Question
Santana Rey created Business Solutions on October 1, 2021. The company has been successful, and its list of customers has grown. To accommodate the growth,
Santana Rey created Business Solutions on October 1, 2021. 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, 2021. 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.
Number | Account Title | Debit | Credit |
---|---|---|---|
101 | Cash | $ 48,482 | |
106.1 | Alexs Engineering Company | 0 | |
106.2 | Wildcat Services | 0 | |
106.3 | Easy Leasing | 0 | |
106.4 | IFM Company | 3,050 | |
106.5 | Liu Corporation | 0 | |
106.6 | Gomez Company | 2,728 | |
106.7 | Delta Company | 0 | |
106.8 | KC, Incorporated | 0 | |
106.9 | Dream, Incorporated | 0 | |
119 | Merchandise inventory | 0 | |
126 | Computer supplies | 650 | |
128 | Prepaid insurance | 1,827 | |
131 | Prepaid rent | 895 | |
163 | Office equipment | 8,110 | |
164 | Accumulated depreciationOffice equipment | $ 400 | |
167 | Computer equipment | 20,000 | |
168 | Accumulated depreciationComputer equipment | 1,220 | |
201 | Accounts payable | 1,140 | |
210 | Wages payable | 1,020 | |
236 | Unearned computer services revenue | 1,370 | |
301 | Santana Rey, Capital | 80,592 | |
302 | Santana 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, Santana 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 (Numbers 119, 413, 414, 415, and 502) are added to its general ledger to accommodate the companys new merchandising activities. Its transactions for January through March follow.
January 4 | The company paid cash to Lyn Addie for five days work at the rate of $255 per day. Four of the five days relate to wages payable that were accrued in the prior year. |
---|---|
January 5 | Santana Rey invested an additional $23,700 cash in the company. |
January 7 | The company purchased $6,900 of merchandise from Kansas Corporation with terms of 1/10, n/30, FOB shipping point, invoice dated January 7. |
January 9 | The company received $2,728 cash from Gomez Company as full payment on its account. |
January 11 | The company completed a five-day project for Alexs Engineering Company and billed it $5,440, which is the total price of $6,810 less the advance payment of $1,370. The company debited Unearned Computer Services Revenue for $1,370. |
January 13 | The company sold merchandise with a retail value of $4,800 and a cost of $3,540 to Liu Corporation, invoice dated January 13. |
January 15 | The company paid $640 cash for freight charges on the merchandise purchased on January 7. |
January 16 | The company received $4,100 cash from Delta Company for computer services provided. |
January 17 | The company paid Kansas Corporation for the invoice dated January 7, net of the discount. |
January 20 | The company gave a price reduction (allowance) of $500 to Liu Corporation and credited Liu's accounts receivable for that amount. |
January 22 | The company received the balance due from Liu Corporation, net of the discount and the allowance. |
January 24 | The company returned defective merchandise to Kansas Corporation and accepted a credit against future purchases (debited accounts payable). The defective merchandise invoice cost, net of the discount, was $486. |
January 26 | The company purchased $9,900 of merchandise from Kansas Corporation with terms of 1/10, n/30, FOB destination, invoice dated January 26. |
January 26 | The company sold merchandise with a $4,590 cost for $6,000 on credit to KC, Incorporated, invoice dated January 26. |
January 31 | The company paid cash to Lyn Addie for 10 days work at $255 per day. |
February 1 | The company paid $2,685 cash to Hillside Mall for another three months rent in advance. |
February 3 | The company paid Kansas Corporation for the balance due, net of the cash discount, less the $486 credit from merchandise returned on January 24. |
February 5 | The company paid $410 cash to Facebook for an advertisement to appear on February 5 only. |
February 11 | The company received the balance due from Alexs Engineering Company for fees billed on January 11. |
February 15 | Santana Rey withdrew $4,780 cash from the company for personal use. |
February 23 | The company sold merchandise with a $2,480 cost for $3,260 on credit to Delta Company, invoice dated February 23. |
February 26 | The company paid cash to Lyn Addie for eight days work at $255 per day. |
February 27 | The company reimbursed Santana Rey $64 cash for business automobile mileage. The company recorded the reimbursement as "Mileage Expense." |
March 8 | The company purchased $2,730 of computer supplies from Harris Office Products on credit with terms of n/30, FOB destination, invoice dated March 8. |
March 9 | The company received the balance due from Delta Company for merchandise sold on February 23. |
March 11 | The company paid $810 cash for minor repairs to the companys computer. |
March 16 | The company received $5,410 cash from Dream, Incorporated, for computing services provided. |
March 19 | The company paid the full amount due of $3,870 to Harris Office Products, consisting of amounts created on December 15 (of $1,140) and March 8. |
March 24 | The company billed Easy Leasing for $9,117 of computing services provided. |
March 25 | The company sold merchandise with a $2,192 cost for $2,890 on credit to Wildcat Services, invoice dated March 25. |
March 30 | The company sold merchandise with a $1,208 cost for $2,270 on credit to IFM Company, invoice dated March 30. |
March 31 | The company reimbursed Santana Rey $352 cash for business automobile mileage. The company recorded the reimbursement as "Mileage Expense." |
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 $2,025.
- Prepaid Insurance coverage of $609 expired during this three-month period.
- Lyn Addie has not been paid for seven days of work at the rate of $255 per day.
- Prepaid rent of $2,685 expired during this three-month period.
- Depreciation on the computer equipment for January 1 through March 31 is $1,220.
- Depreciation on the office equipment for January 1 through March 31 is $400.
- The March 31 amount of merchandise inventory still available totals $664.
5. Prepare a statement of owner's equity (from the adjusted trial balance in part 3) for the three months ended March 31, 2022.
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