The Rachel's Enterprises Solutions had the following balance sheet as of December 31, 2020.  The transactions for the first three months of 2021 are also presented along with other information about specific accounts.

 

 

Rachel's Enterprises Solutions Incorporated 

Balance Sheet

December 31, 2020

 

 

ASSETS			LIABILITIES
Cash	$ 37,000		Accounts Payable	$ 40,000
Marketable Securities	10,000		Wages Payable	10,800
Accounts Receivable	63,000		Taxes Payable	7,200
Uncollectible Accounts	-2,000		Short-Term Note Payable	30,000
Inventory	74,000		Interest Payable	2000
Supplies	4,000		Unearned Revenue	20,000
Prepaid Insurance	7,500		Unearned Consulting Rev.	5,000
Total Current Assets	$193,500		Total Current Liabilities	$ 115,000
Land	$111,500		Long-Term Notes   Payable	$ 50,000
Equipment	217,000		Bonds Payable	100,000
Accumulated Depreciation	-97,000		Mortgage Payable	350,000
Building	590,000		Total Long-Term   Liabilities	$500,000
Accumulated Depreciation	-110,000
Intangible Assets	60,000		STOCKHOLDER EQUITY
Total Long-Term Assets	$771,150		Capital Stock	$100,000
			Paid in Capital	140,000
			Retained Earnings	110,000
			Total Stockholders Equity	$350,000
Total Assets	$965,000		Total Liabilities & Equity	$965,000

 

Additional Information

 

Accounts Receivable

The following table indicates the historical breakout of accounts receivable

 

Days	Current	30 to 60	60 to 90	Over 90
Percent of Balance	50%	30%	15%	5%
Percent Collectible	95%	90%	80%	60%

 

The company uses the gross method of recording all sales on accounts.

 

 

Marketable Securities

The interest rate earned on marketable securities is 7.0%.

 

Inventory

In 202x, the company had used the gross method to record inventory purchases on account. 

 

Prepaid Insurance

A three-year insurance policy in the amount of $9,000 was purchased on July 1, 2020.

 

Equipment

Equipment is depreciated at an average amount of $3,500 per month.

 

Building

The current building was purchased on January 1, ten years ago and has an expected 40-year life at which time its salvage value will be $40,000.

 

Intangible Assets

Intangible assets were initially valued at $60,000 and are being depreciated over 30 years at $2,000 per year.

 

Short-Term Notes Payable

The one-year short-term note payable is due on March 1, 2021.  The interest rate is 8.0% which is payable at maturity.

 

Long-Term Notes Payable

The long-term notes payable are due in ten years.  The interest rate on the notes is 5.0%.

 

Bonds Payable

The bonds payable mature in twenty years.  The interest rate on the bonds is 5.0%.

 

Mortgage Payable

The following amortization schedule can be used for the January, 2021 mortgage payment on the 4.0%, 30- year mortgage.

 

Month	Payment	Interest	Principal	Balance
January	$3,500	$2,063	$1,437	$320,000 $318,563
February	$3,500	$2,063	$1,437	$317,126
March	$3,500	$2,063	$1,437	$315,689

 

Capital Stock

The capital stock is common stock at $10 par value with 50,000 shares authorized, and 10,000 shares issued and outstanding.

 

Journal Entries

 

 

1. Rachel invested $40,000 cash into the business by purchasing capital stock at $10.00 par value. 

 

1. Jan 2 The Company borrowed $60,000 on a short-term 90 day, 4.0% note payable.

 

1. Jan 3 The Company paid $30,000 in advance for the 12 month rental of a warehouse.

 

1. Jan 5 Rachel's Enterprises Board of Directors declared a dividend of $.75 cents per share payable on February 10, 2021 to all shareholders of record on January 20, 2021.

 

1. Jan  6  The amount in wages payable and taxes payable was paid in full.

 

1. Jan 8 The Company paid a total of $30,000 on accounts payable less the 2% in purchase discounts for early payment. 

 

1. Jan 15 Cash sales for two weeks equaled $38,000. The cost of inventory sold equaled $16,000.

 

1. Jan 18 Consulting services revenue during the first two week was $10,000 cash. Please use Consulting Service Revenue. 

 

1. Jan 20 Supplies in the amount of $4,500 were purchased for cash.

 

(10) Jan 21 A customer who owed $25,000 on an account receivable, agreed to sign a 60-day note receivable with an interest rate of 6.0%.  The interest earned on the note will be paid at the maturity date of the note receivable.

 

(11) Jan 29 The balance of $10,000 in accounts payable was paid.

 

(12) Jan 30 The Company purchased $60,000 of inventory on account with the terms 2/10, net 30. 

 

(13) Jan 30 The Company paid freight charges of $1,800 on the inventory purchase.  

 

(14) Jan 31 Cash sales for two weeks equaled $28,000.  The cost of inventory sold equaled $13,000.

 

(15) Jan 31 Sales on account for the month of January totaled $62,000 with the terms 2/10, net 30. The cost of inventory sold equaled $29,000.

 

(16) Jan 31 The unearned revenue represented the rental of special equipment that was used by another company on weekends.  $4,000 of the revenue was earned in January.

 

(17) Jan 31 Collected cash of $49,000 from the accounts receivable, plus there was a total sales discount of $1,000 for the payment of receivables within the ten day discount period.

 

(18) Jan 31 Salary expenses in the amount of $12,000 and tax expenses in the amount of $5,000 were paid.

 

(19) Jan 31 The Company paid a repair bill of $6,000 was paid.

 

(20) Jan 31 A bill in the amount of $2,500 for advertising expenses incurred during the month of January was received.

 

(21) Jan 31 The monthly payment for January of the mortgage payable was made.

 

(22) Jan 31 Consulting services on account for the month were $15,000. Included in this amount was $5,000 advanced payment previously received in the unearned consulting revenue account. 

 

(23) Jan 31 In order to make a sale the company paid $1,200 to have goods shipped to a customer. 

 

(24) Feb 1 The Company made a new issue of 5,000 shares of $10.00 par value common stock for cash.  The market price of the stock was $30 per share.

 

(25) Feb 2 A petty cash fund in the amount of $800 was established.

 

(26) Feb 3 The Company bought back 1,000 shares of its own common stock for $20 per share and reports the purchase as treasury stock.

 

(27) Feb 8 The purchase of inventory on account on Jan 30th which was reported at the gross amount was paid in full less the discount.

 

(28) Feb 10 The dividend declared on January 5^th was paid. 

 

(29) Feb 15 Cash sales for two weeks equaled $21,000. The cost of inventory sold equaled $9,500.

 

(30) Feb 15 Consulting services for cash for two weeks was $20,000. 

 

(31) Feb 20 The Company purchases $31,000 of inventory on account with the terms 2/10, net 30. 

 

(32) Feb 20 The Company paid freight charges of $900 for the inventory purchase. 

 

(33) Feb 27 The Company paid an advertising bill for $6,500 which included the February advertising expense of $4,000 plus the balance due from January.

 

(34) Feb 28 Cash sales for two weeks equaled $32,000. The cost of inventory sold equaled $15,000.

 

(35)  Feb 28 Consulting services for the on credit for the two weeks totaled $22,000. 

 

(36) Feb 28 The monthly payment for February of the mortgage payable was made.

 

(37) Feb 28 The Company collected cash on the accounts receivables for a payment of $70,000 less a total sales discount of $1,400 for the payment of receivables within the ten day discount period.

 

(38) Feb 28 Salary expenses in the amount of $18,000 and tax expenses in the amount of $6,000 were paid.

 

(39) Feb 28 The Company paid a property tax bill of $4,100.

 

(40) Feb 28 Sales on account for the month of February totaled $75,000 with the terms 2/10, net 30. The cost of inventory sold equaled $33,800.

 

(41)  Feb 28 A customer complained that some of the goods they received were damaged. So Rachel's gave them an allowance of $1,700 to keep the customer satisfied. 

 

(42) Mar 1 The short-term note payable of $30,000 that was due on March 1st plus all appropriate interest was paid.

 

(43) Mar 3 The amount of the petty cash fund was increased by $700.

 

(44) Mar 10 Supplies in the amount of $3,900 were purchased on account.

 

(45) Mar 15 Cash sales for two weeks equaled $23,000.  The cost of inventory sold equaled $11,600.

 

(46) Mar 15 The consulting service revenue for cash for two weeks totaled $17,000. 

 

(47) Mar 20 The Company reissued 300 shares of its own treasury stock for $30 per share.

 

(48) Mar 21 The note receivable from January 21st had been paid in full plus interest. 

 

(49) Mar 25 The Company purchased $51,000 of inventory on account using the gross method with the terms 2/10, net 30.

 

(50) Mar 28 The purchase of inventory on account on February 20th was paid in full. 

 

(51) Mar 29 The petty cash fund had $400 in cash and receipts in total amounts for the following expense categories:  entertainment-$250, travel- $265, miscellaneous-$100, postage $240, and supplies $190.  The petty cash fund was replenished.

 

(52) Mar 30 Cash sales for two weeks equaled $24,000.  The cost of inventory sold equaled $11,500.

 

(53) Mar 30 The unearned revenue represented the rental of special equipment that was used by another company on weekends.  $16,000 of the revenue was earned in March.

 

(54) Mar 31 Sales on account for the month of March totaled $78,000 with the terms 2/10, net 30.  The cost of inventory sold equaled $37,000.

 

(55) Mar 31 The Company paid legal fees of $1,500.

 

(56) Mar 31 Collected $75,000 from the accounts receivable less a total sales discount of $1,500 for the payment of receivables within the ten day discount period.

 

(57) Mar 31 Consulting revenue on credit for the month totaled $27,000. 

 

(58) Mar 31 Rachel's returned $4,000 of inventory that we purchased earlier in the month. 

 

(59) Mar 31 A warehouse building was acquired for $325,000.  Closing costs on the acquisition equaled $10,500, and there were costs of $15,800 to get the building into an operational condition to be used by the company. The company paid $75,000 in cash as a down payment with the balance due being added to the mortgage payable account.

 

(60) Mar 31 The utility bill of $7,500 for the quarter was paid.

 

(61) Mar 31 The Company repaid the 90 day note payable from January 2nd in full plus interest.

 

(62) Mar 31 A customer sent an advance payment of $15,000 for the use of special equipment in April and May.

 

(63) Mar 31 A customer returned $5,000 of merchandise in good condition. The cost of the merchandise as $2,200. 

 

(64) Mar 31 The Company reimbursed management for mileage for the quarter a total of $2,500. Please use mileage expense account. 

 

(65) Mar 31 Equipment with a historical cost of $20,000 and an accumulated depreciation of $6,000 was sold for $16,000 cash. (Hint-first update the depreciation for the 3 months-January through March which was $500) 

 

(66) Mar 31 Equipment with a historical cost of $20,000 and an accumulated depreciation of $18,000 was disposed of with an additional disposal cost of $1,300. (Hint-first update the depreciation for the 3 months-January through March which was $500.)

 

(67) Mar 31 The monthly payment for March of the mortgage payable was made.

 

Record these adjusting entries for the quarter so Financial Statements are correct!

A1-Mar 31 The equipment depreciation entry for the three months of 202x was completed.

 

A2 Mar 31 The depreciation entry for the building for the months of January, February, and March was entered.

 

A3 Mar 31 The amortization of intangible assets for the three months of 202x was completed.

 

A4 Mar 31 The bad debt expense based on 1.0% of credit sales for the quarter was recorded. 

 

A5 Mar 31 Salary expenses incurred during the month of March but not yet paid equaled $15,500 

 

A6 Mar 31 Tax expenses incurred during the month of March but not yet paid equaled $8,900.

 

A7 Mar 31 A physical inventory of supplies indicated a total amount of $5,000 of supplies still on hand. A journal entry was completed for the supplies used during the quarter.

 

A8 Mar 31 The amount of rent expense for the warehouse for the first three months of 2021 was recognized.

 

A9 Mar 31 The Company provided services to a customer in the amount of $14,000 during March but a bill has not been sent.

 

A10 Mar 31 The amount of insurance expense for the first three months of 2021 was recognized.

 

A11 Mar 31 The amount of interest earned on marketable securities for the three months of 2021 was recognized.

 

A12 Mar 31 The amount of interest expense for the total long-term notes payable for the first three months of 2021 was recognized.

 

A13 Mar 31 The amount of interest expense for the bonds payable for the three months of 2021 was recognized.

 

 

 

 

Required

 

1.   Complete journal entries for each of the transactions. The numbers in the journal entries can be rounded to the nearest dollar.

 

2.   Develop a trial balance for Rachel's Enterprise Solutions as of March 31, 2021.