Background:

Top Quality Appliance - Long Beach has just purchased a franchise from Top Quality Appliance (TQA). TQA is a manufacturer of kitchen appliances. TQA markets its products via retail stores that are operated as franchises. As a TQA franchise, Top Quality Appliance - Long Beach will receive many benefits, including having the exclusive rights to sell TQA brand appliances in Long Beach. In exchange for these benefits, Top Quality Appliance - Long Beach will pay an annual franchise fee to TQA based on a percentage of sales. The annual franchise fee is a separate cost and in addition to the purchase of the franchise. Top Quality Appliances - Long Beach entered into all transactions listed in the Transactions section below during 2018, its first year of operations.

Assignment:

1) Using the General Journal tab, click Add Transaction to journalize each transaction. Click Post Transaction once you complete the entry, then repeat these steps for each transaction.

2) Click the Reports tab and review the results of recording these transactions on the General Ledger.

3) Under the Reports tab, review the Trial Balance generated as a result of recording these transactions.

4) Using the General Journal tab, click Add Transaction to journalize each adjusting entry needed. Click Post Transaction once you complete the entry, then repeat these steps for each additional adjusting entry.

5) Click the Reports tab and review the adjusted Trial Balance generated as a result of preparing the adjusting entries in Requirement 1.

6) Under the Reports tab, review the Income Statement and Balance Sheet generated as a result preparing these transactions.

7) Click Submit Work when complete.

Transactions:

01/01/2018

Received $500,000 cash from owner, T. Baker, in exchange for capital. Opened a new checking account at Long Beach National Bank and deposited the cash received from the owner.

01/01/2018

Paid $50,000 cash for the TQA franchise.

01/01/2018

Paid $200,000 cash and issued a $400,000, 10-year, 5% notes payable for land with an existing building. An independent appraiser valued the land and building at $100,000 and $500,000, respectively.

01/01/2018

Paid $75,000 for store fixtures.

01/01/2018

Paid $45,000 for office equipment.

01/01/2018

Paid $600 for office supplies.

01/01/2018

Paid $3,600 for a two-year insurance policy.

01/10/2018

Purchased appliances from TQA (merchandise inventory) on account for $425,000.

01/15/2018

Established a petty cash fund for $150.

01/20/2018

Sold appliances on account to B&B Contractors for $215,000, terms n/30 (cost, $86,000). Record two separate entries.

02/01/2018

Sold appliances to Davis Contracting for $150,000 (cost, $65,000), receiving a 6-month, 8% note. Record two separate entries.

02/05/2018

Recorded credit card sales of $80,000 (cost, $35,000), net of processor fee of 2%. Record two separate entries.

02/24/2018

Received payment in full from B&B Contractors.

03/01/2018

Purchased appliances from TQA on account, $650,000.

04/01/2018

Made payment on account to TQA, $300,000.

06/01/2018

Sold appliances for cash to LB Home Builders for $350,000 (cost, $175,000). Record two separate entries.

08/01/2018

Received payment in full on the maturity date from Davis Contracting for the note from February 1.

11/01/2018

Sold appliances to Leard Contracting for $265,000 (cost, $130,000), receiving a 9-month, 8% note. Record two separate entries.

11/03/2018

Made payment on account to TQA, $500,000.

11/10/2018

Sold appliances on account to various businesses for $985,000, terms n/30 (cost, $395,000). Record two separate entries.

11/15/2018

Collected $715,000 cash on account.

12/01/2018

Paid cash for expenses: Salaries, $180,000; Utilities, $12,650 (prepare one compound entry).

12/01/2018

Replenished the petty cash fund when the fund had $62 in cash and petty cash tickets for $85 for office supplies.

12/15/2018

Baker withdrew $5,000.

12/31/2018

Paid the franchise fee to TQA of 5% of total sales of $2,045,000.

12/31/2018

The bank reconciliation revealed $1,565 of interest earned on the checking account.

12/31/2018

The bank reconciliation revealed bank fees totaling $2,465 for the year.

12/31/2018

(Adjustment 1) One year of the prepaid insurance has expired.

12/31/2018

(Adjustment 2) Management estimated that 5% of Accounts Receivable will be uncollectible.

12/31/2018

(Adjustment 3) An inventory of office supplies indicates $475 of supplies have been used.

12/31/2018

(Adjustment 4) Accrued interest revenue on the Leard Contracting note (round to the nearest whole dollar).

12/31/2018

(Adjustment 5) Record depreciation expense on the building. The company uses the straight-line depreciation method, and believes the building will last for 30 years and have a $50,000 residual value.

12/31/2018

(Adjustment 6) Record depreciation expense on the fixtures. The company uses straight-line depreciation method, and believes the fixtures will last for 15 years with zero residual value.

12/31/2018

(Adjustment 7) Record depreciation expense on the office equipment. The company uses the double declining-balance depreciation method, and believes the equipment will last for 5 years and have a $5,000 residual value.

12/31/2018

(Adjustment 8) Record amortization expense for the year on the franchise, which has a 10-year life.

12/31/2018

(Adjustment 9) Calculate the interest owed on the note payable.

(pictured below are the journal entries available)

Cash - 10100 Petty Cash - 10150 Accounts Receivable - 10400 Allowance for Bad Debts - 10450 Notes Receivable - 10500 Interest Receivable - 10550 Merchandise Inventory - 10600 Office Supplies - 10650 Prepaid Insurance - 10700 Land - 11000 Building - 11150 Accumulated Depreciation - Building - 11200 Office Equipment - 11250 Accumulated Depreciation - Office Equipment - 11300 Store Fixtures - 11350 Accumulated Depreciation - Store Fixtures - 11400 Franchise 11900 Accounts Payable - 20100 Notes Payable - 20150 Interest Payable - 20200 Baker, Capital - 30100 Baker, Withdrawals - 30150 Sales Revenue - 40100 Cost of Goods Sold - 50100 Salaries Expense - 50350 Bad Debts Expense - 50550 Supplies Expense - 50700 Insurance Expense - 50750 Utilities Expense - 50850 Franchise Fee Expense - 50900 Credit Card Expense - 50950 Bank Expense - 51000 Depreciation Expense - Building - 51250 Depreciation Expense - Office Equipment - 51300 Depreciation Expense - Store Fixtures - 51350 Amortization Expense - Franchise - 51700 Interest Revenue - 60100 Interest Expense - 70100 Cash Short and Over - 80100