Mason Automotive is an automotive parts company that sells car parts and provides car service to customers. This is Mason's first year of operations and they have hired you as their CPA to prepare the income statement and balance sheet for their company. As such, January 1st, 2022 was the first day that Mason was in business. For the month of January, record all the necessary journal entries for transactions that occurred during the month. In addition, please prepare all necessary adjusting journal entries as of the end of the month.

From the information below, please fill out the 'journal entries' tab for all the necessary journal entries. Furthermore, please complete the 'T-Accounts' tab for the individual accounts so that the 'trial balance' tab can be updated (automatically). I prepared the first journal entry for you in the journal entries tab and T-Accounts tab. Ensure you label the entries how I have for Entry #1.

Once all entries are recored and the T-Accounts tab is updated, please prepare the financial statements (income statement and balance sheet) for the month of January.

E# Activity For The Month of January 1 Mason Automotive sells 7,000,000 shares at $5 par for $21 on January 1st, 2022. On January 2nd, Mason Automotive receives $36 Million advance payment from a customer, Highland Inc., to manufacture 6,200 cars. 3 Mason Automotive buys a patent from Apple for $18.15 Million on January 3rd, 2022. The patent has a legal life of 22 years and useful life of 21 years. Record the necessary entry as of January 10th, 2022. Assume the patent was purchased using cash. 4 Mason Automotive purchased $180 Million dollars worth of inventory on January 4th, 2022. $88 Million was paid with cash with the remaining balance on account. Mason notes that it will use a perpetual inventory system to track inventory. 5 Ed Mason, the CEO, hires 4,300 employees, whom will receive a combined salary of $8.2 Million on a monthly basis. The employees started on January 1st and will be paid for the month of January on February 6th. Employee's withholdings are as follows: 11% for federal income taxes 5.6% for state income taxes and 7.65% for FICA. Record the necessary entry as of the date of hire, January 1st, 2022. 6 Mason Automotive purchases fixed assets of $160 Million that will have a useful life of 16 years and a salvage value of $50 million on January 8th, 2022. $ 70 million was paid with cash with the remaining balance on account. These assets are depreciated using the straight-line method. 6 7 Mason Automotive issues a bond payable on January 11th, 2022 with a face value of $130 Million at 96. The bond will have a useful life of 14 years with an interest payment of 8.25% (Annual Percentage Rate) due at the end of the month. Record the necessary Journal entry as of January 8th, 2022. Note: When considering the amortization of the discount or premium, assume the straight line method is used. Interest will be accrued on a monthly basis. 17 18 19 20 8 Mason Automotive pre-pays for rent Expense for the next four years of $26 Million on January 1st, 2022 9 21 22 Mason Automotive purchased $7.5 Million dollars worth of supplies on account on January 13th, 2022. Information Journal Entries T-Accounts Trial Balance Inco Santana 8 Mason Automotive pre-pays for rent Expense for the next four years of $26 Million on January 1st, 2022. 9 Mason Automotive purchased $7.5 Million dollars worth of supplies on account on January 13th, 2022. 10 On January 15th, Mason Automotive shipped two orders to Panther Paws Corporation. The shipping terms were FOB Destination. The first part of the delivery was received by Pather Paws on January 27th with a sales value of $162 Million and the inventory cost was $87 Million. The second part of the delivery was received on February 3rd with a sales value of $250 Million and an inventory cost of $175 Million. Assume that this sale was made on account. 3 1 11 On January 23rd, Mason Automotive decides to purchase 142,000 shares of Treasury stock at $22.5 per share 27 Month End Adjusting Entries There are 10 applicable adjusting entries that need to be made as of the end of the month based on the information provided 28 above. When recording these adjusting entries consider the following facts: 29 1 Interest expense will be recorded as an operating expense item on the income statement 30 2 Record the necessary adjusting entries related to pre-paid expense as separate journal entries. When reviewing the supply room as of the end of the month, Mason Automation noted that it had $3.75 Million worth of 3 supplies still on hand 31 32 As of the end of the month, 4,200 cars were completed for Highland Inc. and the performance obligation had been met on those 4,200 cars. As such, revenue was determined to be earned on those 4,200 vehicles and it was noted that each vehicle 4 costed $7,000 to manufacture. (These journal entries are considered 2 of the 10 total adjusting entries). Mason Automation uses the balance sheet approach in estimating the allowance for doubtful accounts as of the end of the 33 5 period. Based on industry average, Mason noted that it will use 8.2% of receivables as an estimation 34 6 There should be two separate entries related to payroll that is recorded. 35 36 Note on Balance Sheet: 37 When preparing the balance sheet, close out net income to retained earnings. Debit Account Credit Account Credit Amount (5) JE 1 Debit Amount (5) 147,000,000 Cash Common Stock Additional Paldin Capital 35,000,000 112,000,000 2 3 m! 5 6 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 9 10 Adjusting Entries 0 SIGNI 2 Adj 1 13 14 15 46 Adj2 47 48 49 Ad) 50 51 52 Adj 4 53 54 55 Adjs 56 57 Ad 58 S9 60 Adj 7 61 62 63 Adj B 64 65 66 Adj 9 67 68 69 70 71 72 Adj 10 73 74 Heady Opening Balance Sheet Credit Debit 147,000,000 Adjusted Trial Balance 147,000,000 Cash Accounts Receivable Allowance for Doubtful Accounts Inventory Supplies Pre-Paid Expense Property Plant and Equipment Accumulated Depreciation Patent Accounts Payable Uneamed Revenue Salaries and Wes Payable PCA Withholding Payable Federal income Tax Payable state Income Tax Payable Payable Bond Payable Premium Discount Common Stock Additional Paid in Capital Treasury Stock Betined Earnings Revenue Cost of Goods Sold Rent Buspense Salaries and Wales Expense Payroll Tax Expense Depreciation Expense Amortization Expense Patent) Bad Debt Expense Supplies Expense Interest Expense Totals 35,000,000 112,000,000 (85,000,000) (112,000,000) ) 2 3 147,000,000 147,000,000 5 6 Mason Automation Multiple Step Income Statement Month End Janua 1/31/22 (Enter Account Description) (Enter Account Description) Total Revenue Enter Account Description) (Enter Account Description) Gross Profit 2 3 5 6 Operating Expenses (Selling and Administrative) (Enter Account Description) (Enter Account Description Enter Account Description Enter Account Description) (Enter Account Description [Enter Account Description (Enter Account Description) (Enter Account Description) [Enter Account Description) Total Operating Expenses 22 Net Income 34 25 26 27 28 29 Mason Automation Balance Sheet Month End Lanuary 2022 1/31/22 Liabilities and Stockholders Equity Assets Current Assets (Enter Account Description) Enter Account Description lenter Account Description) Enter Account Description) Enter Account Description) Enter Account Description Total Current Assets Current Liabilities Enter Account Description) Enter Account Description) Enter Account Description) Enter Account Description) Enter Account Description) Enter Account Description) Enter Account Description) Total Current abilities Property Plant and Equipment Enter Account Description Enter Account Descriotion) Total Property Plant and Equipment Long Term Llabilities (Enter Account Description) Enter Account Descriotion) Enter Account Description) Total Long Term Liabilities Intangible Assets Enter Account Description Total intangible Assets Total Liabilities Other Assets inter Account Description Other Long-Term Assets Stockholder's Equity Enter Account Description) Enter Account Description) Inter Account Description) Enter Account Description) Totu Stockholder's Equity Totalt Total abilities and stockholders Equity Information Journal Entros T-Accounts Trial Balance Income Statement Balance Sheet