Rosa Gonzales has worked many years as a professional accountant. At the initial meeting of shareholderswhen the corporation was formed, she was asked by the other shareholders to suggest an appropriatechart of accounts and set of accounting policies. Following is a summary of her recommendations, as adopted by the corporation.

Account	Account Number
Cash	100
Accounts Receivable	110
Food Inventory	120
Restaurant Supplies	130
Prepaid Rent	140
Prepaid Advertising	150
Prepaid Insurance	160
Furniture	170
Accumulated Depreciation: Furniture	171
Equipment	180
Accumulated Depreciation: Equipment	181
Accounts Payable	200
Wages Payable	210
Interest Payable	220
Utilities Payable	230
Taxes Payable	240
Unearned Revenue	250
Bank Loan Payable	260
Capital Stock	300
Retained Earnings	310
Dividends	320
Sales	400
Sales Discounts	401
Food Purchases	500
Freight-In	501
Purchase Discounts	502
Purchases Returns and Allowances	503
Rent Expense	505
Utilities Expense	510
Insurance Expense	520
Wage Expense	530
Advertising Expense	540
Supplies Expense	550
Interest Expense	560
Miscellaneous Expense	570
Depreciation Expense: Furniture	580
Depreciation Expense: Equipment	591
Tax Expense	592
Income Summary	600

1. The company adopted a calendar year, and its first quarter will end March 31, 20X3.

2. Purchases of food inventory are recorded by the gross method, and a periodic inventory system is used. All food vendors offer 1/10, n/30 terms. Bellagio's usually takes advantage of available discounts, but issues payment for the full amount of the invoice when paying "late." No discounts are available on purchases of restaurant supplies.

3. All prepaid expense items are initially recorded in asset accounts, and all unearned revenue is initially entered as a liability.

4. Furniture and equipment is depreciated by the straight-line method. It is assumed that the furniture will have a 5-year life, and will be worthless at the end of its useful life. The equipment has an 8-year life, and it will also be worthless at the end of its useful life.

5. Depreciation on furniture and equipment is recorded for a full month, provided the equipment is purchased during the first 10 days of the month.

6. Adjusting and closing entries are formally recorded in the journal on a quarterly basis only.

complete the following requirements on the blank forms and work papers that accompany this applied study set. To facilitate your work, each form is cross-referenced with the requirement to be answered.

1. Review the transactions for January and prepare the appropriate journal entries. Remember: adjusting entries are only recorded at the end of each quarter.

2. Post the January journal entries to the appropriate ledger accounts.

3. (optional) A trial balance for January 31, 20X3, should be prepared. For this need, use the worksheet's trial balance column.

4. (optional) Analyze the January information, enter adjusting entries in the worksheet, and prepare the adjusted trial balance columns of the worksheet.

5. (optional) Complete the worksheet and prepare the January "multiple-step" income statement and statement of retained earnings, as well as the January 31, 20X3 balance sheet. 6. Review the transactions for February and March, and prepare the appropriate journal entries. 7. Post the February and March journal entries to the appropriate ledger accounts. 8. Analyze all information and prepare adjusting journal entries as of March 31, 20X3. Post these entries to the appropriate ledger accounts.

9. Make an adjusted trial balance as of March 31, 20X3. 10. .Create the first quarter "multiple-step" income statement and statement of retained earnings, as well as the March 31, 20X3 balance sheet

Transactions Occurring During January

Jan. 2 Collected $750,000 from shareholders in exchange for capital stock in Bellagio's Corporation. Jan. 2 Issued check #1001 for $1,415 to reimburse Mike McKesson for miscellaneous expenses that he paid "out of pocket" during the initial formation of the corporation.

Jan. 3 Signed a lease agreement with Monson Realty for space in the Monson Tower. This space is ready for occupancy as a restaurant, and was formerly occupied by the Ice House Grill. Rent is $7,500 per month, and check #1002 was issued for the first six months of rent. Jan. 4 Issued check #1003 for $403,200 to Iceland Corporation. This payment was to buy all of the existing restaurant equipment that is installed and ready to operate in the rented space. Jan. 4 Issued check #1004 for $196,800 to Stewart's Furniture Warehouse. This payment was for furniture that was delivered immediately. Jan. 10 Received the proceeds of a $500,000 loan from Zone Bank. The loan bears interest at an annual rate such that the daily interest charge amounts to $125, commencing on January 10. Jan. 11 Issued check #1005 for $15,000 of restaurant supplies that were immediately delivered. Jan. 12 Purchased $60,000 of food inventory on account from Sisson Wholesale. Freight on the purchase, to be paid by Bellagio to Sisson, was an additional $500. The normal cash discount on food purchases is not applicable to freight charges.

Jan. 13 Notified Sisson Wholesale that certain vegetables received on the 12th were not of sufficient quality. Sisson immediately dispatched one of their employees, who accepted return of certain of the vegetables, authorized destruction of others, and granted a credit memorandum of $2,500 toward the purchase on January 12.

Jan. 14 Issued check #1006 in the amount of $11,400 to a payroll service company. The payroll service company prepares individual payroll checks to employees and otherwise handles payroll issues. For simplicity, record the full amount of the payment as wage expense. Jan. 15 Issued check #1007 for $3,000 to pay for newspaper advertisements that will run for four weeks - two weeks in January and two weeks in February.

Jan. 17 Purchased $55,000 of food inventory on account from Johnson Supply. These goods were purchased FOB destination.

Jan. 18 Hosted a dinner party for the employees of Permian Company. The total bill was $2,400, on account. The invoice is due on February 18, but Bellagio's offered a 2% discount if the invoice is paid by the end of January.

Jan. 19 Bellagio's customers typically pay by cash, debit card, and credit card. Funds for all debit and credit card sales post daily to the Cash account at Bellagio's bank. Proceeds from cash sales are deposited nightly. Bellagio's maintains a list of daily sales, and periodically records the accumulated amount of total sales into the journal. Total accumulated daily sales for January 1 through January 19 are $212,400, and were recorded on January 19. This total excludes the dinner party sale.

Jan. 20 Sold gift cards to Rex Corporation for $3,500 cash. The cash was immediately deposited at the bank. Rex gave these cards to customers and employees as a promotional "thank you" gift. The cards can be redeemed at any time for meals at Bellagio's. Jan. 26 Issued checks #1008 and #1009 to pay the full amount due for the food purchases on January 12 and January 17. Jan. 28 Issued check #1010 in the amount of $12,500 to a payroll service company. The payroll service company prepares individual payroll checks to employees and otherwise handles payroll issues. For simplicity, record the full amount of the payment as wage expense. Jan. 29 Paid $3,750 in dividends to shareholders. Check #1011 was issued for this amount to a local financial institution that handled shareholder records and disbursed amounts to individual shareholders.

Jan. 31 Bellagio's utility consumption is measured via an internet link, and Bellagio can refer to a website to determine the accumulated utilities cost at any time. As of the end of the month, the accrued but unbilled utilities amount to $13,000.

Jan. 31 Bellagio estimates a total tax obligation relating to January's profitable operations in the amount of $20,000. Jan. 31 Accrued employee wages as of the end of January amount to $2,400.

Jan. 31 Acquired and paid for a one-year fire and liability insurance policy by issuing check #1012 in the amount of $3,600. The policy covers the period January 1 to December 31 providing retroactive coverage for any and all events that occurred from January 1 forward. Jan. 31 Noted that $1,000 of the gift cards (issued on January 20) had already been redeemed by month end. Jan. 31 Counted the food inventory, and noted that $12,500 of goods were on hand at month end. Hint: In the adjustments column of the worksheet, debit Food Inventory and credit Income Summary. Jan. 31 Counted the restaurant supplies, and noted that $3,600 was on hand at month end. Jan. 31 Total accumulated daily sales for January 20 through January 31 are $160,250 and were recorded on January 31. This total excludes sales of gift cards and dinner parties.