(Overnight) Michael McBryan, an experienced auto mechanic, opens his own automotive repair business, Overnight Auto Service. A distinctive feature of Overnight's business is that all repair work is done at night. This strategy offers customers the convenience of dropping off their cars in the evening and picking them up the following morning. Operating at night also enables Overnight to minimize its labor costs. Instead of hiring full-time employees, Overnight offers part-time work to mechanics who already have day jobs at major automobile dealerships. This eliminates the need for costly employee training programs and fringe benefits. McBryan officially started Overnight on January 23, 2017 (a Monday). On that day, Overnight was established, and 8,000 shares of stocks were issued at $10 per share to investors consisting of McBryan and several family members. Mcbryan opened a bank account in the name of Overnight in which he deposited the proceeds from the stock issuing. Overnight conducted the following transactions subsequently. The calendar on the next page might help analyzing these transactions. Jan 23. Purchased land for $52,000, paying cash Jan 24. Purchased an old garage built on the land bought on Jan 20 for $26,000.' Overnight made a cash down payment of $6,000 was made, and issued a 90-day note payable, with interest at the rate of 12% per year, in one installment at maturity. The garage has an estimated remaining life of 10 years. Jan 26. Purchased tools and equipment for 13,800, on account, payable within 60 days. The tools and equipment have a useful life of three years. Jan 26. Hired a part-time crew of two mechanics with daily rate $100 each, covering working days only. The crew salaries are paid on a biweekly basis. Jan 27. Realizing that more than needed tools and equipment were bought, Overnight sold some of its new tools, worth $1,800 to Ace Towing, a neighboring business, at cost. Ace agreed to pay the amount within 45 days. Jan 29. Received partial payment of $600 from Ace Towing. Jan 30. Paid $6,800 in partial payment of the tools and equipment. Jan 31. Recorded $2,200 of sales (repair) revenue, received in cash. Jan 31. Received $200 utility bill for January. This amount is due on February 15. Even though the garage is built on the land, it has a different owner than the land, Feb 1. Paid Daily Tribune $360 cash for newspaper advertisement to be run during February Feb 2. Purchased radio advertisement from KARM to be aired in February. The cost was $470. payable within 30 days. Feb 3. Purchased, on credit, various shop supplies costing $1,400, due in 30 days. The supplies are expected to last for three months. Feb 9. Paid the bi-weekly salaries of the repair crew. Feb 15. Collected $5,000 cash for repairs made to vehicles of Airport Shuttle Service. Feb 15. Paid the January utility bill. Feb 23. Paid the bi-weekly salaries of the repair crew. Feb 28. Received 1,600 utility bill for February. This amount is due on March 15. Feb 28. Declared and paid a dividend of 40 cents per share to shareholder. January Su Mo Tu We Th Fr Sa 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 February Su Mo Tu We Th 1 2 5 6 7 8 9 12 13 14 15 16 19 20 21 22 23 26 27 28 Fr Sa 3 4 10 11 17 18 24 25 Federal Holidays 2017 Jan 1 New Year's Day Feb 20 Presidents' Day Jan 2 New Year's Day (observed) May 29 Memorial Day Jan 16Martin Luther King Day Jul 4 Independence Day a) Prepare journal entries for the preceding transactions and any necessary adjustments. (10 points) Post the journal entries to T-accounts. (5 points) Prepare the February 28, 2017 balance sheet for Overnight. (5 points) Prepare the Jan 23 - Feb 28 income statement for Overnight. (5 points) Prepare the Jan 23 - Feb 28 statement of cash flows for Overnight utilizing the indirect method. (10 points)
