Accounting Transactions - January

• Santana Rey is expanding its business to include the sale of computer software.
• Credit terms of 1/10, n/30, FOB shipping point will be extended to customers purchasing this software.
• No cash discount is available on consulting fees.
• New general ledger accounts (119, 413, 414, 415, 502) are created to track merchandising activities.

January Transactions

• Jan 4: Lyn Addie was paid cash for five days' work at $155 per day, with four days relating to accrued wages from the prior year.
• Jan 5: Santana Rey invested an additional $24,400 cash into the company.
• Jan 7: Merchandise worth $6,000 was purchased from Kansas Corporation with terms 1/10, n/30, FOB shipping point, invoice dated January 7.
• Jan 9: $2,718 cash was received from Gomez Company as full payment on its account.
• Jan 11: A five-day project for Alex's Engineering Company was completed and billed for $5,460 ($6,910 total price less $1,450 advance payment). Unearned Computer Services Revenue was debited for $1,450.
• Jan 13: Merchandise with a retail value of $4,900 and a cost of $3,390 was sold to Liu Corporation, invoice dated January 13.
• Jan 15: $700 cash was paid for freight charges on the merchandise purchased on January 7.
• Jan 16: $4,110 cash was received from Delta Company for computer services provided.
• Jan 17: Kansas Corporation was paid for the invoice dated January 7, net of the discount.
• Jan 20: A price reduction (allowance) of $500 was given to Liu Corporation, and Liu's accounts receivable was credited.
• Jan 22: The balance due from Liu Corporation was received, net of the discount and the allowance.
• Jan 24: Defective merchandise was returned to Kansas Corporation, and a credit was accepted against future purchases (accounts payable debited). The defective merchandise invoice cost was $486 net of discount.
• Jan 26: Merchandise worth $9,500 was purchased from Kansas Corporation with terms 1/10, n/30, FOB destination, invoice dated January 26.
• Jan 26: Merchandise with a $4,520 cost was sold for $5,960 on credit to KC, Incorporated, invoice dated January 26.
• Jan 31: Lyn Addie was paid cash for 10 days' work at $155 per day.

February Transactions

• Feb 1: $2,685 cash was paid to Hillside Mall for another three months’ rent in advance.
• Feb 3: Kansas Corporation was paid for the balance due, net of the cash discount, less the $486 credit from merchandise returned on January 24.
• Feb 5: $440 cash was paid to Facebook for an advertisement to appear on February 5 only.
• Feb 11: The balance due from Alex’s Engineering Company for fees billed on January 11 was received.
• Feb 15: Santana Rey withdrew $4,620 cash from the company for personal use.
• Feb 23: Merchandise with a $2,560 cost was sold for $3,310 on credit to Delta Company, invoice dated February 23.
• Feb 26: Lyn Addie was paid cash for eight days’ work at $155 per day.
• Feb 27: Santana Rey was reimbursed $320 cash for business automobile mileage and recorded as "Mileage Expense."

March Transactions

• Mar 8: Computer supplies worth $2,920 were purchased from Harris Office Products on credit with terms n/30, FOB destination, invoice dated March 8.
• Mar 9: The balance due from Delta Company for merchandise sold on February 23 was received.
• Mar 11: $800 cash was paid for minor repairs to the company’s computer.
• Mar 16: $5,340 cash was received from Dream, Incorporated, for computing services provided.
• Mar 19: The full amount due of $4,170 was paid to Harris Office Products, consisting of amounts created on December 15 ($1,250) and March 8.
• Mar 24: Easy Leasing was billed for $9,227 of computing services provided.
• Mar 25: Merchandise with a $2,132 cost was sold for $2,880 on credit to Wildcat Services, invoice dated March 25.
• Mar 30: Merchandise with a $1,198 cost was sold for $2,230 on credit to IFM Company, invoice dated March 30.
• Mar 31: Santana Rey was reimbursed $192 cash for business automobile mileage and recorded as "Mileage Expense."

Adjustments on March 31

• Computer supplies still available total $2,185.
• Prepaid Insurance coverage of $636 expired during the three-month period.
• Lyn Addie has not been paid for seven days of work at $155 per day.
• Prepaid rent of $2,685 expired during the three-month period.
• Depreciation on the computer equipment for January 1 through March 31 is $1,080.
• Depreciation on the office equipment for January 1 through March 31 is $200.
• Merchandise inventory still available totals $564.

Income Statement Preparation

• Single-step format: List all expenses without differentiating between selling expenses and general/administrative expenses.
• Multiple-step format:
  • Begins with gross sales (service revenues plus gross product sales) and includes separate categories for net sales, cost of goods sold, selling expenses, and general/administrative expenses.
  • Selling expenses: Wages Expense, Mileage Expense, and Advertising Expense.
  • Remaining expenses are categorized as general and administrative.