Adria Lopez_JOURNAL TO FINANCIAL STATEMENTS

August 14th, 2017

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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.

No.	Account Title	Debit	Credit
101	Cash	$	48,502
106.1	Alex’s Engineering Co.		0
106.2	Wildcat Services		0
106.3	Easy Leasing		0
106.4	IFM Co.		3,080
106.5	Liu Corp.		0
106.6	Gomez Co.		2,748
106.7	Delta Co.		0
106.8	KC, Inc.		0
106.9	Dream, Inc.		0
119	Merchandise inventory		0
126	Computer supplies		620
128	Prepaid insurance		1,935
131	Prepaid rent		915
163	Office equipment		8,090
164	Accumulated depreciation—Office equipment			$	280
167	Computer equipment		20,100
168	Accumulated depreciation—Computer equipment				1,220
201	Accounts payable				1,210
210	Wages payable			$	700
236	Unearned computer services revenue				1,380
307	Common stock				68,000
318	Retained earnings				13,200
319	Dividends	$	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, 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:

Jan.	4	The company paid cash to Lyn Addie for five days’ work at the rate of $175 per day. Four of the five days relate to wages payable that were accrued in the prior year.
	5	Adria Lopez invested an additional $23,100 cash in the company in exchange for more common stock.
	7	The company purchased $7,200 of merchandise from Kansas Corp. with terms of 1/10, n/30, FOB shipping point, invoice dated January 7.
	9	The company received $2,748 cash from Gomez Co. as full payment on its account.
	11	The company completed a five-day project for Alex’s Engineering Co. and billed it $5,470, which is the total price of $6,850 less the advance payment of $1,380.
	13	The company sold merchandise with a retail value of $4,000 and a cost of $3,480 to Liu Corp., invoice dated January 13.
	15	The company paid $640 cash for freight charges on the merchandise purchased on January 7.
	16	The company received $4,060 cash from Delta Co. for computer services provided.
	17	The company paid Kansas Corp. for the invoice dated January 7, net of the discount.
	20	Liu Corp. returned $700 of defective merchandise from its invoice dated January 13. The returned merchandise, which had a $270 cost, is discarded. (The policy of Success Systems is to leave the cost of defective products in cost of goods sold.)
	22	The company received the balance due from Liu Corp., net of both the discount and the credit for the returned merchandise.
	24	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.
	26	The company purchased $9,900 of merchandise from Kansas Corp. with terms of 1/10, n/30, FOB destination, invoice dated January 26.
	26	The company sold merchandise with a $4,550 cost for $5,900 on credit to KC, Inc., invoice dated January 26.
	29	The company received a $486 credit memorandum from Kansas Corp. concerning the merchandise returned on January 24.
	31	The company paid cash to Lyn Addie for 10 days’ work at $175 per day.
Feb.	1	The company paid $2,745 cash to Hillside Mall for another three months’ rent in advance.
	3	The company paid Kansas Corp. for the balance due, net of the cash discount, less the $486 amount in the credit memorandum.
	5	The company paid $580 cash to the local newspaper for an advertising insert in today’s paper.
	11	The company received the balance due from Alex’s Engineering Co. for fees billed on January 11.
	15	The company paid $4,630 cash for dividends.
	23	The company sold merchandise with a $2,480 cost for $3,340 on credit to Delta Co., invoice dated February 23.
	26	The company paid cash to Lyn Addie for eight days’ work at $175 per day.
	27	The company reimbursed Adria Lopez for business automobile mileage (800 miles at $0.21 per mile).
Mar.	8	The company purchased $2,880 of computer supplies from Harris Office Products on credit, invoice dated March 8.
	9	The company received the balance due from Delta Co. for merchandise sold on February 23.
	11	The company paid $910 cash for minor repairs to the company’s computer.
	16	The company received $5,370 cash from Dream, Inc., for computing services provided.
	19	The company paid the full amount due to Harris Office Products, consisting of amounts created on December 15 (of $1,210) and March 8.
	24	The company billed Easy Leasing for $9,227 of computing services provided.
	25	The company sold merchandise with a $2,102 cost for $2,830 on credit to Wildcat Services, invoice dated March 25.
	30	The company sold merchandise with a $1,158 cost for $2,400 on credit to IFM Company, invoice dated March 30.
	31	The company reimbursed Adria Lopez for business automobile mileage (300 miles at $0.21 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 computer supplies still available totals $2,015.
b.	Three more months have expired since the company purchased its annual insurance policy at a $2,580 cost for 12 months of coverage.
c.	Lyn Addie has not been paid for seven days of work at the rate of $175 per day.
d.	Three months have passed since any prepaid rent has been transferred to expense. The monthly rent expense is $915.
e.	Depreciation on the computer equipment for January 1 through March 31 is $1,220.
f.	Depreciation on the office equipment for January 1 through March 31 is $280.
g.	The March 31 amount of merchandise inventory still available totals $624.

Question one is “Prepare journal entries to record each of the January through March transactions.”

Question two is “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.)”

question three is 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.

question four is 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.

question five is Prepare a statement of retained earnings (from the adjusted trial balance in part 3) for the three months ended March 31, 2014.

question six is Prepare a classified balance sheet (from the adjusted trial balance) as of March 31, 2014

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