Adriana Lopez created Success Systems on October 1, 2007. 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, 2007. These balances are taken from SP 5.

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 modification allows the company to continue using the existing chart of accounts. For simplicity, ignore payroll taxes and sales taxes in this problem.

In response to requests from customers, 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, 505, 506, 507, and 508) are added to its general ledger to accommodate the company’s new merchandising activities. All revenue and expense accounts have zero balances as of January 1, 2008. Its transactions for January through March follow:
Jan.

4 Paid cash to Michelle Jones for five days’ work at the rate of \($150\) per day. Four of the five days relate to wages payable that were accrued in the prior year.
5 Adriana Lopez invested an additional \($10,000\) cash in the business.
a Purchased \($5,700\) of merchandise from Kansas Corp. with terms of 1/10, n/30, FOB shipping point, invoice dated January 7.
9 Received \($3,500\) cash from Gomez Co. as full payment on its account.
11 Completed a five-day project for Alex’s Engineering Co. and billed it \($6,500\), which is the total price of \($9,000\) less the advance payment of \($2,500\). (Debit Unearned Computer Services Revenue for \($2,500.)\)

13 Sold merchandise with a retail value of \($6,000\) to Chang Corp., invoice dated January 13.
1S Paid \($400\) cash for freight charges on the merchandise purchased on January 7.
16 Received \($5,600\) cash from Delta Co. for computer services provided.
17 Paid Kansas Corp. for the invoice dated January 7, net of the discount.
20 Chang Corp. returned \($500\) of defective merchandise from its invoice dated January 13. The returned merchandise is discarded. (The policy of Success Systems is to not adjust its accounts for returned merchandise.)
22 Received the balance due from Chang Corp., net of both the discount and the credit for the returned merchandise.
24 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 Purchased \($9,500\) of merchandise from Kansas Corp. with terms of 1/10, n/30, FOB destination, invoice dated January 26.
26 Sold merchandise for \($4,700\) on credit to KC, Inc., invoice dated January 26.
29 Received a \($496\) credit memorandum from Kansas Corp. concerning the merchandise returned on January 24.
31 Paid cash to Michelle Jones for 10 days’ work at \($150\) per day.

Feb.
1 Paid \($2,625\) cash to Summit Mall for another three months’ rent in advance. (Debit Prepaid Rent, an asset.)
3 Paid Kansas Corp. for the balance due, net of the cash discount, less the \($496\) amount in the credit memorandum.
5 Paid \($800\) cash to the local newspaper for an advertising insert in today’s paper.
11 Received the balance due from Alex’s Engineering Co. for fees billed on January 11.
15 Adriana Lopez withdrew \($5,200\) cash for personal use.
23 Sold merchandise for \($3,800\) on credit to Delta Co., invoice dated February 23.
26 Paid cash to Michelle Jones for eight days’ work at \($150\) per day.
27 Reimbursed Adriana Lopez for business automobile mileage (1,000 miles at \($0.32\) per mile).
Mar.

8 Purchased \($3,250\) of computer supplies from Cain Office Products on credit, invoice dated March 8.
9 Received the balance due from Delta Co. for merchandise sold on February 23.
11 Paid \($1,200\) cash for minor repairs to the company’s computer.
16 Received \($6,250\) cash from Dream, Inc., for computing services provided.
19 Paid the full amount due to Cain Office Products, including amounts created on December 15 (of \($2,100)\) and March 8.
24 Billed Easy Leasing for \($11,000\) of computing services provided.
25 Sold merchandise for \($3,900\) on credit to Wildcat Services, invoice dated March 25.
30 Sold merchandise for \($2,500\) on credit to Clark Company, invoice dated March 30.
31 Reimbursed Adriana Lopez for business automobile mileage (600 miles at \($0.32\) 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 \($1,950.\)

b. Three more months have expired since the company purchased its annual insurance policy at a \($2,400\) cost for 12 months of coverage.
¢. Michelle Jones has not been paid for seven days of work at the rate of \($150\) per day.

d. Three months have passed since any prepaid rent has been transferred to expense. The monthly rent expense is \($875.\)

e. Depreciation on the computer equipment for January | through March 31 is \($1,250.\)

f. Depreciation on the office equipment for January | through March 31 is \($625.\)
Required 

1. Prepare journal entries to record each of the January through March transactions.
2. Post the journal entries in part | to the accounts in the company’s general ledger. (Note: Begin with the ledger’s post-closing adjusted balances as of December 31, 2007.)
3. Prepare a partial work sheet consisting of the first six columns (similar to the one shown in Exhibit 6B.1) that includes the unadjusted trial balance, the March 31 adjusting journal entries (a) through (f), and the adjusted trial balance. Do not prepare closing entries and do not journalize the adjustments or post them to the ledger.

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No. Account Title Dr. Cr. No. Account Title Dr. Cr. 600 101 106.1 Cash $80,260 210 Wages payable 2,500 Alex's Engineering Co. 0 236 Unearned computer services revenue 106.2 Wildcat Services 0 301 A. Lopez, Capital 117,435 106.3 Easy Leasing 0 302 A. Lopez, Withdrawals 0 106.4 Clark Co. 2,300 403 Computer services revenue O O 0 106.5 Chang Corp. 0 413 0 Sales 106.6 Gomez Co. 3,500 414 Sales returns and allowances 0 106.7 Delta Co. 0 415 Sales discounts 0 106.8 KC, Inc. 0 505 Purchases 0 106.9 Dream, Inc. 0 506 Purchase returns and allowances 119 Merchandise inventory 0 507 Purchase discounts 126 Computer supplies 775 508 Transportation-In 0 128 Prepaid insurance 1,800 612 Depreciation expense-Office equipment 0 131 Prepaid rent 875 613 Depreciation expense- 163 Office equipment 10,000 Computer equipment 164 Accumulated depreciation- 623 Wages expense... Office equipment 625 637 167 Computer equipment 25,000 640 Rent expense 168 Accumulated depreciation- 652 Computer equipment 1.250 655 Insurance expense Computer supplies expense. Advertising expense.. 201 Accounts payable 2,100 676 Mileage expense.. 677 Miscellaneous expenses 684 Repairs expense-Computer 0 0 0 0 0 0 0 0 0