Business, 21.07.2020 22:01 chrisd2432

Mason Automotive is an automotive parts company that sells car parts and provides car service to customers. This is Mason's first year of operations and they have hired you as their CPA to prepare the income statement and balance sheet for their company. As such, January 1st , 2019 was the first day that Mason was in business. For the month of January, record all the necessary journal entries for transactions that occurred during the month. In addition, please prepare all necessary adjusting journal entries as of the end of the month. Journal Entry #1
Mason Automotive sells 10,000,000 shares at $5 par for $15 on January 1st, 2019.

Journal Entry #2
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.

Journal Entry #3
On January 1st, Mason Automotive receives $70 Million advance payment from a customer, Highland Inc., to manufacture 7,000 cars.

Journal Entry #4
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.

Journal Entry #5
Mason Automotive purchased $6 Million dollars worth of supplies on account on January 2nd, 2019.

Journal Entry #6
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.

Journal Entry #7
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.

Journal Entry #8
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.

Journal Entry #9
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.

Journal Entry #10
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.

Journal Entry #11
On January 20th, Mason Automotive decides to purchase 500,000 shares of Treasury stock at $35 per share.

There are 10 applicable adjusting entries that need to be made as of the end of the month based on the information provided above. When recording these adjusting entries consider the following facts:

a. Interest expense will be recorded as a operating expense items on the income statement.
b. Record the necessary adjusting entries related to pre-paid expense as separate journal entries.
c. When reviewing the supply room as of the end of the month, Mason Automation noted that it had $2.5 Million worth of supplies still on hand.
d. As of the end of the month, 3,000 cars were completed for Michael Scott Paper Company and the performance obligation had been met on those 3,000 cars. As such, revenue was determined to be earned on those 3,000 vehicles and it was noted that each vehicle costed $5,000 to manufacture.
e. Mason Automation uses the balance sheet approach in estimating the allowance for doubtful accounts as of the end of the period. Based on industry average, Mason noted that it will use 3% of receivables as an estimation.
f. When preparing the balance sheet, close out net income to retained earnings.

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Mason Automotive is an automotive parts company that sells car parts and provides car service to cus...