Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

SP 5 Serial Problem Business Solutions (Algo) LO P1, P2, P3, P4 Skip to question [The following information applies to the questions displayed below.] Santana

SP 5 Serial Problem Business Solutions (Algo) LO P1, P2, P3, P4

Skip to question

[The following information applies to the questions displayed below.]

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.

NumberAccount TitleDebitCredit
101Cash$ 48,462
106.1Alex’s Engineering Company0
106.2Wildcat Services0
106.3Easy Leasing0
106.4IFM Company3,140
106.5Liu Corporation0
106.6Gomez Company2,858
106.7Delta Company0
106.8KC, Incorporated0
106.9Dream, Incorporated0
119Merchandise inventory0
126Computer supplies660
128Prepaid insurance1,854
131Prepaid rent835
163Office equipment8,010
164Accumulated depreciation—Office equipment$ 360
167Computer equipment21,800
168Accumulated depreciation—Computer equipment1,060
201Accounts payable1,200
210Wages payable980
236Unearned computer services revenue1,410
301S. Rey, Capital82,609
302S. Rey, Withdrawals0
403Computer services revenue0
413Sales0
414Sales returns and allowances0
415Sales discounts0
502Cost of goods sold0
612Depreciation expense—Office equipment0
613Depreciation expense—Computer equipment0
623Wages expense0
637Insurance expense0
640Rent expense0
652Computer supplies expense0
655Advertising expense0
676Mileage expense0
677Miscellaneous expenses0
684Repairs expense—Computer0


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 company’s new merchandising activities. Its transactions for January through March follow.

January 4The company paid cash to Lyn Addie for five days’ work at the rate of $245 per day. Four of the five days relate to wages payable that were accrued in the prior year.
January 5Santana Rey invested an additional $24,900 cash in the company.
January 7The company purchased $7,100 of merchandise from Kansas Corporation with terms of 1/10, n/30, FOB shipping point, invoice dated January 7.
January 9The company received $2,858 cash from Gomez Company as full payment on its account.
January 11The company completed a five-day project for Alex’s Engineering Company and billed it $5,450, which is the total price of $6,860 less the advance payment of $1,410. The company debited Unearned Computer Services Revenue for $1,410.
January 13The company sold merchandise with a retail value of $4,900 and a cost of $3,490 to Liu Corporation, invoice dated January 13.
January 15The company paid $800 cash for freight charges on the merchandise purchased on January 7.
January 16The company received $4,010 cash from Delta Company for computer services provided.
January 17The company paid Kansas Corporation for the invoice dated January 7, net of the discount.
January 20The company gave a price reduction (allowance) of $800 to Liu Corporation and credited Liu's accounts receivable for that amount.
January 22The company received the balance due from Liu Corporation, net of the discount and the allowance.
January 24The 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 26The company purchased $9,800 of merchandise from Kansas Corporation with terms of 1/10, n/30, FOB destination, invoice dated January 26.
January 26The company sold merchandise with a $4,620 cost for $5,810 on credit to KC, Incorporated, invoice dated January 26.
January 31The company paid cash to Lyn Addie for 10 days’ work at $245 per day.
February 1The company paid $2,505 cash to Hillside Mall for another three months’ rent in advance.
February 3The company paid Kansas Corporation for the balance due, net of the cash discount, less the $486 credit from merchandise returned on January 24.
February 5The company paid $580 cash to Facebook for an advertisement to appear on February 5 only.
February 11The company received the balance due from Alex’s Engineering Company for fees billed on January 11.
February 15S. Rey withdrew $4,780 cash from the company for personal use.
February 23The company sold merchandise with a $2,470 cost for $3,350 on credit to Delta Company, invoice dated February 23.
February 26The company paid cash to Lyn Addie for eight days’ work at $245 per day.
February 27The company reimbursed Santana Rey $160 cash for business automobile mileage. The company recorded the reimbursement as "Mileage Expense."
March 8The company purchased $2,790 of computer supplies from Harris Office Products on credit with terms of n/30, FOB destination, invoice dated March 8.
March 9The company received the balance due from Delta Company for merchandise sold on February 23.
March 11The company paid $920 cash for minor repairs to the company’s computer.
March 16The company received $5,310 cash from Dream, Incorporated, for computing services provided.
March 19The company paid the full amount due of $3,990 to Harris Office Products, consisting of amounts created on December 15 (of $1,200) and March 8.
March 24The company billed Easy Leasing for $9,097 of computing services provided.
March 25The company sold merchandise with a $2,002 cost for $2,930 on credit to Wildcat Services, invoice dated March 25.
March 30The company sold merchandise with a $1,118 cost for $2,290 on credit to IFM Company, invoice dated March 30.
March 31The company reimbursed Santana Rey $288 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.

  1. The March 31 amount of computer supplies still available totals $2,185.
  2. Prepaid Insurance coverage of $618 expired during this three-month period.
  3. Lyn Addie has not been paid for seven days of work at the rate of $245 per day.
  4. Prepaid rent of $2,505 expired during this three-month period.
  5. Depreciation on the computer equipment for January 1 through March 31 is $1,060.
  6. Depreciation on the office equipment for January 1 through March 31 is $360.
  7. The March 31 amount of merchandise inventory still available totals $674.

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 company’s general ledger. Note: Begin with the ledger’s post-closing adjusted balances as of December 31, 2021.

3. Prepare a 6-column work sheet 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, 2022.

(a) Use a single-step format. List all expenses without differentiating between selling expenses and general and administrative expenses.
(b) Use a multiple-step format that begins with gross sales (service revenues plus gross product sales) and includes separate categories for net sales, cost of goods sold, selling expenses, and general and administrative expenses. Categorize the following accounts as selling expenses: Wages Expense, Mileage Expense, and Advertising Expense. Categorize the remaining expenses as general and administrative.

5. Prepare a statement of owner's equity (from the adjusted trial balance in part 3) for the three months ended March 31, 2022.

6. Prepare a classified balance sheet (from the adjusted trial balance) as of March 31, 2022. (Report Accounts receivable as a single amount.)

2 3 4 Note: Enter debits before credits. Date January 04 5 6 7 General Journal The company paid cash to Lyn Addie for five days' work at the rate of $245 per day. Four of the five days relate to wages payable that were accrued in the prior year. Prev Mulig 8 S 1 2 3 ***** 6 Debit 37 of 6 Credit A Next >

Step by Step Solution

3.47 Rating (154 Votes )

There are 3 Steps involved in it

Step: 1

Date 04Jan 05Jan 07Jan 09Jan 11Jan 13Jan 13Jan 15Jan 16Jan 17Jan Particulars Wages Payable Wa... blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Fundamental Accounting Principles

Authors: John J. Wild, Ken W. Shaw, Barbara Chiappetta

20th Edition

1259157148, 78110874, 9780077616212, 978-1259157141, 77616219, 978-0078110870

More Books

Students also viewed these Accounting questions