Question

The Sheldon Corporation began a consulting business specializing in on-site computer training on January 1, 2018. The following transactions took place during its first three months of operations.

Summary of Transactions

Jan. 1 Sold 5,000 shares of capital stock for a total of $500,000 cash.

Jan. 2 Paid the premium of $12,000 on a 24-month insurance policy on all assets.

Jan. 3 Purchased land and 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 expected to have a useful life of 30 years.

Jan. 10 Purchased a computer network system for $36,000 cash. The expected useful life is 6 years.

Jan. 15 Paid $2,400 cash for a phone system that should have a 3-year useful life.

Jan. 16 Paid cash to acquire equipment and furniture for business purposes at a cost of $12,000. The expected useful life is 4 years.

Jan. 19 Purchased office supplies for $1,250 cash. (Use the asset account “Office Supplies” for such purchases.)

Jan. 24 Paid cash of $10,000 for binders, manuals, and workbooks for use in Sheldon's client programs. Sheldon's policy is to initially record these materials as an asset (Program Supplies) and to then expense the materials used for a particular training program when the program is completed.

Jan. 30 Paid wages of $1,800 and salaries of $3,600 for work performed during January.

Feb. 14 Completed the first client program for a fee of $9,500. The customer paid $2,500 of the fee that day, with the remainder billed on account. Program supplies used on the project had originally cost Sheldon $1,500.

Feb. 15 Paid wages of $2,400 in cash.

Feb. 19 Paid utilities for the month of January of $1,050 in cash.

Feb. 23 Purchased on account 30 specialized manuals as program supplies for use in computer training for a total of $1,800.

Feb. 28 Borrowed $45,000 from 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 and salaries of $6,000.

Mar. 1 Completed on-site computer training for two customers: JKL Products, Inc., and Watson Company. Billed JKL $11,000 on account. The fee for Watson was $9,200, half of which Watson paid in cash with the remainder on account. Program supplies used for the two customers totaled $4,600.

Mar. 4 Purchased additional program supplies on account for a total of $3,600.

Mar. 13 Collected $16,600 on account from credit customers.

Mar. 15 Completed first all-day computer workshop for walk-in customers. Sales totaled $4,250, all in cash. Program supplies used for the workshop originally cost Sheldon $1,850.

Mar. 16 Billed Coastal Corporation $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 to suppliers for materials previously purchased on account.

Mar. 23 Paid utilities for the month of February of $1,800 in cash.

Mar. 26 Received a $2,000 cash advance from Watson Company for additional computer training to begin April 1, 2018.

Mar. 29 Collected $6,250 on account from credit customers.

Mar. 31 Purchased $3,600 of program supplies for cash.

Additional Data Determined at 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 originally cost Sheldon $2,800.

Office supplies on hand at March 31 totaled $450.

Sheldon uses straight-line depreciation on all depreciable assets and assumes the assets will have no value at the end of their estimated useful lives. A full month's depreciation is taken for the month of purchase, regardless of which day of the month the purchase is made. For example, depreciation expense for the three months 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 considered depreciable. You may use a single account (Depreciation Expense) to record all of the depreciation expense for the depreciable assets. Also, you may use a single account (Accumulated Depreciation) to record 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.

Required (round all amounts to the nearest dollar):

Record the necessary adjusting journal entries based on the "additional data" at March 31 in the general journal and then post these journal entries to the T- accounts.

Answer 1

Record necessary adjusting Journal entries
Date	General Journal	Debit	Credit
Mar 31	Wages Expense	2700
	Wages Payable		2700
Mar 31	Salary Expense	8500
	Salary Payable		8500
Mar 31	Accounts Receivable	9300
	Service revenue		9300
Mar 31	Supplies expense	2350
	Supplies		2350
Mar 31	Insurance Expense	1500
	Prepaid Insurance		1500
Mar 31	Interest expense	225
	Interest payable		225
Mar 31	Utilities Expense	1800
	Utilities payable		1800
Mar 31	Depreciation Expense	4950
	Accumulated Depreciation		4950
	Building - cost	300000
	Useful life	30
	Depreciation per year	10000
	Depreciation for three months		2500
	Computer network system - cost	36000
	Useful life	6
	Depreciation per year	6000
	Depreciation for three months		1500
	Phone system - cost	2400
	Useful life	3
	Depreciation per year	800
	Depreciation for three months		200
	Equipment and Furniture - cost	12000
	Useful life	4
	Depreciation per year	3000
	Depreciation for three months		750
	Total Depericiation expenses		4950

Post these entries to the "T" Accounts
Wages Expense
Balance
Mar 31	2700
Balance
Wages Payable
			Balance
		2700	Mar 31
			Balance
Salary Expense
Balance
Mar 31	8500
Balance
Salary Payable
			Balance
		8500	Mar 31
			Balance
Accounts Receivable
Balance
Mar 31	9300
Balance
Service Revenue
			Balance
		9300	Mar 31
			Balance
Supplies Expense
Balance
Mar 31	2350
Balance
Supplies
Balance
		2350	Mar 31
Balance
Insurance Expense
Balance
Mar 31	1500
Balance
Prepaid Insurance
Balance
		1500	Mar 31
Balance
Interest Expense
Balance
Mar 31	225
Balance
Interest Payable
			Balance
		225	Mar 31
			Balance
Utilities Expense
Balance
Mar 31	1800
Balance
Utilities Payable
			Balance
		1800	Mar 31
			Balance
Depreciation Expense
Balance
Mar 31	4950
Balance
Accumulated Depreciation
			Balance
		4950	Mar 31
			Balance