The Sheldon Corporation began a consulting business specializingin on-site computer training on January 1, 2018. The followingtransactions took place during its first three months ofoperations.
Summary of Transactions
Jan. 1 Sold5,000 shares of capital stock for a total of $500,000 cash.
Jan.2 Paid the premiumof $12,000 on a 24-month insurance policy on all assets.
Jan.3 Purchased landand a building for a total of $350,000 cash. The land is valued at$50,000, while the building is valued at $300,000 and is expectedto have a useful life of 30 years.
Jan.10 Purchaseda computer network system for $36,000 cash. The expected usefullife is 6 years.
Jan.15 Paid$2,400 cash for a phone system that should have a 3-year usefullife.
Jan.16 Paid cashto acquire equipment and furniture for business purposes at a costof $12,000. The expected useful life is 4 years.
Jan.19 Purchasedoffice supplies for $1,250 cash. (Use the asset account “OfficeSupplies” for such purchases.)
Jan.24 Paid cashof $10,000 for binders, manuals, and workbooks for use in Sheldon'sclient programs. Sheldon's policy is to initially record thesematerials as an asset (Program Supplies) and to then expense thematerials used for a particular training program when the programis completed.
Jan.30 Paid wagesof $1,800 and salaries of $3,600 for work performed duringJanuary.
Feb.14 Completed thefirst client program for a fee of $9,500. The customer paid $2,500of the fee that day, with the remainder billed on account. Programsupplies used on the project had originally cost Sheldon$1,500.
Feb.15 Paid wages of$2,400 in cash.
Feb.19 Paid utilitiesfor the month of January of $1,050 in cash.
Feb.23 Purchased onaccount 30 specialized manuals as program supplies for use incomputer training for a total of $1,800.
Feb.28 Borrowed $45,000from the bank on a 2-year note. The interest rate on the note is 6%per year (or 0.5% per month).
Mar.1 Paid wages of $3,600 andsalaries of $6,000.
Mar.1 Completed on-site computertraining for two customers: JKL Products, Inc., and Watson Company.Billed JKL $11,000 on account. The fee for Watson was $9,200, halfof which Watson paid in cash with the remainder on account. Programsupplies used for the two customers totaled $4,600.
Mar.4 Purchased additional programsupplies on account for a total of $3,600.
Mar.13 Collected $16,600 onaccount from credit customers.
Mar.15 Completed firstall-day computer workshop for walk-in customers. Sales totaled$4,250, all in cash. Program supplies used for the workshoporiginally cost Sheldon $1,850.
Mar.16 Billed CoastalCorporation $7,500 for on-site training completed on March 16.Program supplies for the training originally cost Sheldon$2,500.
Mar.16 Paid wages of$3,700.
Mar. 17 Purchased office supplies of$750 on account.
Mar.21 Paid $3,200 tosuppliers for materials previously purchased on account.
Mar.23 Paid utilities for themonth of February of $1,800 in cash.
Mar.26 Received a $2,000 cashadvance from Watson Company for additional computer training tobegin April 1, 2018.
Mar.29 Collected $6,250 onaccount from credit customers.
Mar.31 Purchased $3,600 ofprogram supplies for cash.
Additional Data Determinedat March 31, 2018:
Unpaid and unrecorded wages and salaries totaled $2,700 and$8,500, respectively.
Service revenue unrecorded and unbilled at March 31 amounted to$9,300. Program supplies associated with these services originallycost Sheldon $2,800.
Office supplies on hand at March 31 totaled $450.
Sheldon uses straight-line depreciation on all depreciableassets and assumes the assets will have no value at the end oftheir estimated useful lives. A full month's depreciation is takenfor the month of purchase, regardless of which day of the month thepurchase is made. For example, depreciation expense for the threemonths ended March 31, 2018, on the phone system is $200 (i.e.,$2,400/3 years x 3/12 of a year). Land is not considereddepreciable. You may use a single account (Depreciation Expense) torecord all of the depreciation expense for the depreciable assets.Also, you may use a single account (Accumulated Depreciation) torecord the effect of depreciation on total assets.
Sheldon must record accrued interest for one month on the$45,000 bank loan.
Sheldon estimates utilities used during March amounted to$1,800, although the bill has not yet been received.
Remember insurance that has expired.
Record the transactions and events for the three months endingMarch 31, 2018, in general journal format. Record all prepaidexpenses as assets at this time and all unearned revenues asliabilities. Do not record any adjusting journal entriesbased on the "additional data" at this time.
