Question

PREPARE JOURNAL ENTRIES FOR THE FOLLOWING.

1. January 2: Mr. Burns opened up his new company and dissolved the old one. The balances of the accounts (with the exception of fixed assets and uncollectible) were transferred over from the old business. Mr. Burns decided that he needed to invest more money into the business in order to get operational. Mr. Burns invested $2,120,000 to create stock.

2. January 3: Mr. Burns bought a cookie making machine for $500,000 from Cookie Makers on account. The machine has a life of 10 years and a salvage value of $100,000. The machine will use the straight-line depreciation method.

3. January 4: Mr. Burns bought an oven from the Try-N-Save. He took out a note for five months at an interest rate of 10%. The amount of the note was $400,000. The oven has a useful life of 4 years and will use the straight line method of depreciation. The expected salvage value of the oven at the end of its useful life is $50,000.

4. January 15: Mr. Burns bought cookie dough (inventory) to make his cookies. Mr. Burns paid $250,000 for the cookie dough.

5. January 17: Mr. Burns earned the rest of his unearned rent revenue of $300,000 from last year from his nuclear power plant.

6. February 6: After promising to change his evil ways, Lisa Simpson agrees to help Mr. Burns sell his cookies. Lisa sells some cookies to Old Folks Home for $130,000 on account. The cost of selling the cookies was $70,000. For prompt payment, Mr. Burns offered the discount of 1/10, n30.

                                                                                

7. February 20: Mr. Burns sold his delicious cookies to Candy Store on account $200,000. Mr. Burns offered terms 2/20, n30. The cost of merchandise sold was $100,000.

8. February 28: Mr. Burns bought a new truck so he could sell more cookies. Mr. Burns paid $30,000 dollars for the truck. The truck was not expected to have salvage value. Mr. Burns decided to depreciate the truck by straight line. The truck has an expected life of three years.

9. February 28: Mr. Burns collected cash from Homer Simpson of $22,000. The note receivable was signed last December 15. He collected the face value of the note, $16,000 plus the interest receivable recorded last year. Since Homer allowed Lisa to work for him, he decided only to collect the interest accrued last year and not the interest for January and February.

10. March 5: Mr. Burns bought more cookie dough (inventory) to continue to make his cookies. He bought $600,000 worth of inventory. There was also a $20,000 freight charge. The terms of the shipping agreement was FOB shipping. Mr. Burns paid for the whole amount. (Do one journal entry)

11. March 6: Since many families of the City of Springfield did not pay the Old Folks Home last month, Mr. Burns could only collect some of what he was owed on account from February 6. He was only able to collect $80,000 of what was owed. After consulting with Mr. Smithers, Mr. Burns agreed that he no choice but to write off the rest, $50,000 of the amount as uncollectible.

12. March 7: The Candy Store paid Mr. Burns what they owed him on account.

13. March 15: Mr. Burns paid $70,000 of income tax payable owed from last year.

14. April 1: Mr. Burns sold cookies to the Grocery Store on account $400,000. This amount included $15,000 of prepaid freight costs paid by Mr. Burns and added to the invoice. The terms were FOB shipping point. The discount terms were 2/30, n/45. The cost of merchandise sold was $200,000.

15. April 4: Because of cockroaches in some of the cookie dough, the store returned $90,000 worth of the cookie dough. The cost of the merchandise returned was $40,000.

16. April 10: Mr. Burns paid for the following expenses: Advertising $120,000, Office Salaries $55,000, Wages $20,000, and Utility $10,000. (Do one journal entry)

17. May 01: The Grocery Store paid Mr. Burns for the rest of the cookie dough it bought on account.

18. June 1: After threatening revenge against all those who owed him money on account from when he owed the nuclear power plant, he was paid the full amount of what he was owed prior to going into the cookie business. This amounted to $360,000.

19.   June 2: After coming into some extra money, The Old Folks Home decided to pay $40,000 that they owed to Mr. Burns even though there account has been written off. Record the reinstatement of the account and the payment.

20. June 3: Mr. Burns paid for the note he issued to the Try-N-Save on January 3. The payment included the full amount for the oven and the interest.

21. July 5: The following expenses accrued and are to be paid in a later month: Pension Expense $60,000, Health Insurance Expense $50,000, and Professional Fees $10,000. (Do one journal entry)

22. July 25: Mr. Burns paid $100,000 on account that he owed from the Cookie Machine he bought in January. Mr. Burns agreed to issue a note for the rest of the money he owed on account in transaction 2. The note is to be paid next year and has an interest rate of 12%.

23. August 10: Mr. Burns sold cookies on account to Mayor Quimby for has nephew’s 18^th birthday party. Mr. Burns sold $150,000 worth of cookies. The terms were n30 and the cost of merchandise sold was $50,000.

24. September 8: Mr. Burns paid the expenses that accrued on account in transaction 21 (use Cash only once).

25. October 5: Mr. Burns paid off his note from July 25.

26   October 15: Mayor Quimby issued a note to Mr. Burns for transaction 23 due to the fact he had no money because he gave it to Fat Tony and the mob to fix the polls of Springfield so he could get reelected. Mayor Quimby promised to pay Mr. Burns cookies on December 1. The interest rate is 20%.

27. November 1: After being advised by legal council and Mr. Smithers that killing off competition was considered murder, Mr. Burns decided to get a patent to keep from his secrets from being used by his rivals. He paid $40,000 for his patent which will be amortized for 15 years.

28. December 1: After holding his nephew hostage, Mayor Quimby agreed to pay the note and interest he owed to Mr. Burns. Mayor Quimby raised taxes to get the funds.

29. December 8: Mr. Burns bought office supplies on account from Staples for $30,000.

30. Mr. Burns sold $450,000 of cookies on account to Shelbyville. The cost of sales was $250,000

31. Mr. Burns withdrew (dividends to himself) $60,000 dollars to bribe judges and win the Miss Springfield contest.

32. Mr. Burns funded Side Show Bob’s run for Mayor of Springfield from an offshore account. The amount withdrawn from the account was $100,000

Answer 1

Following are the journal entries for the company