Question
Please see below, I have been struggling with journal entries and any assistance or guidance would be appreciated. Jonathan Page was a very inquisitive child
Please see below, I have been struggling with journal entries and any assistance or guidance would be appreciated.
Jonathan Page was a very inquisitive child growing up. He was a great student in school and always asked a lot of questions. While growing up he was a typical American guy and enjoyed soccer and golf. But once Jonathan was given a computer for his 12th birthday he fascinated with electronics. He like everyone else enjoyed playing on the computer but his curiosity went a little further. He opened up his computer to see how it actually worked. He opened up his laptop, computer and cellphone to see how the electronics worked on the inside. His parents were frustrated at first, but when they saw his interest was in how they worked and not just being mischievous, they encouraged him in electronics.
Jonathan enrolled in a computer class in high school and became certified in Microsoft Office. During his summers while he was in high school, He worked for a local computer store in the small town they lived near. While he was just the receptionist and provided customer service, when it was slow the owner would teach him about how a computer worked. When it came time to apply for college, He knew what he wanted to major in computer science at the University of Maryland. His long term desire was to own his own computer consulting business and help clients set up their computer networks and all their computer needs.
After earning undergraduate degree, Jonathan got a job a local bank as an IT troubleshooter. He learn a lot but still wanted to own his own business. So after five years at the local bank, He began his own computer consulting business. While doing computer consulting for the past five years has been successful, many of the companys clients wanted to purchase the computer equipment from the business as well. So recently PBSI has begun offering computer equipment as well as consulting services. So now the company offers computer consulting and computer equipment to small businesses. (Hint-remember you will record these two revenues differently because one is a service and one is merchandise!)
After several years of running a successful small business PBSI has the following balance sheet shown below. Jonathan did not get an MBA so he does not know how to do that much accounting. He has found out that you recently graduated from the Regent University School of Business and Leadership with your MBA. He believes that you have enough experience to help him with his accounting for a few months.
The Page Business Solutions Incorporated had the following balance sheet as of December 31, 2022. The transactions for the first three months of 2023 are also presented along with other information about specific accounts.
Page Business Solutions Incorporated
Balance Sheet
December 31, 2022
ASSETS | LIABILITIES | |||
Cash | $116,250 | Accounts Payable | $ 40,000 | |
Marketable Securities | 20,000 | Wages Payable | 10,800 | |
Accounts Receivable | 83,000 | Taxes Payable | 7,200 | |
All. Uncoll. Accounts | -4,000 | Short-Term Note Payable | 70,000 | |
Inventory | 84,000 | Interest Payable | 8750 | |
Supplies | 5,000 | Unearned Revenue | 30,000 | |
Prepaid Insurance | 9,000 | Unearned Consulting Rev. | 20,000 | |
Total Current Assets | $262,500 | Total Current Liabilities | $ 186,750 | |
Land | $111,500 | Long-Term Notes Payable | $ 50,000 | |
Equipment | 217,000 | Bonds Payable | 100,000 | |
Accum. Depreciation-Eq | -97,000 | Mortgage Payable | 350,000 | |
Building | 590,000 | Total Long-Term Liabilities | $500,000 | |
Accum. Depreciation-Bl. | -110,000 | Total Liabilities | 686,750 | |
Intangible Assets | 60,000 | STOCKHOLDER EQUITY | ||
Total Long-Term Assets | $771,500 | Common Stock | $200,000 | |
Paid in Capital-CS | 38,000 | |||
Retained Earnings | 160,000 | |||
Total Stockholders Equity | $398,000 | |||
Total Assets | 1,084,750 | Total Liabilities & Equity | 1,084,750 |
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 8.0%.
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 $10,800 was purchased on July 1, 2022.
Equipment
Equipment is depreciated at an average amount of $4,000 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, 2023. The interest rate is 15.0% 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 6.0%.
Bonds Payable
The bonds payable mature in twenty years. The interest rate on the bonds is 10.0%.
Mortgage Payable
The following amortization schedule can be used for the January, 2023 mortgage payment on the 5.0%, 30- year mortgage.
Month | Payment | Interest | Principal | Balance |
January |
$2,500 |
$1,437 |
$1,063 | $350,000 $348,937 |
February | $2,500 | $1,417 | $1,083 | $347,854 |
March | $2,500 | $1,397 | $1,103 | $346,751 |
Capital Stock
The capital stock is common stock at $10 par value with 50,000 shares authorized, and 20,000 shares issued and outstanding.
Journal Entries
- Jan 1 Jonathan invested $60,000 cash into the business by purchasing 5,000 share of capital stock at $10.00 par value.
- Jan 2 The Company borrowed $50,000 on a short-term 90 day, 14.0% note payable.
- Jan 3 The Company paid $36,000 in advance for the 12 month rental of a warehouse.
- Jan 5 PBSIs Board of Directors declared a dividend of $.50 cents per share payable on February 10, 2023 to all shareholders of record on January 20, 2023.
- Jan 6 The amount in wages payable and taxes payable was paid in full.
- Jan 8 The Company paid a total of $25,000 on accounts payable less the 2% in purchase discounts for early payment.
- Jan 15 Cash sales for two weeks equaled $45,000. The cost of inventory sold equaled $28,000. Please use Sales Revenue.
- Jan 18 Consulting services revenue during the first two weeks was $15,000 cash. Please use Consulting Service Revenue.
- Jan 20 Supplies in the amount of $5,000 were purchased for cash.
(10) Jan 21 A customer who owed $30,000 on an account receivable, agreed to sign a 60-day note receivable with an interest rate of 12.0%. The interest earned on the note will be paid at the maturity date of the note receivable.
(11) Jan 29 The balance of $20,000 in accounts payable was paid after the discount period.
(12) Jan 30 The Company purchased $65,000 of inventory on account with the terms 2/10, net 30.
(13) Jan 30 The Company paid freight charges of $3,500 on the inventory purchase.
(14) Jan 31 Cash sales for two weeks equaled $43,800. The cost of inventory sold equaled $25,000.
(15) Jan 31 Sales on account for the month of January totaled $86,000 with the terms 2/10, net 30. The cost of inventory sold equaled $48,000.
(16) Jan 31 The unearned revenue represented the rental of special equipment that was used by another company on weekends and $10,000 of the revenue was earned in January.
(17) Jan 31 Collected $40,000 from an accounts receivable, and there was a sales discount for the payment of receivables within the ten-day discount period.
(18) Jan 31 Salary expenses in the amount of $15,000 and tax expenses in the amount of $8,000 were paid.
(19) Jan 31 The Company paid property taxes bill of $10.500.
(20) Jan 31 A bill in the amount of $3,500 for advertising expenses incurred during the month of January was received (use advertising payable).
(21) Jan 31 The monthly payment for January of the mortgage payable was made-(see table.)
(22) Jan 31 Consulting services on account for the month were $35,000. Included in this amount was $20,000 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 10,000 shares of $10.00 par value common stock for cash. The market price of the stock was $25 per share.
(25) Feb 2 A petty cash fund in the amount of $1,000 was established.
(26) Feb 3 The Company bought back 2,000 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 5th was paid.
(29) Feb 15 Cash sales for two weeks equaled $44,000. The cost of inventory sold equaled $20,500.
(30) Feb 15 Consulting services for cash for two weeks was $38,000.
(31) Feb 20 The Company purchases $50,000 of inventory on account with the terms 2/10, net 30.
(32) Feb 20 The Company paid freight charges of $3,500 for the inventory purchase.
(33) Feb 27 The Company paid an advertising bill for $7,500 which included the February advertising expense of $4,000 plus the balance due from January.
(34) Feb 28 Cash sales for two weeks equaled $55,000. The cost of inventory sold equaled $28,000.
(35) Feb 28 Consulting services for the on credit for the two weeks totaled $29,000.
(36) Feb 28 The monthly payment for February of the mortgage payable was made-(see table.)
(37) Feb 28 The Company collected on an accounts receivables for $80,000 less a total sales discount 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 $9,000 were paid.
(39) Feb 28 The Company paid a repair bill of $5,800.
(40) Feb 28 Sales on account for the month of February totaled $90,000 with the terms 2/10, net 30. The cost of inventory sold equaled $55,800.
(41) Feb 28 A customer complained that some of the goods they received were damaged. So PBSI gave them an allowance of $5,800 to keep the customer satisfied.
(42) Mar 1 The short-term note payable of $70,000 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 $9,800 were purchased on account.
(45) Mar 15 Cash sales for two weeks equaled $28,000. The cost of inventory sold equaled $13,500.
(46) Mar 15 The consulting service revenue for cash for two weeks totaled $35,000.
(47) Mar 20 The Company reissued 1000 shares of its own treasury stock for $35 per share.
(48) Mar 21 The note receivable from January 21st had been paid in full plus interest. (Pick up question)
(49) Mar 25 The Company purchased $60,000 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.
Required
Complete journal entries for each of the transactions. The numbers in the journal entries can be rounded to the nearest dollar. Please record the journal entries using the numbers NOT the dates!
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