Question

Required information [The following information applies to the questions displayed below.] Santana Rey created Business Solutions on October 1, 2017. 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, 2017. 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 $ 48,532 106.1 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. 2,808 106.7 Delta Co. 0 106.8 KC, Inc. 0 106.9 Dream, Inc. 0 119 Merchandise inventory 0 126 Computer supplies 680 128 Prepaid insurance 2,070 131 Prepaid rent 845 163 Office equipment 8,130 164 Accumulated depreciation—Office equipment $ 370 167 Computer equipment 20,200 168 Accumulated depreciation—Computer equipment 1,140 201 Accounts payable 1,270 210 Wages payable 620 236 Unearned computer services revenue 1,330 307 Common stock 74,155 318 Retained earnings 7,390 319 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. Also, Business Solutions does not use reversing entries and, therefore, all revenue and expense accounts have zero beginning balances as of January 1, 2018. Its transactions for January through March follow: Jan. 4 The company paid cash to Lyn Addie for five days’ work at the rate of $155 per day. Four of the five days relate to wages payable that were accrued in the prior year. 5 Santana Rey invested an additional $24,600 cash in the company in exchange for more common stock. 7 The company purchased $6,600 of merchandise from Kansas Corp. with terms of 1/10, n/30, FOB shipping point, invoice dated January 7. 9 The company received $2,808 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 $5,330, which is the total price of $6,660 less the advance payment of $1,330. 13 The company sold merchandise with a retail value of $4,300 and a cost of $3,450 to Liu Corp., invoice dated January 13. 15 The company paid $740 cash for freight charges on the merchandise purchased on January 7. 16 The company received $4,040 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 $800 of defective merchandise from its invoice dated January 13. The returned merchandise, which had a $320 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 $486. 26 The company purchased $9,800 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 $4,640 cost for $5,880 on credit to KC, Inc., invoice dated January 26. 31 The company paid cash to Lyn Addie for 10 days’ work at $155 per day. Feb. 1 The company paid $2,535 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 amount in the credit memorandum. 5 The company paid $470 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 The company paid $4,650 cash in dividends. 23 The company sold merchandise with a $2,510 cost for $3,260 on credit to Delta Co., invoice dated February 23. 26 The company paid cash to Lyn Addie for eight days’ work at $155 per day. 27 The company reimbursed Santana Rey for business automobile mileage (500 miles at $0.32 per mile). Mar. 8 The company purchased $2,850 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 $820 cash for minor repairs to the company’s computer. 16 The company received $5,370 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 $1,270) and March 8. 24 The company billed Easy Leasing for $9,167 of computing services provided. 25 The company sold merchandise with a $2,142 cost for $2,990 on credit to Wildcat Services, invoice dated March 25. 30 The company sold merchandise with a $1,058 cost for $2,350 on credit to IFM Company, invoice dated March 30. 31 The company reimbursed Santana Rey for business automobile mileage (700 miles at $0.32 per mile). The following additional facts are available for preparing adjustments on March 31 prior to financial statement preparation: The March 31 amount of computer supplies still available totals $2,145. Three more months have expired since the company purchased its annual insurance policy at a $2,760 cost for 12 months of coverage. Lyn Addie has not been paid for seven days of work at the rate of $155 per day. Three months have passed since any prepaid rent has been transferred to expense. The monthly rent expense is $845. Depreciation on the computer equipment for January 1 through March 31 is $1,140. Depreciation on the office equipment for January 1 through March 31 is $370. 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

SANTANA REY
JOURNAL ENTRIES

Jan 4

For the accrued wages of the previous year the following entries must have been passed:

-on closing day:

Dr Wages……………..$620
Cr Accrued wages…………. $620

-on the first day of next year, the entry must have been reversed:

Dr Accrued wages………$620
Cr Wages…………………………. $620

The entire wages (including last year’s wages) will be debited to wages A/c.

Dr Wages……………….. $775
Cr Cash/ Bank …………………….. $775

Jan 5

Dr Cash……………………. $24600
Cr Common stock………….. $24600

Jan 7

Dr Purchases………….. $6600
Cr Sundry Creditors………………. $6600

Jan 9

Dr Cash………… $2808
Cr Gomez Co………………… $2808

Jan 11

Dr Alex’s engineering Co. ………………….. $5330
Dr Advance payment…………………………. $1330
Cr Sales………………………………………………………….…..$6660

Jan 13

Dr Liu Corp ………………….. $4300
Cr Sales………………………………………………. $4300

Jan 15

Dr Freight on purchases ……………. $740
Cr Cash…………………………………………………. $740

Jan 16

Dr Cash……………………….. $4040
Cr Sales/ Services……………………… $4040

Jan 17

Dr Kanas Corp.
Cr Cash
Cr Discount received

Jan 20

Dr Sales Returns…………………. $800
Cr Liu Corp………………………………………. $800

Jan 22

Dr Cash
Cr Liu Corp

Jan 24

Dr Kansas Corp
Cr purchase Returned

Jan 26

Dr Purchases……………….. $9800
Cr Kansas Corp …………………………….. $9800

Jan 26

Dr KC Inc …………………….. $5880
Cr Sales ……………………………………… $5880

Jan 31

Dr Wages………………………… $1550
Cr Cash…………………………………………..$1550