On October 1, 2017, Santana Rey launched a computer services company called Business Solutions, which provides consulting services, computer system installations, and custom program development. Rey adopts the calendar year for reporting purposes and expects to prepare the company’s first set of financial statements on December 31, 2017. The company’s initial chart of accounts follows.
- Prepare journal entries to record each of the following transactions for Business Solutions.
- Open ledger accounts (in balance column format) and post the journal entries from part 1 to them. 3. Prepare a trial balance as of the end of November.
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On October 1 , 2016, the Submarine Sandwich Company entered into a franchise agreement with an individual. In exchange for an initial franchise fee of $300,000, Submarine will provide initial services to the franchisee to include assistance in design and construction of the building, help in training employees, and help in obtaining financing. Ten percent of the initial franchise fee is payable on October 1, 2016, with the remaining$270,000 payable in nine equal annual installments beginning on October 1, 2017. These installments will include interest at an appropriate rate. The franchise opened for business on January 15, 2017. Required: Assume that the initial services to be performed by Submarine Sandwich subsequent to October 1, 2016, are substantial and that collectibility of the installment receivable is reasonably certain. Substantial performance of the initial services is deemed to have occurred when the franchise opened. Prepare the necessary journal entries for the following dates (ignoring interest charges): 1. October 1, 2016. 2. January 15, 2017
The computer workstation furniture manufacturing that Santana Rey started for Business Solutions is progressing well. Santana uses a job order costing system to account for the production costs of this product line. Santana is wondering whether process costing might be a better method for her to keep track of and monitor her production costs. 1. What are the features that distinguish job order costing from process costing? 2. Should Santana continue to use job order costing or switch to process costing for her workstation furniture manufacturing? Explain.
Santana Rey’s two departments, computer consulting services and computer workstation furniture manufacturing, have each been profitable for Business Solutions. Santana has heard of the balanced scorecard and wants you to provide details on how it could be used to measure performance of her departments. 1. Explain the four performance perspectives included in a balanced scorecard. 2. For each of the four performance perspectives included in a balanced scorecard, provide examples of measures Santana could use to measure performance of her departments.
Santana Rey created Business Solutions on October 1, 2017. The company has been successful, and Santana plans to expand her business. She believes that an additional $86,000 is needed and is investigating three funding sources. a. Santana’s sister Cicely is willing to invest$86,000 in the business as a common shareholder. Since Santana currently has about $129,000 invested in the business, Cicely’s investment will mean that Santana will maintain about 60% ownership and Cicely will have 40% ownership of Business Solutions. b. Santana’s uncle Marcello is willing to invest$86,000 in the business as a preferred shareholder. Marcello would purchase 860 shares of $100 par value, 7% preferred stock. c. Santana’s banker is willing to lend her$86,000 on a 7%, 10-year note payable. She would make monthly payments of $1,000 per month for 10 years. 1. Prepare the journal entry to reflect the initial$86,000 investment under each of the options (a), (b), and (c). 2. Evaluate the three proposals for expansion, providing the pros and cons of each option. 3. Which option do you recommend Santana adopt? Explain.