Term Problem_Adriana Lopez_Journal, Ledger and Trial Balance

Term Problem On October 1, 2014, Adriana Lopez launched a computer services

company 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 financial 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

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, 2014. 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 modification allows the

company to continue using the existing chart of accounts.

Cash

Accounts Receivable - ABC Service Corp.

Accounts Receivable - Bobcat Co.

Accounts Receivable - Colburt Co.

Accounts Receivable - Delta Corp.

Accounts Receivable - Energy Co.

Accounts Receivable - Five Bros, Inc.

Accounts Receivable - Good Times, Inc

Accounts Receivable - Hard Leasing

Accounts Receivable - Inventory, Inc.

Merchandise Inventory

Computer Supplies

Prepaid Insurance

Prepaid Rent

Office Equipment

Accumulated Depreciation - Office Equipment

Computer Equipment

Accumulated Depreciation - Computer Equipment

Accounts Payable

Wages Payable

Unearned Computer Services Revenue

1,550

950

6,000

1,575

$ 56,000

$ 400

26,600

Debit Credit

101

106.1

106.2

106.3

126

128

131

163

164

106.4

106.5

106.6

106.7

106.8

106.9

Acct.

236

167

168

201

210

No.

119

SUCCESS SYSTEMS

Trial Balance

January 1, 2015

4,200

2,350

11,500

3,500

11,200

2,500A. Lopez, Capital

A. Lopez, Withdrawals

Computer Services Revenue

Sales

Sales Returns and Allowances

Sales Discounts

Cost of Goods Sold

Depreciation Expense - Office Equipment

Depreciation Expense - Computer Equipment

Wages Expense

Insurance Expense

Rent Expense

Computer Supplies Expense

Advertising Expense

Mileage Expense

Miscellaneous Expense

Repairs Expense - Computer

Totals

In response to requests from customers, Lopez will begin selling computer software.

The company will extend credit 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 January 1, 2015. Its

transactions for January through March follow:

Jan Paid cash to Lisa Wu for fourteen days’ work at the rate of per day.

Nine of the fourteen days relate to wages payable that were accrued in the

prior year.

Sold merchandise with a retail value of and a cost of to

ABC Service Corp., invoice dated January 10.

Received cash from Inventory, Inc. as full payment on its account.

Purchased of merchandise from Nevada Corp. with terms of 1/15,

n/30, FOB shipping point, invoice dated January 11.

$ 10,000 $ 7,500

11 $ 6,800

7 $175

10

10 $ 3,500

Trial Balance (Continued)

107,375

Credit

Acct.

637

No.

301

403

302

413

414

652

655

676

677

684

415

502

612

613

623

640

January 1, 2015

SUCCESS SYSTEMS

Debit

$ 117,850 $ 117,850Adriana Lopez invested an additional cash in the business.

Paid cash for freight charges on the merchandise purchased on

January 11.

Paid cash to Big Mall for another three months’ rent in advance.

Adriana Lopez withdrew cash for personal use.

Paid Nevada Corp. for the invoice dated January 11, net of the discount.

ABC Service Corp. returned of defective merchandise from its invoice

dated January 10. The returned merchandise, which had a cost, is

discarded. (The policy of Success Systems is to leave the cost of defective

products in cost of goods sold.)

Completed a five-day project for Bobcat Co. and billed it which is

the total price of less the advance payment of .

Feb Purchased of computer supplies from Cain Office Products on

credit, invoice dated March 8.

Received the balance due from ABC Service Corp., net of both the discount

and the credit for the returned merchandise.

Paid cash to Lisa Wu for 17 days’ work at per day.

Reimbursed Adriana Lopez for business automobile mileage ( miles at

per mile).

Paid cash to the local newspaper for an advertising insert in today’s

paper.

Mar Paid cash to Lisa Wu for 18 days’ work at per day.

Paid the full amount due to Cain Office Products, including amounts created on

December 28 (of ) and February 1.

Paid cash for minor repairs to the company’s computer.

Received the balance due from Bobcat Co. for fees billed on January 27.

Sold merchandise for with a cost of on credit to Delta

Corp., invoice dated March 25.

Billed Five Bros, Inc. for of computing services provided.

Reimbursed Adriana Lopez for business automobile mileage ( miles at

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 .

b. Wu has not been paid for 23 days of work at the rate of per day.

c. Three more months have expired since the company purchased its annual

insurance policy at a cost for 12 months of coverage.

$ 1,550

$175

$ 5,000

$ 8,000

$ 4,800 $ 3,600

$1,800

1 $ 1,750

1

1

25

$ 11,000

25

25 $900

27

$ 0.56

14 $ 325

17

18

12

$ 7,500

15

$ 375

$175

15

1

4

$0.56

$ 8,400

25 $ 14,000

$ 7,500

31

16

17

750

$ 175

$720

$ 6,000

825

$ 4,000d. Depreciation on the computer equipment for January 1 through March 31 is .

e. Depreciation on the office equipment for January 1 through March 31 is .

f. The March 31 amount of computer supplies still available totals .

g. Three months have passed since any prepaid rent has been transferred to expense.

The monthly rent expense is .

Required

1. Prepare journal entries to record each of the January through March transactions.

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 January 1,

2013.)

3. Prepare a partial work sheet consisting of the first six columns (similar to the one

shown in Exhibit 5B.1 on page 205.) that includes the unadjusted trial balance, the

March 31 adjustments (a) through (g), and the adjusted trial balance. Journalize the

adjustments, and post them to the ledger.

4. Prepare an income statement (from the adjusted trial balance in part 3) for the three

months ended March 31, 2013. Use the multi-step format. List all expenses without

differentiating between selling expenses and general and administrative expenses.

See the example on page 193, Exhibit 5.13.

5. Prepare a statement of owner’s equity (from the adjusted trial balance in part 3) for

the three months ended March 31, 2013. See the example on page 141, Exhibit 4.2.

6. Prepare a classified balance sheet (from the adjusted trial balance) as of March 31,

2013. See the example on page 148, Exhibit 4.9.

Check

Unadjusted Trial Balance Totals - $ 152,525

Adjusted Trail Balance Totals - $ 157,900

Cash ending balance - $ 40,020