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The Rachel's Enterprises Solutions had the following balance sheet as of December 31, 2020. The transactions for the first three months of 2021 are also

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The Rachel's Enterprises Solutions had the following balance sheet as of December 31, 2020. The transactions for the first three months of 2021 are also presented along with other information about specific accounts.

Rachel's Enterprises Solutions Incorporated

Balance Sheet

December 31, 2020

ASSETSLIABILITIES
Cash$ 37,000Accounts Payable$ 40,000
Marketable Securities10,000Wages Payable10,800
Accounts Receivable63,000Taxes Payable7,200
Uncollectible Accounts-2,000Short-Term Note Payable30,000
Inventory74,000Interest Payable2000
Supplies4,000Unearned Revenue20,000
Prepaid Insurance7,500Unearned Consulting Rev.5,000
Total Current Assets$193,500Total Current Liabilities$ 115,000
Land$111,500Long-Term Notes Payable$ 50,000
Equipment217,000Bonds Payable100,000
Accumulated Depreciation-97,000Mortgage Payable350,000
Building590,000Total Long-Term Liabilities$500,000
Accumulated Depreciation-110,000
Intangible Assets60,000STOCKHOLDER EQUITY
Total Long-Term Assets$771,150Capital Stock$100,000
Paid in Capital140,000
Retained Earnings110,000
Total Stockholders Equity$350,000
Total Assets$965,000Total Liabilities & Equity$965,000

Additional Information

Accounts Receivable

The following table indicates the historical breakout of accounts receivable

DaysCurrent30 to 6060 to 90Over 90
Percent of Balance50%30%15%5%
Percent Collectible95%90%80%60%

The company uses the gross method of recording all sales on accounts.

Marketable Securities

The interest rate earned on marketable securities is 7.0%.

Inventory

In 202x, the company had used the gross method to record inventory purchases on account.

Prepaid Insurance

A three-year insurance policy in the amount of $9,000 was purchased on July 1, 2020.

Equipment

Equipment is depreciated at an average amount of $3,500 per month.

Building

The current building was purchased on January 1, ten years ago and has an expected 40-year life at which time its salvage value will be $40,000.

Intangible Assets

Intangible assets were initially valued at $60,000 and are being depreciated over 30 years at $2,000 per year.

Short-Term Notes Payable

The one-year short-term note payable is due on March 1, 2021. The interest rate is 8.0% which is payable at maturity.

Long-Term Notes Payable

The long-term notes payable are due in ten years. The interest rate on the notes is 5.0%.

Bonds Payable

The bonds payable mature in twenty years. The interest rate on the bonds is 5.0%.

Mortgage Payable

The following amortization schedule can be used for the January, 2021 mortgage payment on the 4.0%, 30- year mortgage.

MonthPaymentInterestPrincipalBalance
January$3,500$2,063$1,437
  1. 000
  2. 563
February$3,500$2,063$1,437$317,126
March$3,500$2,063$1,437$315,689

Capital Stock

The capital stock is common stock at $10 par value with 50,000 shares authorized, and 10,000 shares issued and outstanding.

Journal Entries

  1. Rachel invested $40,000 cash into the business by purchasing capital stock at $10.00 par value.
  2. Jan 2 The Company borrowed $60,000 on a short-term 90 day, 4.0% note payable.
  3. Jan 3 The Company paid $30,000 in advance for the 12 month rental of a warehouse.
  4. Jan 5 Rachel's Enterprises Board of Directors declared a dividend of $.75 cents per share payable on February 10, 2021 to all shareholders of record on January 20, 2021.
  5. Jan 6 The amount in wages payable and taxes payable was paid in full.
  6. Jan 8 The Company paid a total of $30,000 on accounts payable less the 2% in purchase discounts for early payment.
  7. Jan 15 Cash sales for two weeks equaled $38,000. The cost of inventory sold equaled $16,000.
  8. Jan 18 Consulting services revenue during the first two week was $10,000 cash. Please use Consulting Service Revenue.
  9. Jan 20 Supplies in the amount of $4,500 were purchased for cash.

(10) Jan 21 A customer who owed $25,000 on an account receivable, agreed to sign a 60-day note receivable with an interest rate of 6.0%. The interest earned on the note will be paid at the maturity date of the note receivable.

(11) Jan 29 The balance of $10,000 in accounts payable was paid.

(12) Jan 30 The Company purchased $60,000 of inventory on account with the terms 2/10, net 30.

(13) Jan 30 The Company paid freight charges of $1,800 on the inventory purchase.

(14) Jan 31 Cash sales for two weeks equaled $28,000. The cost of inventory sold equaled $13,000.

(15) Jan 31 Sales on account for the month of January totaled $62,000 with the terms 2/10, net 30. The cost of inventory sold equaled $29,000.

(16) Jan 31 The unearned revenue represented the rental of special equipment that was used by another company on weekends. $4,000 of the revenue was earned in January.

(17) Jan 31 Collected cash of $49,000 from the accounts receivable, plus there was a total sales discount of $1,000 for the payment of receivables within the ten day discount period.

(18) Jan 31 Salary expenses in the amount of $12,000 and tax expenses in the amount of $5,000 were paid.

(19) Jan 31 The Company paid a repair bill of $6,000 was paid.

(20) Jan 31 A bill in the amount of $2,500 for advertising expenses incurred during the month of January was received.

(21) Jan 31 The monthly payment for January of the mortgage payable was made.

(22) Jan 31 Consulting services on account for the month were $15,000. Included in this amount was $5,000 advanced payment previously received in the unearned consulting revenue account.

(23) Jan 31 In order to make a sale the company paid $1,200 to have goods shipped to a customer.

(24) Feb 1 The Company made a new issue of 5,000 shares of $10.00 par value common stock for cash. The market price of the stock was $30 per share.

(25) Feb 2 A petty cash fund in the amount of $800 was established.

(26) Feb 3 The Company bought back 1,000 shares of its own common stock for $20 per share and reports the purchase as treasury stock.

(27) Feb 8 The purchase of inventory on account on Jan 30th which was reported at the gross amount was paid in full less the discount.

(28) Feb 10 The dividend declared on January 5th was paid.

(29) Feb 15 Cash sales for two weeks equaled $21,000. The cost of inventory sold equaled $9,500.

(30) Feb 15 Consulting services for cash for two weeks was $20,000.

(31) Feb 20 The Company purchases $31,000 of inventory on account with the terms 2/10, net 30.

(32) Feb 20 The Company paid freight charges of $900 for the inventory purchase.

(33) Feb 27 The Company paid an advertising bill for $6,500 which included the February advertising expense of $4,000 plus the balance due from January.

(34) Feb 28 Cash sales for two weeks equaled $32,000. The cost of inventory sold equaled $15,000.

(35) Feb 28 Consulting services for the on credit for the two weeks totaled $22,000.

(36) Feb 28 The monthly payment for February of the mortgage payable was made.

(37) Feb 28 The Company collected cash on the accounts receivables for a payment of $70,000 less a total sales discount of $1,400 for the payment of receivables within the ten day discount period.

(38) Feb 28 Salary expenses in the amount of $18,000 and tax expenses in the amount of $6,000 were paid.

(39) Feb 28 The Company paid a property tax bill of $4,100.

(40) Feb 28 Sales on account for the month of February totaled $75,000 with the terms 2/10, net 30. The cost of inventory sold equaled $33,800.

(41) Feb 28 A customer complained that some of the goods they received were damaged. So Rachel's gave them an allowance of $1,700 to keep the customer satisfied.

(42) Mar 1 The short-term note payable of $30,000 that was due on March 1st plus all appropriate interest was paid.

(43) Mar 3 The amount of the petty cash fund was increased by $700.

(44) Mar 10 Supplies in the amount of $3,900 were purchased on account.

(45) Mar 15 Cash sales for two weeks equaled $23,000. The cost of inventory sold equaled $11,600.

(46) Mar 15 The consulting service revenue for cash for two weeks totaled $17,000.

(47) Mar 20 The Company reissued 300 shares of its own treasury stock for $30 per share.

(48) Mar 21 The note receivable from January 21st had been paid in full plus interest.

(49) Mar 25 The Company purchased $51,000 of inventory on account using the gross method with the terms 2/10, net 30.

(50) Mar 28 The purchase of inventory on account on February 20th was paid in full.

(51) Mar 29 The petty cash fund had $400 in cash and receipts in total amounts for the following expense categories: entertainment-$250, travel- $265, miscellaneous-$100, postage $240, and supplies $190. The petty cash fund was replenished.

(52) Mar 30 Cash sales for two weeks equaled $24,000. The cost of inventory sold equaled $11,500.

(53) Mar 30 The unearned revenue represented the rental of special equipment that was used by another company on weekends. $16,000 of the revenue was earned in March.

(54) Mar 31 Sales on account for the month of March totaled $78,000 with the terms 2/10, net 30. The cost of inventory sold equaled $37,000.

(55) Mar 31 The Company paid legal fees of $1,500.

(56) Mar 31 Collected $75,000 from the accounts receivable less a total sales discount of $1,500 for the payment of receivables within the ten day discount period.

(57) Mar 31 Consulting revenue on credit for the month totaled $27,000.

(58) Mar 31 Rachel's returned $4,000 of inventory that we purchased earlier in the month.

(59) Mar 31 A warehouse building was acquired for $325,000. Closing costs on the acquisition equaled $10,500, and there were costs of $15,800 to get the building into an operational condition to be used by the company. The company paid $75,000 in cash as a down payment with the balance due being added to the mortgage payable account.

(60) Mar 31 The utility bill of $7,500 for the quarter was paid.

(61) Mar 31 The Company repaid the 90 day note payable from January 2nd in full plus interest.

(62) Mar 31 A customer sent an advance payment of $15,000 for the use of special equipment in April and May.

(63) Mar 31 A customer returned $5,000 of merchandise in good condition. The cost of the merchandise as $2,200.

(64) Mar 31 The Company reimbursed management for mileage for the quarter a total of $2,500. Please use mileage expense account.

(65) Mar 31 Equipment with a historical cost of $20,000 and an accumulated depreciation of $6,000 was sold for $16,000 cash. (Hint-first update the depreciation for the 3 months-January through March which was $500)

(66) Mar 31 Equipment with a historical cost of $20,000 and an accumulated depreciation of $18,000 was disposed of with an additional disposal cost of $1,300. (Hint-first update the depreciation for the 3 months-January through March which was $500.)

(67) Mar 31 The monthly payment for March of the mortgage payable was made.

Record these adjusting entries for the quarter so Financial Statements are correct!

A1-Mar 31 The equipment depreciation entry for the three months of 202x was completed.

A2 Mar 31 The depreciation entry for the building for the months of January, February, and March was entered.

A3 Mar 31 The amortization of intangible assets for the three months of 202x was completed.

A4 Mar 31 The bad debt expense based on 1.0% of credit sales for the quarter was recorded.

A5 Mar 31 Salary expenses incurred during the month of March but not yet paid equaled $15,500

A6 Mar 31 Tax expenses incurred during the month of March but not yet paid equaled $8,900.

A7 Mar 31 A physical inventory of supplies indicated a total amount of $5,000 of supplies still on hand. A journal entry was completed for the supplies used during the quarter.

A8 Mar 31 The amount of rent expense for the warehouse for the first three months of 2021 was recognized.

A9 Mar 31 The Company provided services to a customer in the amount of $14,000 during March but a bill has not been sent.

A10 Mar 31 The amount of insurance expense for the first three months of 2021 was recognized.

A11 Mar 31 The amount of interest earned on marketable securities for the three months of 2021 was recognized.

A12 Mar 31 The amount of interest expense for the total long-term notes payable for the first three months of 2021 was recognized.

A13 Mar 31 The amount of interest expense for the bonds payable for the three months of 2021 was recognized.

1. Complete journal entries for each of the transactions. The numbers in the journal entries can be rounded to the nearest dollar.

2. Develop a trial balance for Rachel's Enterprise Solutions as of March 31, 2021.

3. Develop a single income statement representing January through March in good form for Rachel's Enterprise Solutions for the first three months of 2021. Federal Income Tax Rate is 21%.

4. Develop a single statement of retained earnings in good form as of March 31, 2021, for Rachel's Enterprise Solutions.

5. Develop a balance sheet in good form as of March 31, 2021, for Rachel's Enterprise Solutions.

6. Provide one comment based on your analysis after you complete the financial statements to Rachel's Enterprise Solutions. Do not forget to include a ratio to support your comment, recommendation, or analysis!

Journal Entries

Journal Entries
ParticularsDrCr
1invested $40,000 cash into the business by purchasing capital stock at $10.00 par value.
Cash40,000
Capital Stock40,000
2borrowed $60,000 on a short-term 90 day, 4.0% note payable
Cash60000
Short-Term Notes Payable60000
3paid $30,000 in advance for the 12 month rental
Prepaid Rent30,000
Cash30,000
4declared a dividend of $.75 cents per share payable
Retained Earnings7,500(10,000*0.75)
Divident Payable7,500
5wages payable and taxes payable was paid in full
wages payable10800
Taxes Payable7200
Cash18,000
6paid a total of $30,000 on accounts payable less the 2% in purchase discounts for early payment
Account Payable30,000
Purchase discount600
Cash29,400
7Cash sales for two weeks equaled $38,000. The cost of inventory sold equaled $16,000.
Cash38,000
Cost of good Sold16,000
Inventory16,000
Sales38,000
8Consulting services revenue during the first two week was $10,000 cash
Cash10,000
Consalting Service Revenue10,000
9Supplies in the amount of $4,500 were purchased for cash
Sipplies4,500
Cash4,500
106% Notes Receivable25,000
Account Receivable25,000
11The balance of $10,000 in accounts payable was paid.
Account Payable10,000
Cash10,000
12Purchased $60,000 of inventory on account with the terms 2/10, net 30.Cost of Inventory = 60,000
Inventory60,000Amount of Discount = 60,000*2%= 12,000
Account Payable60,000Cash Paid = 60000 - 12,000 = 48,000
13paid freight charges of $1,800 on the inventory purchase
Freight In1,800
Cash1,800
14Cash sales for two weeks equaled $28,000. The cost of inventory sold equaled $13,000.
Cash28,000
Sales28,000
15Sales on account totaled $62,000 with the terms 2/10, net 30. The cost of inventory sold equaled $29,000
Accounts Receivable62,000
Sales62,000
16$4,000 of the revenue was earned
Unearned Revenue4,000
Rent Revenue4,000
17To record the payment on accounts receivable
Cash49,000
Sales discount1000
Accounts Receivable50,000
18Salary expenses in the amount of $12,000 and tax expenses in the amount of $5,000 were paid.
Salary Expense12,000
Texes expense5,000
Cash17,000
19paid a repair bill of $6,000 was paid
Repair Expenses6,000
Cash6,000
20To record the advertising expense for the month of January
Advertising Expense2,500
Accrued Advertising Expense2,500
21To record the payment of interest and principal of mortgage payable
Mortgage Payable1,437
Interest Expense2,063
Cash3,500
22
Accounts Receivable10,000
Consulting Service Revenue15,000
23
Freight out1,200
Cash1,200
24issuance of 5,000 shares
Cash150,000
Paid In Capital100,000
Capital Stock50,000
25
Petty Cash Fund800
Cash800
26
Treasury Stock20,000
Cash20,000
27
Accounts Payable60,000
Purchase Discount1,200
Cash58,800
28To record the payment of dividends
Dividends Payable10,500
Cash10,500
29To record the cash sales
Cash21,000
Sales21,000
To record the cost of inventory sold
Cost of Goods Sold9,500
Inventory9,500
30receipt of cash from consulting revenue
Cash20,000
Consulting Service Revenue20,000
31purchases on account 2/10, net 30
Purchases31,000
Accounts Payable31,000
32
Freight In900
Cash900
33
Advertising Expense4,000
Accrued Advertising Expense2,500
Cash6,500
34
Cash32,000
Sales32,000
Cost of Goods Sold15,000
Inventory15,000
35
Accounts Receivable22,000
Consulting Revenue22,000
36
Mortgage Payable1,437
Interest Expense2,063
Cash3,500
37
Cash68,600
Sales discount1,400
Accounts Receivable70,000
38
Salary Expense18,000
Taxes Expense6,000
Cash24,000
39
Taxes Expense4,100
Cash4,100
40To record the sales on account, 2/10 net 30; To record the cost of inventory sold
Accounts Receivable75,000
Sales75,000
Cost of Goods Sold33,800
Inventory33,800
41Sales Allowances1,700
Cash1,700
42
Short Term Note Payable30,000
Interest Expense2,400
Cash32,400.00
43
Petty Cash Fund700
Cash700
44
Supplies3,900
Accounts Payable3,900
45
45Cash23,000
Sales23,000
Cost of Goods Sold11,600
Inventory11,600
46
Cash17,000
Consulting Service Revenue17,000
47
Cash9,000
Treasury Stock6,000
Paid in Capital - Treasury Stock3,000
48
Cash25,250
Interest Income250
Notes Receivable25,000
49purchased $51,000 of inventory on account using the gross method with the terms 2/10, net 30.
Purchases51,000
Accounts Payable51,000
50
Accounts Payable31,000
Cash31,000
51To replenish the petty cash fund and record the cash shortage
Entertainment Expense250
Travel Expense265
Miscellaneous Expense100
Postage Expense240
Supplies Expense190
Cash Short or Over55
Cash1,100
52
Cash24,000
Sales24,000
Cost of Goods Sold11,500
Inventory11,500
53Unearned Revenue16,000
Rent Revenue16,000
54To record the sales on account, 2/10 net 30
Accounts Receivable78,000
Sales78,000
55Legal Fees1,500
Cash1,500
56Cash73,500
Sales discount1,500
Accounts Receivable75,000
57Accounts Receivable27,000
Consulting Service Revenue27,000
58Accounts Payable4,000
Purchase Return4,000
59Building351,300
Cash75,000
Mortgage Payable276,300
60Utilities Expense7,500
Cash7,500
61To record the repayment of 4% 90 day note payable
Note Payable60000
Interest Expense600
Cash60,600
62Cash15,000
Unearned Revenue15,000
63Sales5,000
Cash5,000
Inventory2,200
Cost of Goods Sold2,200
64Mileage Expense2,500
Cash2,500
65Cash16,000
Accumulated Depreciation6,500
Equipment20,000
Gain on sale of Equipment2,500
66Accumulated Depreciation18,500
Loss on disposal3,000
Equipment20,000
Cash1,500
67Mortgage Payable1,437
Interest Expense2,063
Cash3,500
Total
ADJUSTING ENTRIES
A1Depreciation Expense10,500
Accumulated Depreciation Eq10,500
A2Depreciation Expense3,438
Accumulated Depreciation Build3,438
A3Amortization Expense500
Intangible Asset500
A4Bad Debts Expense2,150
Uncollectible Accounts2,150
A5Salary Expense15,500
Accrued Salaries Expense15,500
A6Taxes Expense8,900
Accrued Taxes Expense8,900
A7Supplies Expense7,400
Supplies7,400
A8Rent Expense7,500
Prepaid Rent7,500
A9Accounts Receivable14,000
Consulting Service Revenue14,000
A10Insurance Expense2,250.00
Prepaid Insurance2,250.00
A11Accrued Interest Income175
Interest Income175
A12Interest Expense625
Accrued Interest Expense625
A13Interest Expense1,250
Accrued Interest Expense1,250

T-Accounts

image text in transcribed
Cash Cost of Good Sold Short-Term Notes Payable Inventory Supplies Buiding Prepaid Rent Petty Cash Mortgage Payable Intangible Asset Prepaid Insurance Wages Payable Taxes Payable Account Payable Equipment Dividend Payable Notes Receivable Purchases Purchase Discount Purchase Retum Capital Stock Acccum Dep Equip. Accum Depr Build Freight out Sales discount Sales Retained Eamings Freight In Intangible Asset Consult Service Revenue Bad Debts Expense U neamed Revenue Rent Revenue Sales Allowances Paid in Capital Capital Stock in on sale of Equipme Loss on disposal Cash Short or Over Interest Income Accrued interest income Texes expense Repair Expenses Treasury Stock Advertising Expense Legal Fees Salary Expense Interest Expense ued Advertising Expe nearned Consulting R Uncollectible Accounts Mileage Expense Utilities Expense Sales Allowances Rent Expense Insurance Expense ccrued Interest Expen: Supply Expense Entertaint Expense Travel Expense ccrued Taxes Expens crued Salaries Expert reciation Expense Buil preciation Expense Eg Miscellaneous Expens Postage Expense Amortization Expense

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