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):

1. Record the transactions and events for the three months ending March 31, 2018, in general journal format. Record all prepaid expenses as assets at this time and all unearned revenues as liabilities. Do not record any adjusting journal entries based on the "additional data" at this time.

2. Post the journal entries prepared in (1.) to the general ledger T-accounts.

3. Prepare an unadjusted trial balance.

4. 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.

5. Prepare an adjusted trial balance.

6. Prepare an income statement for the first three months of Sheldon's operations. Remember to include the proper heading.

7. Prepare Sheldon's March 31, 2018, balance sheet. Remember to include the proper heading. Also, the balance sheet does NOT need to be a classified balance sheet.

Answer 1

	Sheldon Corporation
	General Journal
Date	Journal	Amount (DR)	Amount (CR)
01-Jan	Cash	$                   5,00,000.00
	To Common Stock		$                           5,00,000.00
	(Being amount of 5000 shares @ $100 per share)
02-Jan	Prepaid Insurance	$                       16,500.00
	To Cash		$                               16,500.00
	(Being amount paid for 24 month insurance)
03-Jan	Land	$                       50,000.00
	Building	$                   3,00,000.00
	To Cash		$                           3,50,000.00
	(Being amount of Land and building purchased)
10-Jan	Computer Network system	$                       36,000.00
	To Cash		$                               36,000.00
	(Being amount of computer network system purchased)
15-Jan	Phone system	$                         2,400.00
	To Cash		$                                 2,400.00
	(Being amount of Phone system purchased)
16-Jan	Equipment and Furniture	$                       12,000.00
	To Cash		$                               12,000.00
	(Being amount of Equipment and furniture purchased)
19-Jan	Office Supplies	$                         1,250.00
	To Cash		$                                 1,250.00
	(Being amount of Office Supplies purchased)
24-Jan	Program Supplies	$                       10,000.00
	To Cash		$                               10,000.00
	(Beeing amount of binders,manual and workbooks)
30-Jan	Wages	$                         1,800.00
	Salaries	$                         3,600.00
	To Cash		$                                 5,400.00
	(Being amount of Wages and Salaries)
14-Feb	Cash	$                         2,500.00
	Accounts Rceivable	$                         7,000.00
	To Service Revenue		$                                 9,500.00
	(Being amount of Service revenue)
14-Feb	Program Supplies Expenses	$                         1,500.00
	To Program Supplies		$                                 1,500.00
	(Being amount of supplies used for project)
15-Feb	Wages	$                         2,400.00
	To Cash		$                                 2,400.00
	(Being amount of Wages Paid)
18-Feb	Utilties Expenses	$                         1,050.00
	To Cash		$                                 1,050.00
	(Being amount of Utiltiies Expenses)
23-Feb	Program supplies	$                         1,800.00
	To Accounts Payable		$                                 1,800.00
	(Being amount of 30 specialized manual purchased on account)
28-Feb	Cash	$                       45,000.00
	To Bank Loan		$                               45,000.00
	(Being amount borrowed from bank @6% interest for two years)
01-Mar	Wages	$                         3,600.00
	Salaries	$                         6,000.00
	To Cash		$                                 9,600.00
	(Being amount of Wages and Salaries paid)
01-Mar	Cash($9200/2)	$                         4,600.00
	Accounts Receivable($11000+$4600)	$                       15,600.00
	To Service Revenue		$                               20,200.00
01-Mar	Program Supplies Expenss	$                         4,600.00
	To Program Supplies		$                                 4,600.00
	(Being amount of Program supplies used for two custmers)
04-Mar	Program Supplies	$                         3,600.00
	To Accounts Payable		$                                 3,600.00
	(Being amount of Program supplies purchased on account)
13-Mar	Cash	$                       16,600.00
	To Accounts Receivable		$                               16,600.00
	(Being amount received from customers)
15-Mar	Cash	$                         4,250.00
	To service Revenue		$                                 4,250.00
	(Being amount of service revenue for completed all day walk in customers)
15-Mar	Program supplies Expenses	$                         1,850.00
	To Program Supplies		$                                 1,850.00
	(Being amount of Program supplies used for workshop)
16-Mar	Accounts Receivable	$                         7,500.00
	To Service Revenue		$                                 7,500.00
	(Being amount billed to Coastal Corporation)
16-Mar	Program Supplies Expenses	$                         2,500.00
	To Program Supplies		$                                 2,500.00
	(Being amount of Program supplies used for training cost)
16-Mar	Wages	$                         3,700.00
	To Cash		$                                 3,700.00
	(Being amount of wages paid)
17-Mar	Office Supplies	$                             750.00
	To Accounts Payable		$                                     750.00
	(Being amount of Office Supplies purchased on account)
21-Mar	Accounts Payable	$                         3,200.00
	To Cash		$                                 3,200.00
	(Being amount paid for office supplies purchased on account previously)
23-Mar	Utilties Expenses	$                         1,800.00
	To Cash		$                                 1,800.00
	(Being amount paid for utilties expenses)
26-Mar	Cash	$                         2,000.00
	To Unearned Service Revenue		$                                 2,000.00
	(Being amoutn received as advance from watson Company)
29-Mar	Cash	$                         6,250.00
	To Accounts Receivable		$                                 6,250.00
	(Being amount received from customers)
31-Mar	Program supplies	$                         3,600.00
	To Cash		$                                 3,600.00
	(Being amoutn of Program supplies purchased)
	Adjusting Entries
Date	Particular	Amount (Dr)	Amount(Cr)
31-Mar	Wages	$                         2,700.00
	Salaries	$                         8,500.00
	To Wages Payable		$                                 2,700.00
	To Salary Payable		$                                 8,500.00
	(Being amount of wages and salaries payable)
31-Mar	Accounts Receivable	$                         9,300.00
	To Service Revenue		$                                 9,300.00
	(Being amount of service revenue unrecorded and unbilled)
31-Mar	Program Supplies Expenses	$                         2,800.00
	To Program Supplies		$                                 2,800.00
	(Being amount of program supplies)
31-Mar	Office Supplies Expenses	$                         1,550.00
	To Office Supplies($1250+$750-$450)		$                                 1,550.00
31-Mar	Depreciation -Building($300000/30)*3/12	$                         2,500.00
	To Accumulated Depreciation-Building		$                                 2,500.00
	(Being aomount of Depreciation on building)
31-Mar	Depreciation-Computer ($36000/6)*3/12	$                         1,500.00
	To Accumulated Deprciation-Computer		$                                 1,500.00
	(Being amount of depreciation on computer)
31-Mar	Depreciation-Phone System($2400/3)*3/12	$                             200.00
	To Accumulated Depreciation-Phone System		$                                     200.00
	(Being amount of depreciation on Phone System)
31-Mar	Depreciation-Equipment & Furniture($12000/4)*3/12	$                             750.00
	To Accumulated Depreciation-Equipment & Furniture		$                                     750.00
	(Being amount of Depreciation on Equipment & Furniture)
31-Mar	Interest A/c=($45000*.5%)	$                             225.00
	To Interest Payable		$                                     225.00
	(Being amount of Interest accrued on amount borrowed from bank )
31-Mar	Utilties Expenses	$                         1,800.00
	To Utilties Expenses Payable		$                                 1,800.00
	(Being amount of Utilties Expenses Payable)
31-Mar	Insurance Expenses=($12000/24)*3	$                         1,500.00
	To prepaid insurance		$                                 1,500.00
	(Being amount of insurance expired fro 3 months)