation : Computer Equipment		1,230
31	Depreciation Expense: Office Equipment	230
	Accumulated Depreciation : Office Equipment		230