Serial Problem Business Solutions LO P1, P2, P3, P4

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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	$	48,492
106.1	Alexs Engineering Co.		0
106.2	Wildcat Services		0
106.3	Easy Leasing		0
106.4	IFM Co.		3,160
106.5	Liu Corp.		0
106.6	Gomez Co.		2,738
106.7	Delta Co.		0
106.8	KC, Inc.		0
106.9	Dream, Inc.		0
119	Merchandise inventory		0
126	Computer supplies		650
128	Prepaid insurance		2,097
131	Prepaid rent		895
163	Office equipment		8,160
164	Accumulated depreciationOffice equipment				$	300
167	Computer equipment		21,600
168	Accumulated depreciationComputer equipment					1,120
201	Accounts payable					1,190
210	Wages payable					660
236	Unearned computer services revenue					1,320
301	S. Rey, Capital					83,202
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 $165 per day. Four of the five days relate to wages payable that were accrued in the prior year.
		5		Santana Rey invested an additional $24,000 cash in the company.
		7		The company purchased $7,600 of merchandise from Kansas Corp. with terms of 1/10, n/30, FOB shipping point, invoice dated January 7.
		9		The company received $2,738 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 $6,790 less the advance payment of $1,320.
		13		The company sold merchandise with a retail value of $4,600 and a cost of $3,490 to Liu Corp., invoice dated January 13.
		15		The company paid $610 cash for freight charges on the merchandise purchased on January 7.
		16		The company received $4,010 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 $9,300 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 $4,480 cost for $5,830 on credit to KC, Inc., invoice dated January 26.
		31		The company paid cash to Lyn Addie for 10 days work at $165 per day.
Feb.		1		The company paid $2,685 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 $420 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 $4,700 cash from the company for personal use.
		23		The company sold merchandise with a $2,550 cost for $3,250 on credit to Delta Co., invoice dated February 23.
		26		The company paid cash to Lyn Addie for eight days work at $165 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 $2,760 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 $830 cash for minor repairs to the companys computer.
		16		The company received $5,310 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 $1,190) and March 8.
		24		The company billed Easy Leasing for $9,197 of computing services provided.
		25		The company sold merchandise with a $2,172 cost for $2,870 on credit to Wildcat Services, invoice dated March 25.
		30		The company sold merchandise with a $1,178 cost for $2,270 on credit to IFM Company, invoice dated March 30.
		31		The company reimbursed Santana Rey for business automobile mileage (400 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 $2,185.

Three more months have expired since the company purchased its annual insurance policy at a $2,796 cost for 12 months of coverage.

Lyn Addie has not been paid for seven days of work at the rate of $165 per day.

Three months have passed since any prepaid rent has been transferred to expense. The monthly rent expense is $895.

Depreciation on the computer equipment for January 1 through March 31 is $1,120.

Depreciation on the office equipment for January 1 through March 31 is $300.

The March 31 amount of merchandise inventory still available totals $544.

Part 1

Required:

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

Part 2

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.)

Part 3

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.

Part 4

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.

Part 5

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

Part 6

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