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Vanishing Games Corporation (VGC) operates a massively multiplayer online game, charging players a monthly subscription of $12. At the start of January 2015, VGCs income statement accounts had zero balances and its balance sheet account balances were as follows:

Cash	$	1,680,000
Accounts Receivable		182,000
Supplies		20,500
Equipment		906,000
Land		1,690,000
Building		462,000
Accounts Payable		167,000
Unearned Revenue		97,000
Notes Payable (due 2018)		111,000
Common Stock		2,200,000
Retained Earnings		2,365,500

In addition to the above accounts, VGCs chart of accounts includes the following: Service Revenue, Salaries and Wages Expense, Advertising Expense, and Utilities Expense.

rev: 09_10_2015_QC_CS-23922

1.

value: 2.50 points

Required information

Required:

1.	Analyze the effect of the January transactions (shown below) on the accounting equation, and indicate the account, amount, and direction of the effect (+ for increase and ? for decrease) of each transaction. (Enter any decreases to account balances with a minus sign.)

a.	Received $55,250 cash from customers for subscriptions that had already been earned in 2014.
b.	Received $185,000 cash from Electronic Arts, Inc. for service revenue earned in January.
c.	Purchased 10 new computer servers for $39,600; paid $11,000 cash and signed a three-year note for the remainder owed.
d.	Paid $18,700 for an Internet advertisement run on Yahoo! in January.
e.	Sold 13,200 monthly subscriptions at $12 each for services provided during January. Half was collected in cash and half was sold on account.
f.	Received an electric and gas utility bill for $5,980 for January utility services. The bill will be paid in February.
g.	Paid $315,000 in wages to employees for work done in January.
h.	Purchased $5,000 of supplies on account.
i.	Paid $5,000 cash to the supplier in (h).

rev: 02_13_2017_QC_CS-78465

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2.

value: 2.50 points

Required information

2.	Prepare journal entries for the January transactions listed in part 1, using the letter of each transaction as a reference. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.)

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3.

value: 2.50 points

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3.	Create T-accounts, enter the beginning balances shown above, post the journal entries to the T-accounts, and show the unadjusted ending balances in the T-accounts.

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4.

value: 2.50 points

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4.	Prepare an unadjusted trial balance as of January 31, 2015.

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5.

value: 2.50 points

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5.	Prepare an Income Statement for the month ended January 31, 2015, using unadjusted balances from part 4.

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6.

value: 2.50 points

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6.	Prepare a Statement of Retained Earnings for the month ended January 31, 2015, using the beginning balance given above and the net income from part 5. Assume VGC has no dividends.

rev: 09_10_2015_QC_CS-23922

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7.

value: 2.50 points

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7.	Prepare a classified Balance Sheet at January 31, 2015, using your response to part 6.

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8.

value: 2.50 points

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8.	Calculate net profit margin, expressed as a percent. (Round your answer to 1 decimal place.)

On January 1, Pulse Recording Studio (PRS) had the following account balances.

Accounts Payable	$	8,500
Accounts Receivable		7,000
Accumulated DepreciationEquipment		6,000
Cash		3,800
Cash Equivalents		1,500
Common Stock		10,000
Equipment		30,000
Notes Payable (long-term)		12,000
Prepaid Rent		3,000
Retained Earnings		5,300
Supplies		500
Unearned Revenue		4,000

The following transactions occurred during January.
1.	Received $2,500 cash on 1/1 from customers on account for recording services completed in December.
2.	Wrote checks on 1/2 totaling $4,000 for amounts owed on account at the end of December.
3.	Purchased and received supplies on account on 1/3, at a total cost of $200.
4.	Completed $4,000 of recording sessions on 1/4 that customers had paid for in advance in December.
5.	Received $5,000 cash on 1/5 from customers for recording sessions started and completed in January.
6.	Wrote a check on 1/6 for $4,000 for an amount owed on account.
7.	Converted $1,000 of cash equivalents into cash on 1/7.
8.	On 1/15, completed EFTs for $1,500 for employees salaries and wages for the first half of January.
9.	Received $3,000 cash on 1/31 from customers for recording sessions to start in February.

One Trick Pony (OTP) incorporated and began operations near the end of the year, resulting in the following post-closing balances at December 31:

Cash	$	18,620
Accounts Receivable		9,650
Allowance for Doubtful Accounts		900*
Inventory		2,800
Unearned Revenue (30 units)		4,350
Accounts Payable		1,300
Notes Payable (long-term)		15,000
Common Stock		5,000
Retained Earnings		4,520

* credit balance.

The following information is relevant to the first month of operations in the following year:

	OTP will sell inventory at $145 per unit. OTPs January 1 inventory balance consists of 35 units at a total cost of $2,800. OTPs policy is to use the FIFO method, recorded using a perpetual inventory system.
	In December, OTP received a $4,350 payment for 30 units to be delivered in January; this obligation was recorded in Unearned Revenue. Rent of $1,300 was unpaid and recorded in Accounts Payable at December 31.
	OTPs note payable matures in three years, and accrues interest at a 10% annual rate.

	January Transactions
1.	Included in OTPs January 1 Accounts Receivable balance is a $1,500 balance due from Jeff Letrotski. Jeff is having cash flow problems and cannot pay the $1,500 balance at this time. On 01/01, OTP arranges with Jeff to convert the $1,500 balance to a 6-month note, at 12% annual interest. Jeff signs the promissory note, which indicates the principal and all interest will be due and payable to OTP on July 1 of this year.
2.	OTP paid a $500 insurance premium on 01/02, covering the month of January; the payment is recorded directly as an expense.
3.	OTP purchased an additional 150 units of inventory from a supplier on account on 01/05 at a total cost of $9,000, with terms 2/15, n/30.
4.	OTP paid a courier $300 cash on 01/05 for same-day delivery of the 150 units of inventory.
5.	The 30 units that OTPs customer paid for in advance in December are delivered to the customer on 01/06.
6.	On 01/07, OTP paid the amount necessary to settle the balance owed to the supplier for the 1/05 purchase of inventory (in 3).
7.	Sales of 40 units of inventory occuring during the period of 01/07 01/10 are recorded on 01/10. The sales terms are 2/10, n/30.
8.	Collected payments on 01/14 from sales to customers recorded on 01/10. The discount was properly taken by customers on $5,800 of these credit sales; consequently, OTP received less than $5,800.
9.	OTP paid the first 2 weeks wages to the employees on 01/16. The total paid is $2,200.
10.	Wrote off a $1,000 customers account balance on 01/18. OTP uses the allowance method, not the direct write-off method.
11.	Paid $2,600 on 01/19 for December and January rent. See the earlier bullets regarding the December portion. The January portion will expire soon, so it is charged directly to expense.
12.	OTP recovered $400 cash on 01/26 from the customer whose account had previously been written off on 01/18.
13.	An unrecorded $400 utility bill for January arrived on 01/27. It is due on 02/15 and will be paid then.
14.	Sales of 65 units of inventory during the period of 01/10 01/28, with terms 2/10, n/30, are recorded on 01/28.
15.	Of the sales recorded on 1/28, 15 units are returned to OTP on 01/30. The inventory is not damaged and can be resold.
16.	On 01/31, OTP records the $2,200 employee salary that is owed but will be paid February 1.
17.	OTP uses the aging method to estimate and adjust for uncollectible accounts on 01/31. All of OTPs accounts receivable fall into a single aging category, for which 8% is estimated to be uncollectible. (Update the balances of both relevant accounts prior to determining the appropriate adjustment, and round your calculation to the nearest dollar.)
18.	Accrue interest for January on the note payable on 01/31.
19.	Accrue interest for January on Jeff Letrotskis note on 01/31 (see 1).