GROUP ASSIGNMENT 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 franchisee, Top Quality Appliance -Long Beach will receive many benefits, including having the exclusive right to sell TQA brand appliances in Long Beach. TQA appliances have an excellent reputation and the TQA name and logo are readily recognized by consumers. TQA also manages national television advertising campaigns that benefit the franchisees. 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. In addition to purchasing the franchise, Top Quality Appliance-Long Beach will also purchase land with an existing building to use for its retail store, store fixtures, and office equipment. The business will purchase appliances from TQA and resell them in its store, primarily to local building contractors for installation in new homes. Top Quality Appliance-Long Beach uses a perpetual inventory system (FIFO with a cost flow method). As a new business, all beginning balances are $0. Top Quality Appliance Long Beach Chart of Accounts Cash Accounts Receivable Baker, Capital Baker, Withdrawals Sales Revenue Allowance for Bad Debts Interest Revenue Cost of Goods Sold Merchandise Inventory Office Supplies Prepaid Insurance Interest Receivable Notes Receivable Land Building Accumulated Depreciation Building Store Fixtures Accumulated Depreciation Store Fixtures Office Equipment Accumulated Depreciation-Office Equipment Franchise Franchise Fee Expense Salaries Expense Utilities Expense Insurance Expense Supplies Expense Bad Debt Expense Bank Expense Credit Card Expense Depreciation Expense-Building Depreciation Expense-Store Fixtures Depreciation Expense-Office Equipment Amortization Expense-Franchise Interest Expense Accounts Payable Interest Payable Notes Payable b. c. e. f. h. Top Quality Appliance-Long Beach completed the following transactions during 2018, its first year of operations: 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. Paid $50,000 cash for a TQA franchise. Paid $200,000 cash and issued a $400,000, 10-year, 5% notes payable for land with an existing building. The assets had the following market values: Land, $100,000; Building, $500,000. d. Paid $75,000 for store fixtures. Paid $45,000 for office equipment Paid $600 for office supplies. Paid $3,600 for a two-year insurance policy. Purchased 1,700 units of appliances from TQA (merchandise inventory) on account for $425,000. i. Paid $85 for office supplies. j. Sold 344 units of appliances on account to B&B Contractors for $215,000, terms n/30. k. Sold 260 units of appliances to Davis Contracting for $150,000, receiving a 6-month, 8% note. 1. Recorded credit card sales of $80,000 for 140 units, net of processor fee of 2% (Credit card expense). Received payment in full from B&B Contractors. Purchased 1,300 units of appliances from TQA on account for $650,000. Made payment on account to TQA, $300,000. P- Sold 700 units of appliances for cash to LB Home Builders for $350,000. Received payment in full on the maturity date from Davis Contracting for the note. Sold 388 units of appliances to Leard Contracting for $265,000, receiving a 9-month, 8% note. Made payment on account to TQA, $500,000. Sold 790 units of appliances on account to various businesses for $985,000, terms n/30 u. Collected $715,000 cash on account. Paid cash for expenses: Salaries, $180,000; Utilities, $12,650 Baker withdrew $5,000. y. Paid the franchise fee to TQA of 5% of total sales of $2,045,000. Received interest revenue of $1,565 from Long Beach National Bank. Paid annual fees (considered a bank expense) including EFT payments to Bank Checks and Service charge in total of $2,465. (Bank Checks is a company that prints business checks for Top Quality Appliance-Long Beach) m. n. 0. 9. r. S. t. V. X. Z 3. Record adjusting entries for the year ended December 31, 2018: a. One year of the prepaid insurance has expired. b. Management estimates that 5% of Accounts Receivable will be uncollectible. c. An inventory of office supplies indicates $475 of supplies have been used. d. Calculate the interest eamed on the outstanding Leard Contracting note receivable. Assume the note was received on October 31. Round to the nearest dollar. e. Record depreciation expense for the year. Assuming the assets were purchased on January 2, 2018: Building, straight-line, 30 years, $50,000 residual value. Store Fixtures, straight-line, 15 years, no residual value. Office Equipment, double-declining-balance, 5 years, $5,000 residual value. f. Record amortization expense for the year on the franchise, which has a 10-year life. g. Calculate the interest owed on the note payable. Assume the note was issued on January 1