Santana Rey created Business Solutions on October 1, 2017. The company has been successful, and its list of customers has grown. To accommodate the growth, the accounting system is modified to set up separate accounts for each customer. The following chart of accounts includes the account number used for each account and any balance as of December 31, 2017. Santana Rey decided to add a fourth digit with a decimal point to the 106 account number that had been used for the single Accounts Receivable account. This change allows the company to continue using the existing chart of accounts.

No. Account Title Debit Credit 101 Cash $ 48,532 106.1 Alexs Engineering Co. 0 106.2 Wildcat Services 0 106.3 Easy Leasing 0 106.4 IFM Co. 3,090 106.5 Liu Corp. 0 106.6 Gomez Co. 2,688 106.7 Delta Co. 0 106.8 KC, Inc. 0 106.9 Dream, Inc. 0 119 Merchandise inventory 0 126 Computer supplies 610 128 Prepaid insurance 1,854 131 Prepaid rent 855 163 Office equipment 8,160 164 Accumulated depreciationOffice equipment $ 400 167 Computer equipment 21,300 168 Accumulated depreciationComputer equipment 1,060 201 Accounts payable 1,130 210 Wages payable 700 236 Unearned computer services revenue 1,350 301 S. Rey, Capital 82,449 302 S. Rey, Withdrawals 0 403 Computer services revenue 0 413 Sales 0 414 Sales returns and allowances 0 415 Sales discounts 0 502 Cost of goods sold 0 612 Depreciation expenseOffice equipment 0 613 Depreciation expenseComputer equipment 0 623 Wages expense 0 637 Insurance expense 0 640 Rent expense 0 652 Computer supplies expense 0 655 Advertising expense 0 676 Mileage expense 0 677 Miscellaneous expenses 0 684 Repairs expenseComputer 0

In response to requests from customers, S. Rey will begin selling computer software. The company will extend credit terms of 1/10, n/30, FOB shipping point, to all customers who purchase this merchandise. However, no cash discount is available on consulting fees. Additional accounts (Nos. 119, 413, 414, 415, and 502) are added to its general ledger to accommodate the companys new merchandising activities. Also, Business Solutions does not use reversing entries and, therefore, all revenue and expense accounts have zero beginning balances as of January 1, 2018. Its transactions for January through March follow:

Jan. 4 The company paid cash to Lyn Addie for five days work at the rate of $175 per day. Four of the five days relate to wages payable that were accrued in the prior year. 5 Santana Rey invested an additional $25,000 cash in the company. 7 The company purchased $6,600 of merchandise from Kansas Corp. with terms of 1/10, n/30, FOB shipping point, invoice dated January 7. 9 The company received $2,688 cash from Gomez Co. as full payment on its account. 11 The company completed a five-day project for Alexs Engineering Co. and billed it $5,470, which is the total price of $6,820 less the advance payment of $1,350. 13 The company sold merchandise with a retail value of $4,400 and a cost of $3,510 to Liu Corp., invoice dated January 13. 15 The company paid $710 cash for freight charges on the merchandise purchased on January 7. 16 The company received $4,180 cash from Delta Co. for computer services provided. 17 The company paid Kansas Corp. for the invoice dated January 7, net of the discount. 20 Liu Corp. returned $700 of defective merchandise from its invoice dated January 13. The returned merchandise, which had a $280 cost, is discarded. (The policy of Business Solutions is to leave the cost of defective products in cost of goods sold.) 22 The company received the balance due from Liu Corp., net of both the discount and the credit for the returned merchandise. 24 The company returned defective merchandise to Kansas Corp. and accepted a credit against future purchases. The defective merchandise invoice cost, net of the discount, was $486. 26 The company purchased $10,000 of merchandise from Kansas Corp. with terms of 1/10, n/30, FOB destination, invoice dated January 26. 26 The company sold merchandise with a $4,600 cost for $5,810 on credit to KC, Inc., invoice dated January 26. 31 The company paid cash to Lyn Addie for 10 days work at $175 per day. Feb. 1 The company paid $2,565 cash to Hillside Mall for another three months rent in advance. 3 The company paid Kansas Corp. for the balance due, net of the cash discount, less the $486 amount in the credit memorandum. 5 The company paid $410 cash to the local newspaper for an advertising insert in todays paper. 11 The company received the balance due from Alexs Engineering Co. for fees billed on January 11. 15 Santana Rey withdrew $4,750 cash from the company for personal use. 23 The company sold merchandise with a $2,550 cost for $3,410 on credit to Delta Co., invoice dated February 23. 26 The company paid cash to Lyn Addie for eight days work at $175 per day. 27 The company reimbursed Santana Rey for business automobile mileage (1,000 miles at $0.32 per mile). Mar. 8 The company purchased $2,850 of computer supplies from Harris Office Products on credit, invoice dated March 8. 9 The company received the balance due from Delta Co. for merchandise sold on February 23. 11 The company paid $860 cash for minor repairs to the companys computer. 16 The company received $5,260 cash from Dream, Inc., for computing services provided. 19 The company paid the full amount due to Harris Office Products, consisting of amounts created on December 15 (of $1,130) and March 8. 24 The company billed Easy Leasing for $9,157 of computing services provided. 25 The company sold merchandise with a $2,102 cost for $2,870 on credit to Wildcat Services, invoice dated March 25. 30 The company sold merchandise with a $1,048 cost for $2,360 on credit to IFM Company, invoice dated March 30. 31 The company reimbursed Santana Rey for business automobile mileage (300 miles at $0.32 per mile).

The following additional facts are available for preparing adjustments on March 31 prior to financial statement preparation:

The March 31 amount of computer supplies still available totals $2,205. Three more months have expired since the company purchased its annual insurance policy at a $2,472 cost for 12 months of coverage. Lyn Addie has not been paid for seven days of work at the rate of $175 per day. Three months have passed since any prepaid rent has been transferred to expense. The monthly rent expense is $855. Depreciation on the computer equipment for January 1 through March 31 is $1,060. Depreciation on the office equipment for January 1 through March 31 is $400. The March 31 amount of merchandise inventory still available totals $594.

Required:

1. Prepare journal entries to record each of the January through March transactions.

2. Post the journal entries in part 1 to the accounts in the companys general ledger. (Note: Begin with the ledgers post-closing adjusted balances as of December 31, 2017.) (Record the transactions in the order presented. Do not skip rows.) 3. Prepare a partial work sheet consisting of the first six columns that includes the unadjusted trial balance, the March 31 adjustments (a) through (g), and the adjusted trial balance. Do not prepare closing entries and do not journalize the adjustments or post them to the ledger.

4. Prepare an income statement (from the adjusted trial balance in part 3) for the three months ended March 31, 2018. Use a single-step format. List all expenses without differentiating between selling expenses and general and administrative expenses.

5. Prepare a statement of owners equity (from the adjusted trial balance in part 3) for the three months ended March 31, 2018.

6. Prepare a classified balance sheet (from the adjusted trial balance) as of March 31, 2018.