Answer:
Mason Automotive sells 10,000,000 shares at $5 par for $15 on January 1st, 2019.
Dr Cash 150,000,000
Cr Common stock 50,000,000
Cr Additional paid in capital 100,000,000
Ed Mason, the CEO, hires 4,000 employees, whom will receive a combined salary of $6.5 Million on a monthly basis. The employees started on January 1st and will be paid for the month of January on February 5th. Employee's withholdings are as follows: 10% for federal income taxes 5% for state income taxes and 7% for FICA. Record the necessary entry as of January 1st, 2019.
No journal entry required
Adjusting entry:
January 31, 2019, wages expense
Dr Wages expense 6,500,000
Dr FICA taxes expense 455,000
Cr Federal income taxes withheld payable 650,000
Cr State income taxes withheld payable 325,000
Cr FICA taxes withheld payable 455,000
Cr FICA taxes payable 455,000
Cr Wages payable 5,070,000
On January 1st, Mason Automotive receives $70 Million advance payment from a customer, Highland Inc., to manufacture 7,000 cars.
Dr Cash 70,000,000
Cr Deferred revenue 70,000,000
Adjusting entry:
January 31, 2019, 5,000 cars were finished and delivered
Dr Deferred revenue 35,000,000
Cr Sales revenue 35,000,000
Mason Automotive issues a bond payable on January 1st, 2019 with a face value of $500 Million at 98. The bond will have a useful life of 10 years with an interest payment of 8% (Annual Percentage Rate) due at the end of the month. Record the necessary journal entry as of January 1st, 2019.
Dr Cash 490,000,000
Dr Discount on bonds payable 10,000,000
Cr Bonds payable 10,000,000
(Note: When considering the amortization of the discount or premium, assume the straight line method is used).
Adjusting entry
January 31, 2019, interest expense
Dr interest expense 3,416,666
Cr Discount on bonds payable 83,333
Cr Interest payable 3,333,333
Mason Automotive purchased $6 Million dollars worth of supplies on account on January 2nd, 2019.
Dr Supplies 6,000,000
Cr Accounts payable 6,000,000
Adjusting entry
January 31, 2019, supplies expense
Dr Supplies expense 3,500,000
Cr Supplies 3,500,000
On January 2nd, Mason Automotive shipped an order to Panther Paws Corporation. The shipping terms were FOB shipping point and the value of the order was $95 Million and the inventory cost was $55 Million. Assume that this sale was made on account. Dr Accounts receivable 95,000,000
Cr Sales revenue 95,000,000
Dr Cost of goods sold 55,000,000
Cr Inventory 55,000,000
Adjusting entry:
January 31, 2019, allowance for doubtful accounts (3%)
Dr Bad debt expense 2,850,000
Cr Allowance for doubtful accounts 2,850,000
Mason Automotive purchased $150 Million dollars worth of inventory on January 2nd, 2019. $80 Million was paid with cash with the remaining balance on account. Mason notes that it will use a perpetual inventory system to track inventory.
Dr Inventory 150,000,000
Cr Cash 80,000,000
Cr Accounts payable 70,000,000
Mason Automotive buys a patent from Apple for $20 Million on January 3rd, 2019. The patent has a legal life of 20 years and the useful life was the same. Record the necessary entry as of January 3rd, 2019. Assume the patent was purchased using cash. Dr Patent 20,000,000
Cr Cash 20,000,000
Adjusting entry:
January 31, 2019, patent amortization expense
Dr Patent amortization expense 83,333
Cr Patent 83,333
Mason Automotive pre-pays for Rent Expense for the next year of $12 Million and Insurance Expense of $3.7 Million on January 3rd, 2019.
Dr Prepaid rent 12,000,000
Dr Prepaid insurance 3,700,000
Cr Cash 15,700,000
Adjusting entries:
January 31, 2019, rent expense
Dr Rent expense 1,000,000
Cr Prepaid rent 1,000,000
January 31, 2019, insurance expense
Dr Insurance expense 308,333
Cr Prepaid insurance 308,333
Mason Automotive purchases fixed assets of $100 Million that will have a useful life of 10 years and a salvage value of $20 million on January 4th, 2019. $20 million was paid with cash with the remaining balance on account. These assets are depreciated using the straight-line method.
Dr Fixed assets 100,000,000
Cr Cash 20,000,000
Cr Accounts payable 80,000,000
Adjusting entry:
January 31, 2019, depreciation expense
Dr Depreciation expense 666,667
Cr Accumulated depreciation - fixed assets 666,667
On January 20th, Mason Automotive decides to purchase 500,000 shares of Treasury stock at $35 per share.
Dr Treasury stock 17,500,000
Cr Cash 17,500,000