Question

Mason Automotive is an automotive parts company that sells car parts and provides car service to customers. This is Mason's first year of operations and they have hired you as their CPA to prepare the income statement and balance sheet for their company. As such, January 1st , 2019 was the first day that Mason was in business. For the month of January, record all the necessary journal entries for transactions that occurred during the month. In addition, please prepare all necessary adjusting journal entries as of the end of the month. From the information below, please fill out the "journal entries tab" for all the necessary journal entries. Furthermore, please complete the "T-Accounts" tab for the individual accounts so that the trial balance tab can be updated (automatically). I prepared the first journal entry for you in the journal entries tab and T-Accounts tab. Ensure you label the entries similar to how I have shown in Entry #1. Once all entries are recored and the T-Accounts tab is updated, please prepare the financial statements (income statement and balance sheet) for the month of January.

I just need help in the T-Accounts only

Journal Entry #1

Mason Automotive sells 20,000,000 shares at $1 par for $20 on January 1st, 2019.

Journal Entry #2

Ed Mason, the CEO, hires 4,500 employees, whom will receive a combined salary of $5 Million on a monthly basis. The employees started on January 1st and will be paid for the month of January on February 4th. Employee's withholdings are as follows: 10% for federal income taxes 5.5% for state income taxes and 9% for FICA. Record the necessary entry as of January 1st, 2019.

Journal Entry #3

On January 20th, Mason Automotive decides to purchase 100,000 shares of Treasury stock at $23 per share.

Journal Entry #4

Mason Automotive issues a bond payable on January 1st, 2019 with a face value of $100 Million at 97. The bond will have a useful life of 20 years with an interest payment of 6% (Annual Percentage Rate) due at the end of the month. Record the necessary journal entry as of January 1st, 2019. (Note: When considering the amortization of the discount or premium, assume the straight line method is used).

Journal Entry #5

On January 1st, Mason Automotive receives $50 Million advance payment from a customer, Highland Inc., to manufacture 5,000 cars.

Journal Entry #6

Mason Automotive purchased $253 Million dollars worth of inventory on January 2nd, 2019. $87 Million was paid with cash with the remaining balance on account. Mason notes that it will use a perpetual inventory system to track inventory.

Journal Entry #7

On January 2nd, Mason Automotive shipped an order to Panther Paws Corporation. The shipping terms were FOB shipping point. The sales value of the order was $207 Million and the inventory cost was $157 Million. Assume that this sale was made on account.

Journal Entry #8

Mason Automotive pre-pays for Rent Expense for the next year of $15.6 Million on January 3rd, 2019.

Journal Entry #9

Mason Automotive purchased $5 Million dollars worth of supplies on account on January 2nd, 2019.

Journal Entry #10

Mason Automotive buys a patent from Apple for $21 Million on January 3rd, 2019. The patent has a legal life of 25 years and useful life of 20 years. Record the necessary entry as of January 3rd, 2019. Assume the patent was purchased using cash.

Journal Entry #11

Mason Automotive purchases fixed assets of $170 Million that will have a useful life of 20 years and a salvage value of $20 million on January 4th, 2019. $30 million was paid with cash with the remaining balance on account. These assets are depreciated using the straight-line method. Prepare a balance sheet for the month of January

Answer 1

			Fig. in Mlns.
No.	Date	Account Title	Debit	Credit
1	Jan 1,2019	Cash	400
		Common stock		20
		APIC-Common stock		380
2		Salaries expense	5
		Federal Income tax withholding		0.5
		State Income tax withholding		0.275
		FICA taxes payable		0.45
		Salaries payable		3.775
		Payroll tax expense	0.45
		FICA taxes payable		0.45
3		No JE reqd.
		No financial transaction has taken place--only decision to purchase
4		Cash (100*0.97)	97
		Discounts on bond payable	3
		Bonds payable		100
5		Cash	50
		Unearned revenue		50
6	2-Jan	Inventory	253
		Cash		87
		Notes payable(253-87)		166
7		Accounts receivable	207
		Sales revenue		207
		Cost of goods sold	157
		Inventory		157
8		Prepaid rent	15.6
		Cash		15.6
9		Supplies	5
		Accounts payable		5
10	3-Jan	Patent	21
		Cash		21
11	4-Jan	Fixed assets	170
		Cash		30
		Accounts payable		140
	31-Jan	Adjusting entries
12		Interest expense	0.5125
		Interest payable( $ 100*6%/12 mths*1mth)		0.5
		Discount on bonds payable( $ 3/20 yrs./12 mths)		0.0125
13		Amortisation expense($ 21/20 yrs./12mths.* 1mth)	0.0875
		Acc. Amortsn.-Patent		0.0875
14		Depreciation expense($ 170-20)/20 yrs./12mths.* 1mth)	0.625
		Acc. Depn.-Fixed assets		0.625
			1385.275	1385.275

Trial Balance
Cash	393.4
Accounts receivable	207
Inventory	96
Supplies	5
Prepaid rent	15.6
Fixed assets	170
Acc. Depn.-Fixed assets		0.625
Patent	21
Acc. Amortsn.-Patent		0.0875
Accounts payable		145
Unearned revenue		50
Salaries payable		3.775
Federal Income tax withholding		0.5
State Income tax withholding		0.275
FICA taxes		0.9
Interest payable		0.5
Bonds payable		100
Discounts on bond payable	2.9875
Notes payable		166
Common stock		20
APIC-Common stock		380
Sales revenue		207
Cost of goods sold	157
Salaries expense	5
Payroll tax expense	0.45
Amortisation expense	0.0875
Depreciation expense	0.625
Interest expense	0.5125
Totals	1074.663	1074.663
Income Statement
Sales revenue		207
Cost of goods sold		157
Gross profit		50
Less :Operating expenses:
Salaries expense	5
Payroll tax expense	0.45
Amortisation expense	0.0875
Depreciation expense	0.625	6.1625
Operating income		43.8375
Less:Interest expense		0.5125
Net Income		43.325
Balance sheet
Assets
Cash	393.4
Accounts receivable	207
Inventory	96
Supplies	5
Prepaid rent	15.6
Total current assets		717
Fixed assets	170
Acc. Depn.-Fixed assets	-0.625
Patent	21
Acc. Amortsn.-Patent	-0.0875	190.2875
Total assets		907.2875
Liabilities &SH Equity
Accounts payable	145
Unearned revenue	50
Salaries payable	3.775
Federal Income tax withholding	0.5
State Income tax withholding	0.275
FICA taxes	0.9
Interest payable	0.5
Total current liabilities		200.95
Bonds payable	100
Discounts on bond payable	-2.9875
Notes payable	166
Total Non-current liabilities		263.0125
SH Equity
Common stock	20
APIC-Common stock	380
Net Income	43.325
Total SH Equity		443.325
Total Liabilities &SH Equity		907.2875