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Part 3 -Becoming a Merchandiser (94 points) -Santana Rey created Business Solutions on October 1, 2018. 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, 2018. 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 Title Dr. 48,372 101 Cash 106.1 Accounts receivable-Alexs Engineering Co 106.2 Accounts receivable-Wildcat Services 106.3 106.4 Accounts receivable- Easy Leasing Accounts receivable - IFM Co. 3,000 106.5 Accounts receivable - Liu Corp. 106.6 Accounts receivable Gomez Co. 106.7 Accounts receivable- Delta Co. 106.8 Accounts receivable KC, Inc. 106.9 Accounts receivable Dream, Inc. 119 Merchandise inventory 126 Computer supplies 128 Prepaid insurance 131 Prepaid rent 163 Office equipment 164 Accumulated deprecdiation-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 eanrings 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 Depre iation expense-Computer equipment 623 Wages expense 63 Insurance expense 640 Rent expense 825 8,000 20,000 1,100 73,000 7,360 85,110 85,110
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 companys new merchandising activities. Its transactions for January through March follow 1/4 1/5 1/7 1/9 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 wages payable that were accrued in the prior year Santana Rey invested an additional $25,000 cash in the company in exchange for more common stock. The company purchased $5,800 of merchandise from Kansas Corp. with terms of 1/10, n/30, FOB shipping point, invoice dated January 7 The company received $2,668 cash from Gomez Co. as full payment on its account. The company completed a five-day is the total price of $7,000 less the advance payment of $1,500. The company sold merchandise with a retail value of $5,200 and a cost of $3,560 to Liu Corp invoice dated January 13, The company paid $600 cash for freight charges on the merchandise purchased on January 7 The company received $4,000 cash from Del The company paid Kansas Corp. for the invoice dated January 7, net of the discount. Liu Corp. returned $500 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.) The company received the balance due from Liu Corp, net of both the discount and the credit for the returned merchandise 1/11 project for Alexs Engineering Co. and billed it $5,500, which 1/15 1/16 1/17 1/20 Ita Co. for computer services provided of defective merchandise from its invoice dated January 13. The 1/22 1/24 The company 1/26 The company purchased $9,000 of merchandise from Kansas Corp. with terms of 1/10, n/30, /26 The company sold merchandise with a $4,640 cost for $5,800 on credit to KC, Inc, invoice returned defective merchandise to Kansas Corp. and accepted a credit against future purchases. The defective merchandise invoice cost, net of the discount, was $496. FOB destination, invoice dated January 26 1/31 2/1 2/3 dated January 26 The company paid cash to Lyn Addie for 10 days work at $125 per day. The company paid $2,475 cash to Hillside Mall for another three months rent in advance. The company paid Kansas Corp. for the balance due, net of the cash discount, less the $496 amount in the credit memorandum. /S The company paid $600 cash to the local newspaper for an advertisement in the February 5 2/11 The company received the balance due from Alexs Engineering Co. for fees billed on January issue. 2/15 The company paid $4,800 cash in dividends 2/23 The company sold merchandise with a $2,660 cost for $3,220 on credit to Delta Co., invoice dated February 23. 2/26 The company paid cash to Lyn Addie for eight days work at $125 per day 2/27 The company reimbursed Santana Rey for business automobile mileage (600 miles at $0.32 per mile)
3/8 The company purchased $2,730 of computer supplies from Harris Office Products on credit with terms of n/30, FOB destination, invoice dated March 8. The company received the balance due from Delta Co. for merchandise sold on February 23. The company paid $960 cash for minor repairs to the companys computer The company received $5,260 cash from Dream, Inc., for computing services provided The company paid the full amount due to Harris Office Products, consisting of amounts created on December 15 (of $1,100) and March 8. The company billed Easy Leasing for $9,047 of computing services provided. The company sold merchandise with a $2,002 cost for $2,800 on credit to Wildcat Services, invoice dated March 25. The company sold merchandise with a $1,048 cost for $2,220 on credit to IFM Company invoice dated March 30. The company reimbursed Santana Rey for business automobile mileage (400 miles at $0.32 per mile). 3/9 3/11 3/16 3/19 3/24 3/25 3/30 3/31 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 $2,005 Three more months have expired since the company purchased its annual insurance policy at a $2,220 cost for 12 months of coverage. . . Lyn Addie has not been paid for seven days of work at the rate of $125 per day Three months have passed since any prepaid rent has been transferred to expense. The monthly rent expense is $825. Depreciation on the computer equipment for January 1 through March 31 is $1,250. . . . Depreciation on the office equipment for January 1 through March 31 is $400 * The March 31 amount of merchandise inventory still available totals $704 Required 1. 2. Prepare journal entries to record each of the January through March transactions. Post the journal entries in part 1 to the accounts in the companýs general ledger. (Note: use the T- accounts provided.) 3. Prepare the adjusting journal entries required by the additional facts above 4. Post the adjusting journal entries to the T-accounts used in part 2. S. Determine the balance in each of the T-accounts 6. Prepare an adjusted trial balance 7. Prepare an income statement for the three months ended March 31, 2019. Use a multiple-step format that begins with gross sales (service revenues plus gross product sales) and includes separate categories for net sales, cost of goods sold, selling expenses, and general and administrative expenses Categorize the following accounts as selling expenses: wages expense, mileage expense, and advertising expense. Categorize the remaining expenses as general and administrative. Prepare a statement of retained earnings for the three months ended March 31, 2019. Prepare a classified balance sheet as of March 31, 2019. 8. 9.
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Journal Entries in the books of Santana Re Date Particulars Debit Credit 500 125 04-Jan Wagcs Pavable Wages Expenses Cash To record wages expense 625 05-Ja Cash 25,000 S.Rey Capital (To record investment in the business.) 25,000 07-Jan Merchandise Inventory 5,800 5.800 Accounts Pavable (To record purchase of inventory on account 09-Jan Cash 2,668 Gomez Co (To record cash receipt from clicnt) 2.668 5,500 1,500 11-JanAlex Engineerin Unearned service revenue Computer Service Revenue (To record services provided 7.000 13-Jan Liu Cor 5,200 5.200 Sales To record sales of goods. 13-Jan Cost of goods sold 3,560 Merchandise Inventory To record the cost of goods sold 3.560 15-Jan Merchandise Invento Cash 600 600 To record payment of freight ex on inventorv 6-Jan Cash 4,000 4.000 Computer Service Revenue (To record receipt of cash 7Jan Accounts Payable 5,800 Cash Merchandise Inventorv 5.742 58 (To record payment of accounts payable20-Jan Sales Return & Allowances 500 Liu Cor (To record sales return.) 500 4,653 47 22-JanCash Sales Discount Liu Cor (To record receipt of payment from customer.) 4.700 24-Jan No Journal Entry Required 26-Ja Mcrchandisc Invcnt Accounts Payable To record purchase 9,000 9,000 of inventory 26-Jan KC Inc 5,800 Sales 5.800 (To record sale of goods.) 26-Jan Cost of goods sold 4,640 Merchandise Inventory To record the cost of goods sold 4.640 24-Jan Accounts Pavable 496 Merchandise Invento 496 To record return of defective goods.) 31-Jan Wages Expenses 1,250 1,250 (To record wages expense.) 01-Feb aid Rent Cash 2,475 2.475 (To record rent expensc.) 03-Feb Accounts Pavable 8,504 8,419 85 as Merchandise Inventory To record payment of accounts payable.) 05-FebAdvertising Expense 600 600 To record advertising expense) 1l-Feb Cash 5,500 5.500 Alex Engineerin To record cash receipt from customer15-Feb Dividends 4,800 as 4.800 (To record drawings) 23-Feb Delta Inc 3,220 Sales (To record sale of 3.220 23-Feb Cost of goods sold 2,660 Merchandise Inventory To record the cost of goods sold 2,660 26-Fcb Wagcs Expcnscs 1,000 1,000 To record wages expense 27-Feb Mileage Expenseí600*0.32 192 192 (To record mileage expense.) 08-Mar Computer Supplies 2,730 Accounts Pavable To record purchase of oflice supplies 2.73009-Mar Cash 3,220 Delta Co (To record cash receipt from customer.) 3,220 11-Mar Repair Expenses-Computer 960 Cash (To record the repair expenses.) 960 6-Mar Cash 5,260 Computer Service Revenue (To record cash receipt from customer.) 5,260 19-Mar Accounts Pavablc 3,830 Cash (To record payment of accounts payable.) 3,830 24-Mar Easy Leasin 9,047 9.047 Computer Service Revenue To record the scrvices provided 25-MarWildcat Service 2,800 Sales To record sale of goods 2.800 25-Mar Cost of goods sold 2,002 Merchandise Inventory To record the cost of goods sold 2,002 30-Mar IFM Company 2,220 Sales 2,220 To record sale of 30-Mar Cost of goods sold 1,048 Merchandise Inventory 1.048 (To record the cost of goods sold.) 31-Mar Mileage Expense(400 0.32) 128 Cash To record milcage expense.) 128Cash 101 Date Particulars Debit Credit Balance 01-JanBalance 04-Jan Wages Payable 04-Jan Wages Expenses 05-JanS. Rev, CapitalComputer Supplies 126 Date Particulars Debit Credit Balance 01-Jan Balance 08-Mar Accounts Payable 580 3,310 S 2,730 PrepaidCommon Stock 307 Date Particulars Debit Credit Balance 01-Jan Balance 05-JanIntroduction of capital 73,000 $ 25.00098,000 Dividends Date Particulars Debit Credit Balance 01-Jan Balance 15-Fcb Cash S 4.800 4,800 Computer Service Revenue 403 Date Particulars Debit Credit Balance 01-Jan Balance 11-Jan Alex Engineeri 16-Jan Cash 16-Mar Cash 24-MarEasy Leasin $ 7.000 S 4,000 7.000 11,000 $ 5,26016,260 25,307 9.047 $ Wages Expenses 623 Date Particulars Debit Credit Balance 01-Jan Balancc 04-Jan Cash 31-JanCash 26-Feb Cash 125 S 1.250 S 1.000 12.5 1,375 2.375 Advertising Expenses 655 Date Particulars Debit Credit Balance 01-Jan Balance 05-Feb Cash 600 600 Mileage Expenses 676 Date Particulars Debit Credit Balance 01-Jan Balancc 27-Feb Cash 31-Mar Cash 192 128 192 320Miscellaneous Expenses 677 Date Particulars Debit Credit Balance 01-Jan Balance Repair Expenses Computer 684 Date Particulars Debit Credit Balance 01-Jan Balance 11-MarCash 960 060 Accumulated Depreciation Office Equipment 164 Date Particulars Debit Credit Balance 01-Jan Balance 400 Accumulated Depreciation Computer Equipment 168 Date Particulars Debit Credit Balance 01-Jan Balance 1,250 Wages Payable 210 Date Particulars Debit Credit Balance 01-Jan Balancc 04-Jan Cash 500 500 Unearned Computer Service Revenue 236 Dehit Credit Date Particulars 01-Jan Balance 11-Jan Balancc Balance 1、500 S 1.500 Depreciation Expense Office Equipment 612 Date Particulars Debit Credit Balance 01-Jan BalanceDepreciation Expense Computer Equipment 613 Date Particulars Debit Credit Balance 01-Jan Balance Insurance Expenses 637 Date Particulars Debit Credit Balance 01-Jan Balance Rent Expenses 640 Date Particulars Debit Credit Balance 01-JanBalance Computer Supplies Expense 652 Date Particulars Debit Credit Balance 01-Jan Balance Sales 413 Date Particulars Debit Credit Balance 01-Jan Balance 13-Jan Liu Co 26-Jan KC Inc 23-Feb Delta Inc 25-Mar Wildcat Service 30-MarIFM Con .200S $5.800$ 5,200 11,000 14,220 17,020 19,240 3.220S $ 2.800 2,220 S Sales returns and allowances 414 Date Particulars Debit Credit Balance 01-JanBalance 20-Jan Liu Co 500 500 Sales discounts 415 Date Particulars Debit Credit Balance 01-Jan Balancc 22-JanLiu CoCost of goods sold 502 Date Particulars Debit Credit Balance 01-JanBalance 13-Jan Merchandise Inventory 26-Jan Merchandise Inventory 23-FebMerchandise Inventory 25-Mar Merchandise Inventorv 30-Mar Merchandise Inventory S 3,560 S 4.640 2,660 S 2.002 S 1,048 3.560 8,200 10,860 $12,862 13,910 Alex Engincering Co. 106.1 Date Particulars Debit Credit Balance 01-Jan Balance 11-Jan Computer Service Revenue S 5,500 I-Feb Cash 5.500S Wildcat Service 106.2 Date Particulars Debit Credit Balance 01-Jan Balance 25-Mar Sales S 2,800 2,800 Easy Leasing 106.3 Date Particulars Debit Credit Balance 01-Jan Balance 24-Mar Computer Service Revenue S 9,047 9,047 IFM Co. 106.4 Date Particulars Debit Credit Balance 01-Jan Balancc 30-Mar Sales 3,000 5,220 S 2.220 Liu Corp 106.5 Date Particulars Dehit Credit Balance 01-Jan Balancc 13-Jan Salcs 20-JaSales Return & Allowances 22-JanCash 22-JanSalcs Discount 5.200 4,700 47 S5.200 500 $4.653 $ 47Gomez Co. 106.06 Date Particulars Debit Credit Balance 01-Jan Balancc 09-JanCash 2,668 $ 2.668 Delta Co. 106.7 Date Particulars Debit Credit Balance 01-JanBalance 23-Feb Sales 09-Mar Cash S 3.220 3,220 KC Inc. 106.8 Date Particulars Debit Credit Balance 01-Jan Balance 26-Jan Sales S 5.800 5.800 Dream Inc. 106.9 Date Particulars Debit Credit Balance 01-Jan Balance Retained Earnings 318 Date Particulars Debit Credit Balance 01-Jan Balance 7,360articuars Uadjusted Trial Balance Debit AdjustedTrial Balance Debit Credit Debit Credit Credit repaid Insurance cmmon Stock 4, 30ว 4,200 Miecellaneaus Exoense Computer ation-Ccmpute Depreclation cifice Equipmen: Cemouter Supples Expense 41S s sold 106.3 MCo Delta Co Particulars Sales returns and al owances Computer Comauter Suppics ExpenseStatement of Owners Equity in the books of Santana Re Particulars Amount Beginning Balance Addition:s Closing capital $73,000 $25,000 $98,000 Opening retained earning Withdrawals Net Income Retained Earnings 7,360 4,800 $18,967 S21,527 Particulars Amount Cash Merchandise Invento Computer Supplies Prepaid Insurance Prepaid Rent Accounts Receivable 704 2,005 1,249 825 $22,867 Total Current Assets 95,702 Office Equipment Accumulated Depreciation - Office Equipment 8,000 800 S 7,200 $20,000 Computer Equipment Accumulated Depreciation Computer Equipment 2,500 S 17,500 24,700 120,402 Total Fixed Assets Total Assets Liabilities Accounts Payable Wages Pavable Unearned Computer Service Revenue 0 875 875 Total Liabilities Shareholders equit Common stock Retained earnin $98,000 $21,527 119,527 Total Liabilities & Shareholders Equity 120,402

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