Adria Lopez created Success Systems on October 1, 2013. The company has been suc
ID: 2447117 • Letter: A
Question
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 $125 per day. Four of the five days relate to wages payable that were accrued in the prior year.
The company purchased $5,800 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 $5,500, which is the total price of $7,000 less the advance payment of $1,500.
The company sold merchandise with a retail value of $5,200 and a cost of $3,560 to Liu Corp., invoice dated January 13.
The company paid $600 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 $500 of defective merchandise from its invoice dated January 13. The returned merchandise, which had a $320 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 $496.
The company purchased $9,000 of merchandise from Kansas Corp. with terms of 1/10, n/30, FOB destination, invoice dated January 26.
The company sold merchandise with a $4,640 cost for $5,800 on credit to KC, Inc., invoice dated January 26.
The company received a $496 credit memorandum from Kansas Corp. concerning the merchandise returned on January 24.
The company paid $2,475 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 $496 amount in the credit memorandum.
The company paid $600 cash to the local newspaper for an advertising insert in today’s paper.
The company sold merchandise with a $2,660 cost for $3,220 on credit to Delta Co., invoice dated February 23.
The company reimbursed Adria Lopez for business automobile mileage (600 miles at $0.32 per mile).
The company purchased $2,730 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 $1,100) and March 8.
The company sold merchandise with a $2,002 cost for $2,800 on credit to Wildcat Services, invoice dated March 25.
The company sold merchandise with a $1,100 cost for $2,220 on credit to IFM Company, invoice dated March 30.
The company reimbursed Adria Lopez for business automobile mileage (400 miles at $0.32 per mile).
The following additional facts are available for preparing adjustments on March 31 prior to financial statement preparation:
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.
Explanation / Answer
Date
Particulars
Debit
Credit
Jan-14
$
$
4
Wages expense
125
Wages payable
500
Cash
625
(Payment for wages accrued in the previous year and for wage expense for one day of the current year recorded)
5
Cash
25000
Common stock
25000
(Issue of common stock)
7
Merchandise Inventory
5800
Accounts payable
5800
The company purchased $5,800 of merchandise from Kansas Corp. with terms of 1/10, n/30, FOB shipping point
9
Cash
2668
Gomez Company
2668
(cash received from Gomez Co. Recorded)
11
Alex's Engineering
5500
Unearned Computer service revenue
1500
Computer Service revenue
7000
(billing of $5500 to Alex’s engineering and adjustment of unearned service revenue received from them recorded)
13
Liu Corp.
5200
Sales
5200
(sale to Liu Corp recorded)
Cost of goods sold
3560
Merchandise Inventory
3560
(cost of goods sold to liu corp. recorded)
15
Merchandise Inventory
600
Cash
600
(freight incurred on purchase of merchandise inventory recorded)
16
Cash
4000
Computer service revenue
4000
(cash received from Delta co. For computer service provided)
17
Accounts payable
5800
Retained earnings
58
Cash
5742
(payment to Kansas corp. Net of discount recorded)
20
Sales return and allowances
500
Liu Corp.
500
(defective merchandise returned by liu corp.)
22
Cash
4700
Liu Corp.
4700
(received from lieu corp. the balance of the account receivable from them)
24
Advance to Kansas corp.
496
Merchandise Inventory
496
(return of merchandise inventory)
26
Merchandise Inventory
9000
Kansas Corp.
9000
(Purchase of merchandise inventory on account)
26
KC Inc.
5800
Sales
5800
(sale of merchandise inventory on account)
Cost of goods sold
4640
Merchandise Inventory
4640
29
No journal entry required
31
Wage expense
1250
Cash
1250
(payment of wages expense)
Feb.
1
Prepaid rent
2475
Cash
2475
(rent prepaid for three months)
3
Kansas Corp
8910
Retained earnings
90
Cash
8504
Advance to Kansas corporation
496
(payment made to Kansas Corp for the amount due net of discount and the advance amount of $496)
5
Advertising expenses
600
Cash
600
(advertising expenses paid)
11
Cash
5500
Alex's Engineering
5500
(for the amount received from Alex's engineering for the amount due for providing computer service)
15
Dividends
4800
Cash
4800
(dividends paid)
23
Delta Co
3220
Sales
3220
(merchandise inventory sold to Delta Co on account)
Cost of goods sold
2660
Merchandise inventory
2660
26
Wages expenses
1000
Cash
1000
(paid wages expense)
27
Mileage expenses
192
Cash
192
(paid mileage expenses)
Mar
8
Computer supplies
2730
Accounts payable
2730
(purchase of computer supplies on account)
9
Cash
3220
Delta Co
3220
(Received cash from the Delta co. For the sale made to them on account)
11
Repairing Expenses-computer
960
Cash
960
(computer repairing expenses psid in cash and recorded)
16
Cash
5260
Computer service revenue
5260
(cash received fro providing computer service from Dream Co.)
19
Accounts payable
3830
Cash
3830
paid the full amount due to Harris Office Products, consisting of amounts created on December 15 (of $1,100) and March 8.
24
Easy leasing
8900
Computer service revenue
8900
(provided computer service to Easy Leasing on account)
25
Wildcat services
2800
Sales
2800
(Sold goods to wildcat services on account)
Cost of goods sold
2002
Merchandise Inventory
2002
30
IFM company
2200
Sales
2200
(sold goods to IMF company on account)
Cost of goods sold
1100
Merchandise Inventory
1100
31
Mileage Expense
128
Cash
128
(mileage expenses reimbursed and recorded)
Date
Particulars
Debit
Credit
Jan-14
$
$
4
Wages expense
125
Wages payable
500
Cash
625
(Payment for wages accrued in the previous year and for wage expense for one day of the current year recorded)
5
Cash
25000
Common stock
25000
(Issue of common stock)
7
Merchandise Inventory
5800
Accounts payable
5800
The company purchased $5,800 of merchandise from Kansas Corp. with terms of 1/10, n/30, FOB shipping point
9
Cash
2668
Gomez Company
2668
(cash received from Gomez Co. Recorded)
11
Alex's Engineering
5500
Unearned Computer service revenue
1500
Computer Service revenue
7000
(billing of $5500 to Alex’s engineering and adjustment of unearned service revenue received from them recorded)
13
Liu Corp.
5200
Sales
5200
(sale to Liu Corp recorded)
Cost of goods sold
3560
Merchandise Inventory
3560
(cost of goods sold to liu corp. recorded)
15
Merchandise Inventory
600
Cash
600
(freight incurred on purchase of merchandise inventory recorded)
16
Cash
4000
Computer service revenue
4000
(cash received from Delta co. For computer service provided)
17
Accounts payable
5800
Retained earnings
58
Cash
5742
(payment to Kansas corp. Net of discount recorded)
20
Sales return and allowances
500
Liu Corp.
500
(defective merchandise returned by liu corp.)
22
Cash
4700
Liu Corp.
4700
(received from lieu corp. the balance of the account receivable from them)
24
Advance to Kansas corp.
496
Merchandise Inventory
496
(return of merchandise inventory)
26
Merchandise Inventory
9000
Kansas Corp.
9000
(Purchase of merchandise inventory on account)
26
KC Inc.
5800
Sales
5800
(sale of merchandise inventory on account)
Cost of goods sold
4640
Merchandise Inventory
4640
29
No journal entry required
31
Wage expense
1250
Cash
1250
(payment of wages expense)
Feb.
1
Prepaid rent
2475
Cash
2475
(rent prepaid for three months)
3
Kansas Corp
8910
Retained earnings
90
Cash
8504
Advance to Kansas corporation
496
(payment made to Kansas Corp for the amount due net of discount and the advance amount of $496)
5
Advertising expenses
600
Cash
600
(advertising expenses paid)
11
Cash
5500
Alex's Engineering
5500
(for the amount received from Alex's engineering for the amount due for providing computer service)
15
Dividends
4800
Cash
4800
(dividends paid)
23
Delta Co
3220
Sales
3220
(merchandise inventory sold to Delta Co on account)
Cost of goods sold
2660
Merchandise inventory
2660
26
Wages expenses
1000
Cash
1000
(paid wages expense)
27
Mileage expenses
192
Cash
192
(paid mileage expenses)
Mar
8
Computer supplies
2730
Accounts payable
2730
(purchase of computer supplies on account)
9
Cash
3220
Delta Co
3220
(Received cash from the Delta co. For the sale made to them on account)
11
Repairing Expenses-computer
960
Cash
960
(computer repairing expenses psid in cash and recorded)
16
Cash
5260
Computer service revenue
5260
(cash received fro providing computer service from Dream Co.)
19
Accounts payable
3830
Cash
3830
paid the full amount due to Harris Office Products, consisting of amounts created on December 15 (of $1,100) and March 8.
24
Easy leasing
8900
Computer service revenue
8900
(provided computer service to Easy Leasing on account)
25
Wildcat services
2800
Sales
2800
(Sold goods to wildcat services on account)
Cost of goods sold
2002
Merchandise Inventory
2002
30
IFM company
2200
Sales
2200
(sold goods to IMF company on account)
Cost of goods sold
1100
Merchandise Inventory
1100
31
Mileage Expense
128
Cash
128
(mileage expenses reimbursed and recorded)
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