ation applies to the questions displayed below.] 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. Credit Debit $48,502 0 3,010 2,748 0 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 Corp. 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 ----..1-1- 0 0 670 1,854 855 8,050 $ 320 20,200 ------ 670 1 854 855 8,050 320 1968 106.9 119 126 128 131 163 164 167 168 201 210 236 307 318 319 403 20,200 1,240 1,170 700 1, 370 71,829 9,260 o KUInc. Dream, Inc. Merchandise inventory Computer supplies Prepaid insurance Prepaid rent office equipment Accumulated depreciation office equipment Computer equipment Accumulated depreciation-Computer equipment Accounts payable Wages payable Unearned computer services revenue Common stock Retained earnings Dividends Computer services revenue Sales Sales returns and allowances Sales discounts 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 Miscellaneous expenses Repairs expense-Computer 0 0 414 415 502 612 613 623 637 640 652 655 676 677 684 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. a 4 The company paid cash to Lyn Addie for five days' work at the rate of $175 per day. Four of the five days relate to wages payable that were accrued in the prior year. 5 Santana Rey invested an additional $23,700 cash in the company in exchange for more common stock. 7 The company purchased $5,900 of merchandise from Kansas Corp. with terms of 1/10, n/30, FOB shipping point, invoice dated January 7. 9 The company received $2,748 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 $5,380, which is the total price of $6,750 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 $4,900 and a cost of $3,500 to Liu Corp., invoice dated January 13. 15 The company paid $620 cash for freight charges on the merchandise purchased on January 7. 16 The company received $4,120 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 $600 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 $496. 26 The company purchased $9,500 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 $4,540 cost for $5,870 on credit to kc, Inc., invoice dated January 26. 31 The company paid cash to Lyn Addie for 10 days' work at $175 per day. 1 The company paid $2,565 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 $496 credit from merchandise returned on January 24. Feb. Mar. Help Save & 3 The company paid Kansas Corp. for the balance due, net of the cash discount, less the $496 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 $4,620 cash dividend. 23 The company sold merchandise with a $2,650 cost for $3,398 on credit to Delta Co., invoice dated February 23. 26 The company paid cash to Lyn Addie for eight days' work at $175 per day. 27 The company reimbursed Santana Rey $288 cash for business automobile mileage. The company recorded the reimbursement as "Mileage Expense.' 8 The company purchased $2,820 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 $930 cash for minor repairs to the company's computer. 16 The company received $5,380 cash from Dream, Inc., for computing services provided. 19 The company paid the full amount due of $3,990 to Harris Office Products, consisting of amounts created on December 15 (of $1,170) and March 8. 24 The company billed Easy Leasing for $9,247 of computing services provided. 25 The company sold merchandise with a $2,092 cost for $2,870 on credit to Wildcat Services, invoice dated March 25. 30 The company sold merchandise with a $1,108 cost for $2,360 on credit to IFM Company, invoice dated March 30. 31 The company reimbursed Santana Rey $352 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: a. The March 31 amount of computer supplies still available totals $2,035. b. Prepaid Insurance coverage of $618 expired during this 3-month period. c. Lyn Addie has not been paid for seven days of work at the rate of $175 per day. d. Prepaid rent of $2,565 expired during this 3-month period. e. Depreciation on the computer equipment for January 1 through March 31 is $1,240. f. Renreciation on the office equipment for January 1 through March 31 is $320. 4. Prepare an income statement (from the adjusted trial balance in part 3) for the three months ended March 31, 2020. (a) Use a single-step format. List all expenses without differentiating between selling expenses and general and administrative expenses. (b) 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. X . ! Required information Revenues $ Computer services revenue Net sales 25,497 19,390 Total revenues 44,887 14,736 320 1,240 4,875 618 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 Repairs expense Computer 5,130 1,455 540 640 930 Total expenses 30,484 14,403 $