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.

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.

Answer 1

	Date	Account titles			Debit	Credit
	Jan 1.	Cash			500000
		Common stock				500000
		(Sold 5,000 shares of capital stock)
	Jan 2.	Prepaid insurance			12000
		Cash				12000
		(Paid the premium on a 24-month insurance policy)
	Jan 3.	Land			50000
		Building			300000
		Cash				350000
		( Purchased land and a building)
	Jan 10.	Computer network			36000
		Cash				36000
		( Purchased a computer network system )
	Jan 15.	Phone system			2400
		Cash				2400
		(Paid $2,400 cash for a phone system)
	Jan 16.	Furniture			12000
		Cash				12000
		(Paid cash to acquire equipment and furniture)
	Jan 19.	Office supplies			1250
		Cash				1250
		(Purchased office supplies)
	Jan 24.	Program supplies			10000
		Cash				10000
		(Paid cash for binders, manuals, and workbooks)
	Jan 30.	Wages			1800
		Salaries			3600
		Cash				5400
		(Paid wages and salaries )
	Feb 14.	Cash			2500
		Accounts receivable			7000
		Service revenue				9500
		(Completed the first client program)
		Program supplies expense			1500
		Program supplies				1500
		(Program supplies used on the project)
	Feb 15.	Wages			2400
		Cash				2400
		(Paid wages)
	Feb 19.	Utility expense			1050
		Cash				1050
		(Paid utilities for the month of January)
	Feb 23.	Program supplies			1800
		Accounts payable				1800
		(Purchased on account 30 specialized manuals)
	Feb 28.	Cash			45000
		Notes payable				45000
		(Borrowed from the bank on a 2-year note)
	Mar 1.	Wages			3600
		Salaries			6000
		Cash				9600
		(Paid wages and salaries )
	Mar 1.	Cash		(9200*1/2)	4600
		Accounts receivable			15600
		Service revenue		(11000+9200)		20200
		(Completed on-site computer training for two customers)
		Program supplies expense			4600
		Program supplies				4600
		(Program supplies used on the project)
	Mar 4.	Program supplies			3600
		Accounts payable				3600
		(Purchased additional program supplies on account)
	Mar 13.	Cash			16600
		Accounts receivable				16600
		(Collected $16,600 on account from credit customers)
	Mar 15.	Cash			4250
		Service revenue				4250
		(Completed first all-day computer workshop for walk-in customers)
		Program supplies expense			1850
		Program supplies				1850
		(Program supplies used on the project)
	Mar 16.	Accounts receivable			7500
		Service revenue				7500
		(Billed Coastal Corporation for on-site training)
		Program supplies expense			2500
		Program supplies				2500
		(Program supplies used on the project)
	Mar 16.	Wages			3700
		Cash				3700
		(Paid wages)
	Mar 17.	Office supplies			750
		Accounts payable				750
		(Purchased office supplies on account)
	Mar 21.	Accounts payable			3200
		Cash				3200
		( Paid to suppliers for materials previously purchased)
	Mar 23.	Utility expense			1800
		Cash				1800
		(Paid utilities for the month of February)
	Mar 26.	Cash			2000
		Unearned service revenue				2000
		(Received cash advance from Watson Company)
	Mar 29.	Cash			6250
		Accounts receivable				6250
		( Collected on account from credit customers)
	Mar 31.	Program supplies			3600
		Cash				3600
		(Purchased program supplies for cash)