Question

$122.600 Us of goods sold, selling expenses and reland administrative expenses 3. Prepare a single-step income statement for the year ended October 31. 4. Compute the current ratio, acid-test ratio, and gross margin ratio as of October 31. (Round ratios to two decimals.) Total expenses. $197.100 SERIAL PROBLEM Business Solutions P1 P2 P3 P4 This serial problem began in Chapter 1 and continues through most of the book. It previous chapters ments were not completed, the serial problem can begin at this point. SP 4 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. Account $48372 $ 500 73.000 7.359 101 Cash ************* 1051 La's Engineering Ca. 1052 Wildcat Services.. 1063 Emy Leasing 106.4 FMC ***** 1065 L Corp..... . 106.6 Gomer ca. 106.7 Delta Co. 105.8 KC Inc. ... 106,9 Dream, Inc. ... 119 Merchandise inventory. 126 Computer supplies.. . 128 Prepaid insurance ... 131 Prepaid rent.... 163 Оce equipment 164 Accumulated depreciation- Omice equipment.********** 167 Computer equipment...... 168 Accumulated depreciation Computer equipment............. 201 Accounts payable .............. 210 Wages payable 236 Uhearned computer services 307 Common tod..... 313 ned earning... 319 Dividends. 493 Computer services revenue 413 Sales ********** 414 Sales returns and lowances 415 Sales discounts ....... 502 Cost of goods sold... 612 Depreciation expense Office equipment .... 613 Depreciation expense Computer equipment 623 Wages expense. ********* 637 insurance expense . .. 640 Rent expense .. . 652 Computer supplies expense 655 Advertising expense. 676 Mileage expense.... 677 Miscellaneous expenses.... 684 Rears expense Computer $ 400 1.250 1.100 In response to requests from customers, S. Rey will begin selling computer software. The company will extend credit terms of 1/10, 1/30, 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. It transactions for January through March follow Jan. 4 The company paid cash to Lyn Addie for five days' work at the rate of $125 per day. Four of the five days relate to wares payable that were accrued in the prior year. 5 Santana Rey invested in additional $25,000 cash in the company in exchange for more common stock 7 The company purchased 55,800 of merchandise from Kansas Corp, with terms of 1/10, n/30, FOB shipping point, invoice dated January 7. 9 The company received $2,668 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 $5,500, which is the total price of $7,000 less the advance payment of $1,500. The company debited Unearned Computer Services Revenue for $1,500. wanderinge Stock -Seivab

Answer 1

Credit Business Solutions Journal entries Date Account 4-Jan Wages Payable Wages expense Cash Debit $ $ Calculation =125*4 500 125 $ 625 $ 25,000 5-Jan Cash Common stock $ 25,000 $ 5,800 7-Jan Merchandise Inventory Accounts Payable $ 5,800 $ 2,668 9-Jan Cash Gomez Co $ 2,668 11-Jan Unearned computer services revenue Alex's Engineering Co Computer services revenue $ $ 1,500 5,500 $ 7,000 $ 5,200 $ 5,200 13-Jan Liu Co Sales Cost of goods sold Merchandise Inventory $ 3,560 $ 3,560 $ 600 15-Jan Merchandise Inventory Cash $ 600 $ 4,000 16-Jan Cash Computer services revenue $ 4,000 $ 5,800 17-Jan Accounts Payable Cash Merchandise Inventory $ $ 5,742 58 =5,800*1% $ 500 20-Jan Sales returns and allowances Liu Co $ 500 22-Jan Cash Sales discounts Liu Co $ $ 4,653 47 -4,700*1% 4,700 =5,200-500 $ $ 501 =496/99 100 24-Jan Accounts Payable Merchandise Inventory $ 501 $ 9,000 26-Jan Merchandise Inventory Accounts Payable $ 9,000 $ 5,800 $ 5,800 26-Jan KC. Inc. Sales Cost of goods sold Merchandise Inventory $ 4,640 $ 4,640 $ 1,250 =125*10 $ 1,250 31-Jan Wages expense Cash Feb 1-Feb Prepaid rent Cash $ 2,475 $ 2,475 $ 8,499 3-Feb Accounts Payable Cash Merchandise Inventory $ $ =9,000-501 8,414 85 -8,499*1% $ 600 5-Feb Advertising expense Cash $ 600 $ 5,500 11-Feb Cash Alex's Engineering Co $ 5,500 $ 4,800 15-Feb Dividends Cash $ 4,800 $ 3,220 $ 3,220 23-Feb Delta Co Sales Cost of goods sold Merchandise Inventory $ 2,660 $ 2,660 $ 1,000 =125*8 26-Feb Wages expense Cash $ 1,000 $ 192 $ 192 27-Feb Mileage expense Cash March 8-Mar Computer supplies Accounts Payable $ 2,730 $ 2,730 $ 3,220 9-Mar Cash Delta Co $ 3,220 $ 960 11-Mar Reapirs expense - Computer Cash $ 960 $ 5,260 16-Mar Cash Computer services revenue $ 5,260 $ 3,830 =1,100+2,730 19-Mar Accounts Payable Cash $ 3,830 $ 9,047 24-Mar Easy Leasing Computer services revenue $ 9,047 $ 2,800 $ 2,800 25-Mar Wildcat Services Sales Cost of goods sold Merchandise Inventory $ 2,002 $ 2,002 $ 2,220 $ 2,220 30-Mar IFM CO Sales Cost of goods sold Merchandise Inventory $ 1,048 $ 1,048 $ 128 $ 128 31-Mar Mileage expense Cash Adjusting entries 31-Mar Computer supplies expense Computer supplies $ 1,305 =3,310-2,005 $ 1,305 $ 555 31-Mar Insurance expense Prepaid Insurance 555 $ 875 =125*7 31-Mar Wages expense Wages Payable $ 875 $ 2,475 31-Mar Rent expense Prepaid rent $ 2,475 $ 1,250 31-Mar Depreciation expense - Computer equipment Accumulated Depreciation - Computer equipment $ 1,250 $ 400 31-Mar Depreciation expense - Office equipment Accumulated Depreciation - Office equipment $ 400 $ 142 =846-704 31-Mar Cost of goods sold Merchandise Inventory $ 142

Credit Date Debit Date Credit Alex's Engineering Co-AR Op bal $ - 11-Jan $ 5,500 11-Feb $ 5,500 Date Debit Date Credit Wildcat Services - AR Op bal $ . 25-Mar $ 2,800 Date Debit Date Easy Leasing - AR Op bal 24-Mar $ 9,047 Business Solutions Ledger accounts Date Debit Date Credit Cash Op bal $ 48,372 4-Jan $ 625 5-Jan $ 25,000 15-Jan $ 600 9-Jan $ 2,668 17-Jan $ 5,742 16-Jan $ 4,000 31-Jan $ 1,250 22-Jan $ 4,653 1-Feb $ 2,475 11-Feb $ 5,500 3-Feb $ 8,414 9-Mar $ 3,220 5-Feb $ 600 16-Mar $ 5,260 15-Feb $ 4,800 26-Feb $ 1,000 27-Feb $ 192 11-Mar $ 960 19-Mar $ 3,830 31-Mar $ 128 Bal. $ Bal. $ 68,057 IFM CO - AR 3,000 2,220 Op bal $ - Liu CO - AR $ . $ 5,200 20-Jan $ 22-Jan $ $ Op bal $ 30-Mar $ Op bal 13-Jan 2,800 $ 9,047 Gomez CO - AR Delta Co-AR 2,668 9-Jan $ 2,668 Op bal $ . 23-Feb $ 3,220 9-Mar $ 3,220 500 4,700 Bal. $ Bal. $ 5,220 KC. Inc. - AR Dream Inc. -AR - Bal. $ Computer supplies Op bal $ 580 S-Mar $ 2,730 Op bal $ Op bal 26-Jan $ $ 5,800 Bal. $ - Merchandise Inventory Op bal $ . 7-Jan $ 5,800 13-Jan $ 3,560 15-Jan $ 600 17-Jan $ 58 26-Jan $ 9,000 26-Jan $ 4,640 24-Jan $ 501 3-Feb $ 85 23-Feb $ 2,660 25-Mar $ 2,002 30-Mar $ 1,048 Bal. $ Bal. Bal. 5,800 Office Equip 8,000 $ . Accum. Depr.- Office Equip Op bal $ $ 846 Computer Equipment $ 20,000 Bal. $ 3,310 Accum. Depr. - Computer Equip Op bal $1,250 Op bal $ 400 Op bal Bal. $ 400 $ 1,250 $ 8,000 Prepaid Insurance $ 1,665 Bal. Prepaid rent Op bal $ 825 1-Feb $ 2,475 Bal. $ 20,000 Accounts Payable 17-Jan $ 5,800 Op bal $ 1,100 24-Jan $ 501 7-Jan $ 5,800 3-Feb $ 8,499 26-Jan $ 9,000 19-Mar $ 3,830 8-Mar $ 2,730 Bal. Wages Payable 4-Jan $ 500 Op bal Op bal $ 500 Bal. $ $ S Bal. $ 1,665 Unearned computer services revenue 11-Jan $ 1,500 Op bal $1,500 3,300 Common stock Op bal $ 5-Jan $ Bal. Retained earnings Op bal Bal. Dividends 15-Feb $ 4,800 $ 7,360 73,000 25,000 Bal. $ Bal. $ 98,000 Bal. $ 7,360 Bal. $ 4,800

Sales returns and allowances 20-Jan $ 500 Sales discounts 22-Jan $ 47 Computer services revenue 11-Jan $ 7,000 16-Jan $ 4,000 16-Mar $ 5,260 24-Mar $ 9,047 Sales 13-Jan $ 26-Jan $ 23-Feb $ 25-Mar $ 30-Mar $ 5,200 5,800 3,220 2,800 2,220 $ 25,307 Bal. $ 19,240 Bal. $ 500 Depreciation expense - Office equip Depreciation expense-Computer equip Bal. Cost of goods sold 13-Jan $ 3,560 26-Jan $ 4,640 23-Feb $ 2,660 25-Mar $ 2,002 30-Mar $ 1,048 Bal. $ 47 Wages expense 4-Jan $ 125 31-Jan $ 1,250 26-Feb $ 1,000 Bal. Bal. $ 13,910 Insurance expense $ - Computer supplies expense Rent expense Bal. $ 2,375 Advertising expense 5-Feb $ 600 Bal. Bal. $ 600 Miscellaneous expense Bal. $ Mileage expense 27-Feb $ 192 31-Mar $ 128 Bal. Reapirs expense - Computer 11-Mar $ 960 Bal. $ 320 Bal. Bal. $ 960

Business Solutions As of Mar 31, 2020 Unadjusted TB Debit Credit 68,057 As of Mar 31, 2020 Adjustments Debit Credit As of Mar 31, 2020 Adjusted TB Debit Credit 68,057 2,800 9,047 5,220 2,800 9,047 5,220 5,800 5,800 846 3,310 1,665 3,300 142 1,305 555 2,475 704 2,005 1,110 825 8,000 8,000 400 400 800 20,000 20,000 1,250 1,250 2,500 No. Account Title 101 Cash 106.1 Alex's Engineering Co 106.2 Wildcat Services 106.3 Easy Leasing 106.4 IFM CO 106.5 Liu Co 106.6 Gomez Co 106.7 Delta Co 106.8 KC. Inc. 106.9 Dream Inc. 119 Merchandise Inventory 126 Computer supplies 128 Prepaid Insurance 131 Prepaid rent 163 Office equipment 164 Accumulated Depreciation - Office equipment 167 Computer equipment 168 Accumulated Depreciation - Computer equipment 201 Accounts Payable 210 Wages Payable 236 Unearned computer services revenue 307 Common stock 318 Retained earnings 319 Dividends 403 Computer services revenue 413 Sales 414 Sales returns and allowances 415 Sales discounts 502 Cost of goods sold 612 Depreciation expense - Office equipment 613 Depreciation expense - Computer equipment 623 Wages expense 637 Insurance expense 640 Rent expense 652 Computer supplies expense 655 Advertising expense 676 Mileage expense 677 Miscellaneous expense 684 Reapirs expense - Computer 875 875 98,000 7,360 98,000 7,360 4,800 4,800 25,307 19,240 25,307 19,240 500 47 13,910 2,375 142 400 1,250 875 555 2,475 1,305 500 47 14,052 400 1,250 3,250 555 2,475 1,305 600 320 320 960 151,557 960 154,082 151,557 7,002 7,002 154,082

25,307 Business Solutions Income statement For three months ended March 31, 2020 Computer services revenue Sales Less: Sales returns and allowances Sales discounts Net Sales revenue Total Revenues 19,240 (500) (47) 18,693 44,000 Expenses: Cost of goods sold Depreciation expense - Office equipment Depreciation expense - Computer equipment Wages expense Insurance expense Rent expense Computer supplies expense Advertising expense Mileage expense Reapirs expense - Computer Total Expenses Net Income 14,052 400 1,250 3,250 555 2,475 1,305 600 320 960 25,167 18,833 Business Solutions Statement of retained earnings For three months ended March 31, 2020 Retained earnings, Jan 1, 2020 Net Income Less Dividends Retained earnings, Mar 31, 2020 7,360 18,833 (4,800) 21,393

25,307 19,240 (500) (47) 18,693 44,000 14,052 29,948 Business Solutions Multi-step Income Statement For three months ended March 31, 2020 Computer services revenue Sales Less: Sales returns and allowances Sales discounts Net Sales revenue Total Revenues Cost of goods sold Gross Profit Operating expenses Selling expenses Wages expense Mileage expense Advertising expense Total Selling expenses General & Administrative expenses Depreciation expense - Office equipment Depreciation expense - Computer equipment Insurance expense Rent expense Computer supplies expense Reapirs expense - Computer Total General & Administrative expenses Total Operating expenses Net Profit 3,250 320 600 4,170 400 1,250 555 2,475 1,305 960 6,945 11,115 18,833

Business Solutions Balance Sheet As of March 31, 2020 Assets Current Assets Cash Accounts Receivable Merchandise Inventory Computer supplies Prepaid Insurance Prepaid rent Total Current Assets 68,057 22,867 704 2,005 1,110 825 95,568 7,200 Property, Plant& Equipment Office equipment Accumulated Depreciation - Office equipment Computer equipment Accumulated Depreciation - Computer equipment Total Property, Plant& Equipment Total Assets 8,000 (800) 20,000 (2,500) 17,500 24,700 120,268 Liabilities & Stockholders Equity Current Liabilities Wages Payable 875 Stockholders Equity Common Stock Retained earnings Total Stockholders Equity Total Liabilities & Stockholders Equity 98,000 21,393 119,393 120,268