Santana Rey created Business Solutions on October 1, 2019. Thecompany has been successful, and its list of customers has grown.To accommodate the growth, the accounting system is modified to setup separate accounts for each customer. The following chart ofaccounts includes the account number used for each account and anybalance as of December 31, 2019. Santana Rey decided to add afourth digit with a decimal point to the 106 account number thathad been used for the single Accounts Receivable account. Thischange allows the company to continue using the existing chart ofaccounts.
No. Account Title Debit Credit
101 Cash $ 48,472
106.1 Alex’s Engineering Co. 0
106.2 Wildcat Services 0
106.3 Easy Leasing 0
106.4 IFM Co. 3,040
106.5 Liu Corp. 0
106.6 Gomez Co. 2,818
106.7 Delta Co. 0
106.8 KC, Inc. 0
106.9 Dream, Inc. 0
119 Merchandise inventory 0
126 Computer supplies 730
128 Prepaid insurance 1,881
131 Prepaid rent 895
163 Office equipment 8,200
164 Accumulated depreciation—Office equipment $ 290
167 Computer equipment 20,900
168 Accumulated depreciation—Computer equipment 1,200
201 Accounts payable 1,280
210 Wages payable 820
236 Unearned computer services revenue 1,500
301 S. Rey, Capital 81,846
302 S. Rey, Withdrawals 0
403 Computer services revenue 0
413 Sales 0
414 Sales returns and allowances 0
415 Sales discounts 0
502 Cost of goods sold 0
612 Depreciation expense—Office equipment 0
613 Depreciation expense—Computer equipment 0
623 Wages expense 0
637 Insurance expense 0
640 Rent expense 0
652 Computer supplies expense 0
655 Advertising expense 0
676 Mileage expense 0
677 Miscellaneous expenses 0
684 Repairs expense—Computer 0
In response to requests from customers, S. Rey will beginselling computer software. The company will extend credit terms of1/10, n/30, FOB shipping point, to all customers who purchase thismerchandise. However, no cash discount is available on consultingfees. Additional accounts (Nos. 119, 413, 414, 415, and 502) areadded to its general ledger to accommodate the company’s newmerchandising activities. Its transactions for January throughMarch follow:
Jan. 4 The company paid cash to Lyn Addie for five days’ workat the rate of $205 per day. Four of the five days relate to wagespayable that were accrued in the prior year.
5 Santana Rey invested an additional $24,900 cash in thecompany.
7 The company purchased $7,100 of merchandise from KansasCorp. with terms of 1/10, n/30, FOB shipping point, invoice datedJanuary 7.
9 The company received $2,818 cash from Gomez Co. as fullpayment on its account.
11 The company completed a five-day project for Alex’sEngineering Co. and billed it $5,360, which is the total price of$6,860 less the advance payment of $1,500. The company debitedUnearned Computer Services Revenue for $1,500.
13 The company sold merchandise with a retail value of $4,300and a cost of $3,490 to Liu Corp., invoice dated January 13.
15 The company paid $610 cash for freight charges on themerchandise purchased on January 7.
16 The company received $4,100 cash from Delta Co. forcomputer services provided.
17 The company paid Kansas Corp. for the invoice dated January7, net of the discount.
20 The company gave a price reduction (allowance) of $400 toLiu Corp., and credited Liu's accounts receivable for thatamount.
22 The company received the balance due from Liu Corp., net ofthe discount and the allowance.
24 The company returned defective merchandise to Kansas Corp.and accepted a credit against future purchases (debited accountspayable). The defective merchandise invoice cost, net of thediscount, was $496.
26 The company purchased $9,900 of merchandise from KansasCorp. with terms of 1/10, n/30, FOB destination, invoice datedJanuary 26.
26 The company sold merchandise with a $4,450 cost for $6,000on credit to KC, Inc., invoice dated January 26.
31 The company paid cash to Lyn Addie for 10 days’ work at$205 per day.
Feb. 1 The company paid $2,685 cash to Hillside Mall foranother three months’ rent in advance.
3 The company paid Kansas Corp. for the balance due, net ofthe cash discount, less the $496 credit from merchandise returnedon January 24.
5 The company paid $450 cash to Facebook for an advertisementto appear on February 5 only.
11 The company received the balance due from Alex’sEngineering Co. for fees billed on January 11.
15 Santana Rey withdrew $4,780 cash from the company forpersonal use.
23 The company sold merchandise with a $2,620 cost for $3,280on credit to Delta Co., invoice dated February 23.
26 The company paid cash to Lyn Addie for eight days’ work at$205 per day.
27 The company reimbursed Santana Rey $96 for businessautomobile mileage. The company recorded the reimbursement as"Mileage Expense."
Mar. 8 The company purchased $2,770 of computer supplies fromHarris Office Products on credit with terms of n/30, FOBdestination, invoice dated March 8.
9 The company received the balance due from Delta Co. formerchandise sold on February 23.
11 The company paid $950 cash for minor repairs to thecompany’s computer.
16 The company received $5,430 cash from Dream, Inc., forcomputing services provided.
19 The company paid the full amount due of $4,050 to HarrisOffice Products, consisting of amounts created on December 15 (of$1,280) and March 8.
24 The company billed Easy Leasing for $9,067 of computingservices provided.
25 The company sold merchandise with a $2,092 cost for $2,910on credit to Wildcat Services, invoice dated March 25.
30 The company sold merchandise with a $1,078 cost for $2,370on credit to IFM Company, invoice dated March 30.
31 The company reimbursed Santana Rey $224 for businessautomobile mileage. The company recorded the reimbursement as"Mileage Expense."
The following additional facts are available for preparingadjustments on March 31 prior to financial statementpreparation:
The March 31 amount of computer supplies still availabletotals $2,065.
Prepaid Insurance coverage of $627 expired during this 3-monthperiod.
Lyn Addie has not been paid for seven days of work at the rateof $205 per day.
Prepaid rent of $2,685 expired during this 3-monthperiod.
Depreciation on the computer equipment for January 1 throughMarch 31 is $1,200.
Depreciation on the office equipment for January 1 throughMarch 31 is $290.
The March 31 amount of merchandise inventory still availabletotals $534.
2. Post the journal entries in part 1 to the accounts in thecompany’s general ledger. Note: Begin with the ledger’spost-closing adjusted balances as of December 31, 2019. (Record thetransactions in the order presented. Do not skip rows.)
