SP5 Santana Rey created Business Solutions on October 1, 2019. 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, 2019. 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. Dr. No. Cr. Account Title Dr. CE. No Account Title $ 500 1.500 30,360 $0 $48.372 0 0 O 3,000 0 2668 0 0 0 OOOO 101 Cash 106.1 Alex's Engineering Co. 106.2 Wildcat Services 106.3 Easy Leasing 105.4 FM Co. 106.5 Liu Corp 106,6 Gomez Co 106,7 Delta Co 106.8 KC, Inc. 106.9 Dream, Inc. 119 Merchandise inventory 126 Computer supplies 128 Prepaid insurance 131 Prepaid rent 163 Office equipment 164 Accumulated depreciation- Office equipment 167 Computer equipment 168 Accumulated depreciation- Computer equipment 201 Accounts payable 210 Wages payable 236 Uneamed computer Services revenue 301 Rey. Capital 302 S Rey, Withdrawals 403 Computer services reven 413 Sales 414 Sales returns and allowances 415 Sales discounts 502 Cost of goods sold 612 Depreciation experse-Office equipment 613 Depreciation expense- Computer equipment 623 Wages expense 637 Insurance expense 540 Rent expense 652 Computer supplies expense 655 Advertising espese 676 Mileage expense 677 Miscellaneous expenses 684 Repairs expense-Computer 580 1,665 825 8,000 $400 20,000 1.250 1.100 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, Jan. 4 The company paid cash to Lyn Addie for five days' work at the rate of $125 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 $5,800 of merchandise from Kansas Corp. with terms of 1/10. n/30, FOB shipping point, invoice dated January 7. 9 The company received $2,668 cash from Gomez Co. as full payment on its account 11 The company completed a five-day project for Alex's Engineering Co. and billed it $5,500, which is the total price of $7.000 less the advance payment of $1,500. The company debited Unearned Computer Services Revenue for $1,500. 13 The company sold merchandise with a retail value of $5,200 and a cost of 3.560 to Liu Corp. invoice dated January 13. [continued on next page) Cedrimage Shutterstock 5 Chat Account Mercharon persom 15 The company paid $616 cash for freight charges on the merchandise purchased on January 7. 16 The company received 4.000 cash from Della Co. for computer services provided 17 20 The company gave a price reduction allowance) of $500 to the Corp. and credited Liu's cou receivable for that amount. 24 The company returned defective merchandise to Kansas Corp. and accepted a credit against The company received the balance due from Liu Corp.net of the discount and the allowance future purchases (debited accounts payable. The defective merchandise invoice cost, net of the discount, was $196 26 The company purchased 9,000 of merchandise from Kansas Corp. with terms of 1/10, 1/30 FOB destination, invoice dated January 26, 26 The company sold merchandise with 54.610 cost for $5.800 on credit to KC, Inc., invoice dated January 26. 31 The company paid cash to Lyn Addie for 10 days' work at $125 per day Feb. 1 The company paid $2.475 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 5496 credit from merchandise returned on January 24, The company paid 5600 cash to Facebook for an advertisement to appear on February 5 only. 11 The company received the balance due from Alex's Engineering Co. for fees billed on January 11. 15 Santana Rey withdrew S1.800 cash from the company for personal use. 23 The company sold merchandise with a $2,660 cost for $3,220 on credit to Delta Co, invoice dated February 23 26 The company paid cash to Lyn Addie for eight days' work at $125 per day. 27 The company reimbursed Santana Rey 5192 cash for business automobile mileage. The com- pany recorded the reimbursement as "Mileage Expense. Mar. & The company purchased $2.70 of computer supplies from Harris Office Products on credit with terms of n/30, FOB destination, invoice dated March 9 The company received the balance de from Delta Co, for merchandise sold on February 23. 11 The company paid $960 cash for minor repairs to the company's computer 16 The company received 55.200 cash from Dream, Inc. for computing services provided 19 The company paid the full amount due of $3,830 to Harris Office Products, consisting of amount created on December 15 (of $1.100) and March 8. 24 The company hilled Easy Leasing for 59,047 of computing services provided 25 The company sold merchandise with a $2,000 cost for $2.800 on credit to Wildcat Services, invoice dated March 25 30 The company sold merchandise with a $1,018 cost for $2.220 on credit to IPM Company, in: voice dated March 30. 31 The company reimbursed Santana Rey S128 cash for business aitomobile mileage. The com- pany recorded the reimbursement as "Mileage Expense." The following additional facts are available for preparing adjustments on March 31 prior to financial state- ment preparation a. The March 31 amount of computer supplies still available totals $2.005. b. Prepaid insurance coverage of 555 expired during this three-month period c. Lyn Addic has not been paid for seven days of work at the rate of S125 per day d. Prepaid rent of S2.475 expired during this three month period. e. Depreciation on the computer equipment for January 1 through March 31 is $1.250 t. Depreciation on the office equipment for January 1 through March 31 is $400 9. The March 31 amount of merchandise inventory still available totals $704 wah 808057 Required 1. Prepare journal entries to record each of the January through March transactions 2. Post the journal entries in part to the accounts in the company's general ledger. Note: Begin with the ledger's post-closing adjusted balances as of December 31, 2019. 3. Prepare a 6-column work sheet (similar to the we shown in Exhibit 3.13) that includes the unadjusted trial balance, the March 31 udjustments through C), and the adjusted trial balance. Do not prepare closing entries and do nox journalize the adjustments or post them to the ledger fenntinuet on next page Chapter 5 Accounting for Merchandising 4. Prepare an income statement (from the adjusted trial balance in part 3) for the three months ended March 31, 2020. (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 follow- ing 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, 2020. 6. Prepare a classified balance sheet (from the adjusted trial balance) as of March 31, 2020