Practice Set Serial Problem Success Systems LO P1, P2, P3, P4 [The following inf
ID: 2473262 • Letter: P
Question
Practice Set
Serial Problem Success Systems LO P1, P2, P3, P4
[The following information applies to the questions displayed below.]
Adria Lopez created Success Systems on October 1, 2013. 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, 2013. Adria Lopez 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.
In response to requests from customers, A. Lopez 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. Also, Success Systems does not use reversing entries and, therefore, all revenue and expense accounts have zero beginning balances as of January 1, 2014. Its transactions for January through March follow:
The company paid cash to Lyn Addie for five days’ work at the rate of $185 per day. Four of the five days relate to wages payable that were accrued in the prior year.
The company purchased $6,100 of merchandise from Kansas Corp. with terms of 1/10, n/30, FOB shipping point, invoice dated January 7.
The company completed a five-day project for Alex’s Engineering Co. and billed it $5,390, which is the total price of $6,810 less the advance payment of $1,420.
The company sold merchandise with a retail value of $4,800 and a cost of $3,560 to Liu Corp., invoice dated January 13.
The company paid $780 cash for freight charges on the merchandise purchased on January 7.
The company paid Kansas Corp. for the invoice dated January 7, net of the discount.
Liu Corp. returned $400 of defective merchandise from its invoice dated January 13. The returned merchandise, which had a $290 cost, is discarded. (The policy of Success Systems is to leave the cost of defective products in cost of goods sold.)
The company received the balance due from Liu Corp., net of both the discount and the credit for the returned merchandise.
The company returned defective merchandise to Kansas Corp. and accepted a credit against future purchases. The defective merchandise invoice cost, net of the discount, was $486.
The company purchased $9,800 of merchandise from Kansas Corp. with terms of 1/10, n/30, FOB destination, invoice dated January 26.
The company sold merchandise with a $4,570 cost for $5,820 on credit to KC, Inc., invoice dated January 26.
The company received a $486 credit memorandum from Kansas Corp. concerning the merchandise returned on January 24.
The company paid $2,535 cash to Hillside Mall for another three months’ rent in advance.
The company paid Kansas Corp. for the balance due, net of the cash discount, less the $486 amount in the credit memorandum.
The company paid $470 cash to the local newspaper for an advertising insert in today’s paper.
The company sold merchandise with a $2,580 cost for $3,330 on credit to Delta Co., invoice dated February 23.
The company reimbursed Adria Lopez for business automobile mileage (800 miles at $0.21 per mile).
The company purchased $2,770 of computer supplies from Harris Office Products on credit, invoice dated March 8.
The company received the balance due from Delta Co. for merchandise sold on February 23.
The company paid the full amount due to Harris Office Products, consisting of amounts created on December 15 (of $1,260) and March 8.
The company sold merchandise with a $2,122 cost for $2,810 on credit to Wildcat Services, invoice dated March 25.
The company sold merchandise with a $1,198 cost for $2,350 on credit to IFM Company, invoice dated March 30.
The company reimbursed Adria Lopez for business automobile mileage (600 miles at $0.21 per mile).
The following additional facts are available for preparing adjustments on March 31 prior to financial statement preparation:
rev: 11_06_2013_QC_37724, 02_19_2014_QC_45514, 12_20_2014_QC_CS-2022
References
Section BreakLearning Objective: 04-P1 Analyze and record transactions for merchandise purchases using a perpetual system.Learning Objective: 04-P4 Define and prepare multiple-step and single-step income statements.
Serial Problem Success Systems LO P1, P2, P3, P4Learning Objective: 04-P2 Analyze and record transactions for merchandise sales using a perpetual system.
Difficulty: HardLearning Objective: 04-P3 Prepare adjustments and close accounts for a merchandising company.
1.
value:
16.66 points
Required information
Part 1
Prepare journal entries to record each of the January through March transactions. (If no entry is required for a particular transaction, select "No journal entry required" in the first account field.)
rev: 11_06_2013_QC_37724, 12_23_2014_QC_CS-2022
References
eBook & Resources
WorksheetLearning Objective: 04-P1 Analyze and record transactions for merchandise purchases using a perpetual system.Learning Objective: 04-P4 Define and prepare multiple-step and single-step income statements.
Part 1Learning Objective: 04-P2 Analyze and record transactions for merchandise sales using a perpetual system.
Difficulty: HardLearning Objective: 04-P3 Prepare adjustments and close accounts for a merchandising company.
Check my work
2.
value:
16.66 points
Required information
Part 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, 2013.) (Record the transactions in the order presented. Do not skip rows.)
References
eBook & Resources
WorksheetLearning Objective: 04-P1 Analyze and record transactions for merchandise purchases using a perpetual system.Learning Objective: 04-P4 Define and prepare multiple-step and single-step income statements.
Part 2Learning Objective: 04-P2 Analyze and record transactions for merchandise sales using a perpetual system.
Difficulty: HardLearning Objective: 04-P3 Prepare adjustments and close accounts for a merchandising company.
Check my work
3.
value:
16.66 points
Required information
Part 3
Prepare a partial work sheet consisting of the first six columns that includes the unadjusted trial balance, the March 31 adjustments (a) through (g), and the adjusted trial balance.
rev: 02_19_2014_QC_45514
References
eBook & Resources
WorksheetLearning Objective: 04-P1 Analyze and record transactions for merchandise purchases using a perpetual system.Learning Objective: 04-P4 Define and prepare multiple-step and single-step income statements.
Part 3Learning Objective: 04-P2 Analyze and record transactions for merchandise sales using a perpetual system.
Difficulty: HardLearning Objective: 04-P3 Prepare adjustments and close accounts for a merchandising company.
Check my work
4.
value:
16.66 points
Required information
Part 4
Prepare an income statement (from the adjusted trial balance in part 3) for the three months ended March 31, 2014. Use a single-step format. List all expenses without differentiating between selling expenses and general and administrative expenses.
rev: 10_29_2013_QC_37632
References
eBook & Resources
WorksheetLearning Objective: 04-P1 Analyze and record transactions for merchandise purchases using a perpetual system.Learning Objective: 04-P4 Define and prepare multiple-step and single-step income statements.
Part 4Learning Objective: 04-P2 Analyze and record transactions for merchandise sales using a perpetual system.
Difficulty: HardLearning Objective: 04-P3 Prepare adjustments and close accounts for a merchandising company.
Check my work
5.
value:
16.66 points
Required information
Part 5
Prepare a statement of retained earnings (from the adjusted trial balance in part 3) for the three months ended March 31, 2014.
References
eBook & Resources
WorksheetLearning Objective: 04-P1 Analyze and record transactions for merchandise purchases using a perpetual system.Learning Objective: 04-P4 Define and prepare multiple-step and single-step income statements.
Part 5Learning Objective: 04-P2 Analyze and record transactions for merchandise sales using a perpetual system.
Difficulty: HardLearning Objective: 04-P3 Prepare adjustments and close accounts for a merchandising company.
Check my work
6.
value:
16.70 points
Required information
Part 6
Prepare a classified balance sheet (from the adjusted trial balance) as of March 31, 2014.
References
eBook & Resources
WorksheetLearning Objective: 04-P1 Analyze and record transactions for merchandise purchases using a perpetual system.Learning Objective: 04-P4 Define and prepare multiple-step and single-step income statements.
Part 6Learning Objective: 04-P2 Analyze and record transactions for merchandise sales using a perpetual system.
Difficulty: HardLearning Objective: 04-P3 Prepare adjustments and close accounts for a merchandising company.
Check my work
Practice Set
instructions | helpExplanation / Answer
The journal entries for the transactions are as under: Jan. 4 Wages Payable $ 740 Wages expenses $ 185 Cash $ 925 (being wages payable for 4 days and wages expenses for 1 day is paid) Jan. 5 Cash $ 23,000 Common stock $ 23,000 (Adria Lopez invested cash) Jan. 7 Merchandise Inventory $ 6,100 Kansas co. $ 6,100 (being merchandise inventory purchased on account) Jan. 9 Cash $ 2,768 Gomez Co. $ 2,768 (being cash received from Gomez) Jan. 11 Accounts Receivable $ 5,390 Unearned Revenue $ 1,420 Computer service revenue $ 6,810 (Being five day project for Alex Engineering company billing made) Jan. 13 Liu corp. $ 4,800 Sales $ 4,800 (Being merchandise inventory sold) Jan. 13 Cost of goods sold $ 3,560 Merchandise Inventory $ 3,560 (Being cost of goods sold transferred) Jan. 15 Merchandise Inventory $ 780 Cash $ 780 (Being freight charges paid on purchases) Jan. 16 Cash $ 4,060 Computer sevices revenue $ 4,060 (Being computer services revenue received from Delta co.) Jan. 17 Kansas Co. 6100 Cash $ 6,039 Purchase discount $ 61 (being paid to Kansas after discount of 1% on sales amount) Jan. 20 Sales Return $ 400 Liu corp. $ 400 (Being sales return made.) Merchandise Inventory $ 290 Cost of goods sold $ 290 (Being cost of inventory returned is recorded) Loss on Inventory write down $ 290 Merchandise Inventory $ 290 (Being the inventory discarded) Jan.22 Cash $ 4,356 Sales discount $ 44 Liu corp $ 4,400 (Being cash received from Liu corp. net of discount and sales return of $400) Jan.24 Kansas Corp. $ 486 Merchandise Inventory $ 486 (Being defective inventory returned and accepted the liability) Jan. 26 Inventory $ 9,800 Kansas Corp. $ 9,800 (Being inventory purchased from Kansas) Jan. 26 KC $ 5,820 Sales $ 5,820 (Being inventory sold on account) Cost of goods sold $ 4,570 Merchandise Inventory $ 4,570 (Being cost of goods sold transferred) Jan. 29 Accounts receivable $ 486 Kansas Corp. $ 486 (Being credit memo accepted from Kansas corp.) Jan.31 Wages $ 1,850 Cash $ 1,850 (Being wages paid to Lyn Addie ) 1st Feb. Prepaid rent $ 2,535 Cash $ 2,535 (Being rent paid in advance for 3 months) Feb. 3 Kansas Corp. $ 9,800 Cash $ 9,221 Account Receivables $ 486 Purchase discount $ 93 (Being cash paid to Kansas net of discount and credit memo of $486) Feb. 5 Advertising expenses $ 470 Cash $ 470 (Being advertising expense paid) Feb. 11 Cash $ 5,390 Alex Engineering $ 5,390 (Being cash received from Alex Engineering) Feb. 15 Dividends $ 4,630 Cash $ 4,630 (Being dividends paid in cash) Feb. 23 Delta Co. $ 3,330 Sales $ 3,330 (Being sold to Delta co. on account) Cost of goods sold $ 2,580 Merchandise Inventory $ 2,580 (Being cost of inventory sold is transferred) Feb. 26 Wages $ 1,480 Cash $ 1,480 (Being wages paid to Lyn addie) Feb. 27 Mileage expense $ 168 Cash $ 168 (Being mileage expenses paid @ $0.21 per mile for 800 miles) Mar. 8 Computer Supplies $ 2,770 Harris $ 2,770 (Being computer supplies purchased) Mar. 9 Cash $ 3,330 Delta $ 3,330 (Being cash received from Delta Co.) Mar. 11 Repairs expenses $ 920 Cash $ 920 (Being repairs of computer paid in cash) Mar. 16 Cash $ 5,310 Computer service revenue $ 5,310 (Being cash received from computer services made) Mar. 19 Harris $ 1,260 Cash $ 1,260 (Being cash paid to Harris) Mar. 24 Easy leasing $ 9,057 Computer services earned $ 9,057 (Being billed to easy leasing) Mar. 25 Wildcat services $ 2,810 Sales $ 2,810 (Being sold on account) Cost of goods sold $ 2,122 Merchandise Inventory $ 2,122 (Being inventory sold transferred to cost of goods sold account) Mar. 30 IFM Co. $ 2,350 Sales $ 2,350 (Being sold on account) Cost of goods sold $ 1,198 Merchandise Inventory $ 1,198 (Being inventory sold transferred to cost of goods sold account) Mar. 31 Mileage expenses $ 126 Cash $ 126 (Being cash paid for 600 miles mileage expenses @ $ 0.21 per mile)
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