On october 1, 2014, Adriana Lopez launchd a computer services campany called Suc
ID: 2446949 • Letter: O
Question
On october 1, 2014, Adriana Lopez launchd a computer services campany called Success Systems, which provides consulting services, computer systems installations, and custom program development. Lopez adopts the calendar year for reporting purposes and prepared the company's first set of finacncial statements on december 31, 2014. The company has been successful and its list of customers has grown. to accommodate the growth, the accounting system is modified to set up account number used for each account and any balance as of december 31. 2014. Lopez decided to add a fourth digit with a deciam point to the 106 account number that had been used for the single accounts receivable account. This modification allows the company to continue using the existing chart of accounts.
Trial Balance
Acct No. Debit Credit
101 Cash $15,000
106.1 Accounts receivable - ABC Service Corp
106.2 Account receivable - Bobcat CO
106.3 Account receivable - Colburt Co.
106.4 Account receivable - Delta Corp.
106.5 Account receivable - Energy Co.
106.6 Account receivable - Five Bros. Inc
106.7 Account receivable - Good Times Inc
106.8 Account receivable - Hard leasing
106.9 Account receivable - Inventory, inc. 5,500
119 Merchandise Inventory 14,000
126 Computer Supplies 3,500
128 Prepaid Insurance 4,200
131 Prepaid Rent 4,800
163 Office Equipment 15,400
164 Accumulated Depreciation - Office Equipment $ 550
167 Computer Equipment 42,000
168 Accumulated Depreciation - Computer Equipment 1500
201 Accounts Payable 2100
210 Wages Payable 1620
236 Unearned Computer Services Revenue 6000
In response to requests from customers, Lopez will begin selling computer software. The company will extend cred terms of 1/20, n/30, FOB shipping point, to all customers who purchase this merchandise. However, no cash discount is available on consulting fees. Success Systems does not use reversing entries and, therefore, all revenue and expense accounts have zero balances as of Jan 2015. Its tranactions for jan through March follow:
Jan 7 Paid cash to lisa wu for fourteen days' work at the rate of $180 per day. Nine of the fourtee days relate to wages payable that were accrued in the prior year.
10 Sold merchandise with a retail value of $14,000 and a cost of $10,500 to ABC Corp. Invoice dated Jan 10.
10 Received $5500 Cash from inventory Inc. As full payment on its account.
11 Purchased $9000 of merchandise from Nevada Corp. with terms of 1/15. n/30/ FOB shipping point, invoice dated Jan 11.
12 Adriana Lopez invested an additional $25,000 cash in the business.
14 Paid $5 for freight charges on the merchandise purchased on Jan 11.
17 Paid $7,200 cash to Big Mall for another three months rent in advance.
18 A. Lopez withdrew $9,500 cash for personal use.
25 Paid Nevada Corp. for the invoice data January 11, net of the discount.
25 ABC Service Corp. returned $600 of defective merchandise from its invoice dated Jan 10. The returned merchandise, which had a $480 cost, is discarded. ( The policy of Success System is to leave the cost of defective products in cost of goods sold)
27 Completed a five-day project for Bobcat Co. and billed it $9000 which is the total price of $15,000 less the advance payment of $6000.
FEB 1 Purchased $1,250 of computer supplies from Cain Office products on credit, invoice dated March 8.
1 Received the balance due from ABC Service Corp, Net of both the discount and the credit from the returned merchandise.
1 Paid cash to lisa wu for 17 days work at $180 per day.
15 Reimbursed A. Lopez for business automobile mileage ( 400 miles at $0.56 per mile).
15 Paid $1500 cash to the local newspaper for an advertising insert in todays paper.
MAR 1 Paid cash to Lisa Wu for 18 days work at $180 per day/
4 Paid the full amount due ot cain office products, including amounts created on December 28 (of $2100) and Feb 1.
16 Paid $225 cash for minor repairs to the company's computer.
17 Received the balance due from Bobcat co. for fees billed on Jan 27.
25 Sold merchandise for $7600 with a cost of $5700 on credit to Delta Corp. invoice dated march 25
25 Billed Five Bros inc. for $12000 of computing services provided.
31 Reimbursed A. Lopez for business automobile mileage (500 miles at $.56 per mile.)
The following additional facts are available for preparing adjustments on March 31 prior to financial statement preparation:
a. The march 31 amount of merchandise inventory still available totals $ 6750.
b. Wu has not been paid for 23 days of work at the rate of $180 per day.
c. Three more months have expired since the company purchased its annual insurance policy at a $8400 cost of 12 months of coverage.
REQUIRED
1. Prepare journal entries to record each of the January through March transactions.
2. Post the journal entries in part 2 to the accounts in the companys general ledger. (note: begin with the ledger's post closing adjusted balanaces as of jan 1. 2015)
3. Prepare a partial work sheet consisting of the first six columns (similar to the one shown in exhibit 41. on page 150) that includes the unadjusted trial balance, the march 31 adjustments (a) throuh (g) and the adjusted trial balance. journalize the adjustments and post them to the ledger.
Explanation / Answer
SUCCESS SYSTEMS
JOURNAL ENTRIES
JANUARY-MARCH,2014
DATE PARTICULARS DEBIT($) CREDIT($) JAN 7 WAGES PAYABLE A/C DR 1,620 WAGES A/C DR 900 TO CASH A/C 2,520 (BEING WAGES PAID) JAN 10 ABC CORP A/C DR 14,000 TO SALES A/C 14,000 (BEING GOODS SOLD) JAN 10 CASH A/C DR 5,500 TO ACCOUNTS RECEIVABLE-INVENTORY INC A/C 5,500 (BEING CASH RECEIVED FROM INVENTORY INC) JAN 11 PURCHASE A/C DR 9,000 TO NEVADA CORP A/C 9,000 (BEING GOODS PURCHASED FROM NEVADA CORP) JAN 12 CASH A/C DR 25,000 TO CAPITAL A/C 25,000 (BEING CASH BOUGHT IN BY A.LOPEZ) JAN 14 PURCHASE A/C DR 5 TO CASH A/C 5 (BEING FREIGHT PAID FOR GOODS PURCHASED) JAN 17 PREPAID RENT A/C DR 7,200 TO CASH A/C 7,200 (BEING RENT PAID IN ADVANCE) JAN 18 DRAWINGS A/C DR 9,500 TO CASH A/C 9,500 (BEING CASH WITHDRAWN BY A.LOPEZ) JAN 25 NEVADA CORP A/C DR 9,000 TO DISCOUNT A/C 90 TO CASH A/C 8,910 (BEING PAYMENT MADE TO NEVADA CORP) JAN 25 SALES A/C DR 600 TO ABC CORP A/C 600 (BEING GOODS RETURNED BY ABC CORP) JAN 27 BOBCAT CO.A/C DR 9,000 TO PROJECT INCOME A/C 9,000 (BEING BOBCAT CO BILLED FOR A PROJET) FEB 1 COMPUTER SUPPLIES A/C DR 1,250 TO CAIN OFFICE PRODUCTS A/C 1,250 (BEING COMPUTER SUPPLIES PURCHASED) FEB 1 CASH A/C DR 13,400 TO ABC CORP A/C 13,400 (BEING CASH RECEIVED FROM ABC CORP) FEB 1 WAGES A/C DR 3,060 TO CASH A/C 3,060 (BEING WAGES PAID) FEB 15 AUTOMOBILE MILEAGE A/C DR 224 TO CAPITAL A/C 224 (BEING AUTOMOBILE MILEAGE PAID BY A.LOPEZ) FEB 15 CAPITAL A/C DR 224 TO CASH A/C 224 (BEING CASH REIMBURSED TO A.LOPEZ) FEB 15 ADVERTISING A/C DR 1,500 TO CASH A/C 1,500 (BEING CASH PAID FOR ADVERTISING) MAR 1 WAGES A/C DR 3,240 TO CASH A/C 3,240 (BEING WAGES PAID) MAR 4 CAIN OFFICE PRODUCTS A/C DR 3,350 TO CASH A/C 3,350 (BEING CASH PAID TO CAIN OFFICE PRODUCTS) MAR 16 COMPUTER REPAIRS A/C DR 225 TO CASH A/C 225 (BEING CASH PAID FOR COMPUTER REPAIRS) MAR 17 CASH A/C DR 9,000 TO BOBCAT CO. A/C 9,000 (BEING CASH RECEIVED FROM BOBCAT CO) MAR 25 DELTA CORP A/C DR 7,600 TO SALES A/C 7,600 (BEING GOODS SOLD TO DELTA CORP) MAR 25 FIVE BROS INC A/C DR 12,000 TO COMPUTING SERVICES A/C 12,000 (BEING COMPUTING SERVICES PROVIDED TO FIVE BROS INC) MAR 31 AUTOMOBILE MILEAGE A/C DR 280 TO CAPITAL A/C 280 (BEING AUTOMOBILE MILEAGE PAID BY A.LOPEZ) MAR 31 CAPITAL A/C DR 280 TO CASH A/C 280 (BEING REIMBURSEMENT MADE TO A.LOPEZ)Related Questions
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