Background Maverick's Boards is a surf shop started in January of 2020 by Blaise Maverick. He has saved over $70,000 to invest in the business. He has had a meeting with his lawyer and his Certified Public Accountant (CPA) and they have determined that the business should be organized as a corporation. The CPA has agreed to help Mr. Maverick set up his accounting system. He provided to Mr. Maverick a chart of accounts. He will be using a Perpetual Inventory System. Chart of Accounts Numbering System 1xxxx 15xxx 17xxx 2xxxx 27xxx 39xxx 4xxxx 5xxxx 6xxxx Current Asset Property, Plant & Equipment Accumulated Depreciation Current Liabilities Long-term Liabilities Stockholders' Equity Revenues Cost of Goods Sold Operating Expenses Below is the Chart of Accounts that will be used in the journal entries. Use the account numbers listed below. Chart of Accounts Current Assets Current Liabilities 10000 Cash 20000 Accounts Payable 11000 Accounts Receivable 21100 Note Payable-Wells Fargo 12000 Inventory - Surfboards 21200 Note Payable - Computer Equip. 12100 Inventory - Wakeboards 23100 Wages Payable 13100 Office Supplies 23200 Interest Payable 13200 Shipping Supplies 23300 Sales Tax Payable 14000 Prepaid Rent 23400 Utility Payable 14100 Prepaid Insurance Stockholders' Equity 39003 Common Stock Long-Term Assets 39005 Retained Earnings 15000 Furniture and Fixtures 39007 Dividends 17000 Accumulated Depreciation - Fumiture and Fixtures Revenue 15100 Computer Equipment 40000 Sales 17100 Accumulated Depreciation - Computer Equipment 60850 Registration & Dues Fee Expenses 50000 60100 60150 60 200 60300 60350 60400 60450 60500 60550 60600 60650 60700 60750 60800 Cost of Goods Sold Legal Expense Office Supplies Expense Shipping Supply Expense Insurance Expense Wage Expense Credit Card Expense Delivery Expense Advertising and Promotion Expense Utility Expense Rent Expense Depreciation Expense Interest Expense Bank Service Fee Gasoline Expense 2. 4. Record the January 2020 transactions in the general journal (last section of this practice set) using the following events. No explanation is required for the journal entries. Instead of recording the names of the accounts use the account number. Prepare the journal entries as shown in the practice set. Transactions Date Deposit No Description / Check No 1 1/02/2020 Blaise met with his lawyer and CPA for advice on starting the business. The lawyer told Mr. Maverick to register the company name Maverick's Boards with the County of El Paso. In addition, Mr. Maverick will get an employer identification number (EIN) from the Internal Revenue Service and get a sales tax permit from the state of Texas. 1/02/2020 Deposit #1 Mr. Maverick opened a business checking account at Wells Fargo Bank by depositing $70,000. The corporation issued him a stock certificate for 7,000 shares of common stock with no par value. 3. 1/03/2020 Ck #1001 Mr. Maverick signed a one-year rental. He was required to pay $9,000 for rent for the months of January 1, 2020 - June 30, 2020 1/03/2020 Ck #1002 Arranged for a general business liability insurance policy and paid $4,000 to State Penn Insurance. This premium is for twelve months coverage. 1/03/2020 Purchased a new computer system that cost $5,200 from Computer Inc. for use in the business. Mr. Maverick signed a 6 month, 10% note pay able for the cost of the system. The computer system has an estimated useful life of five years the residual (salvage) value is $400. This will be recorded as Computer Equipment. Depreciation will be an adjusting entry using straight- line depreciation 1/05/2020 Deposit #2 Signed a note payable to borrow $10,000 from Wells Fargo bank. Interestis 12% annually and the note is to be repaid with interest in twelve months. Interest will be an adjusting entry. 7. 1/05/2020 Ck #1003 Paid $1,100 for shipping supplies. 1/06/2020 Ck #1004 Paid $14,600 for furniture and fixtures. The estimated service life of these assets is 8 years. The residual (salvage) value is $200. These items will be recorded as Furniture and Fixtures and depreciated accordingly. Depreciation will be done in the adjusting journal entries using straight-line depreciation. 1/06/2020 Ck #1005 Arranged for Sun City Movers to make the delivery of the computer system and paid the delivery charge of $750. This charge should be added to the cost of the computer equipment purchased and depreciated on the same 5. 6. 8. 9. 10. 1/08/2020 Ck 1006 11. 1/08/2020 12. 1/09/2020 13. 1/13/2020 Ck #1007 14. 1/14/2020 15. 1/14/2020 Deposit #3 16. 1/16/2020 Ck #1008 17. 1/16/2020 18. 1/20/2020 Deposit M basis as the computer equipment. The depreciation will be calculated in the adjusting journal entries. Purchased $450 of office supplies for cash from Office Supplies Co. Purchased $8,000 of merchandise inventory (surfboards) on account. The vendor did not extend credit terms. Purchased $6,000 of merchandise inventory (wakeboards) on account There were no credit terms for prompt payment. Mr. Maverick received and paid the $940 charge from lawyer, Maverick's Boards is now open for business, Sold merchandise for $7,200 cash. Sales Tax was $594. The cost of the Surfboards is $3,000; the cost of the Wakeboards is $1,100. Part of this sale must be delivered to the customer. The merchandise will be shipped FOB destination Paid $250 to ship the merchandise. Purchased additional surfboards on account for $4,500. Credit terms were 2/15, n/30 Recorded cash sales that totaled $8,300. Sales tax is $685. The cost of merchandise sold was $4,500 (surfboards were $2,500; wakeboards were $2,000). Mr. Maverick joined the El Paso Chamber of Commerce. He paid the registration fee of $200 Mr. Maverick participated in a surfboard exhibition held at the convention center. He felt this was a good way to publicize his new business, Convention Center charged Mr. Maverick $800. He will pay the bill later, He considers this an advertising and promotion expense. Mr. Maverick paid the Convention Center rental. Paid for the wakeboards purchased on 1/09/2020, Mr. Maverick recorded cash sales totaling $9,000. Sales tax is $743. The cost of the merchandise sold was $4,500 (surfboards $3,000; wakeboards $1,500). Paid the balance due for the surfboards. There are two invoices, American Express sent bill for $235 for gasoline. This was automatically deducted from Blaise's checking account as a debit memo. Received but did not pay the utility bill for the month, $445, Paid the first monthly installment on the computer equipment. The payment amount is $910, of this amount, $43.33 is for interest and $866.67 is for principal. 19. 1/22/2020 Ck #1009 20. 1/23/2020 21. 1/23/2020 22. 1/26/2020 Ck #1010 23. 1/26/2020 Ck #1011 24. 1/27/2020 Deposit 5 25. 1/27/2020 Ck #1012 26. 1/30/2020 27. 1/30/2020 28. 1/30/2020 Ck #1013 29. 1/30/2020 Deposit #6 Recorded sales made for the last week of the month. Sales tax is $248. Total cash sales were $3,000. The cost of the merchandise sold was $1,800 (surfboards $1,100; wakeboards $700). Paid the sales tax to the proper taxing authority. Declared and paid a cash dividend of $650 to Mr. Maverick. 30. 1/31/2020 Ck #1014 31. 1/31/2020 Ck #1015 Dr Account Dollar Cr acount Account Dollar Transaction # Date No. Amount No. Amount