1) Mason Automotive sells 10,000,000 shares at $5 par for $30 on January 1st, 2018. Â
Dr Cash 300,000,000
 Cr Common stock 50,000,000
 Cr Additional paid in capital 250,000,000
2) Ed Mason, the CEO, hires 3,000 employees, whom will receive a combined salary of $12 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. Â Â Â Â Â
No journal entry required
Adjusting entry:
January 31, 2018, wages expense
Dr Wages expense 12,000,000
Dr FICA taxes expense 840,000
 Cr Federal income taxes withheld payable 1,200,000
 Cr State income taxes withheld payable 600,000
 Cr FICA taxes withheld payable 840,000
 Cr FICA taxes payable 840,000
 Cr Wages payable 9,360,000
3) Mason Automotive issues a bond payable on January 1st, 2018 with a face value of $200 Million at 102. The bond will have a useful life of 5 years with an interest payment of 5% (Annual Percentage Rate) due at the end of the month. Record the necessary journal entry as of January 1st, Â 2018.
Dr Cash 204,000,000
 Cr Premium on bonds payable 4,000,000
 Cr Bonds payable 200,000,000
(Note: When considering the amortization of the discount or premium, assume the straight line method is used). Â
Adjusting entry    Â
January 31, 2018, interest expense
Dr interest expense 766,666.66
Dr Premium on bonds payable 66,666.67
 Cr Interest payable 833,333.33
4) Mason Automotive purchased $80 Million dollars worth of inventory on January 2nd, 2018. $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. Â
Dr Inventory 80,000,000
   Cr Accounts payable 80,000,000   Â
5) Mason Automotive purchases fixed assets of $120 Million that will have a useful life of 10 years and no salvage value on January 2, 2018. $20 million was paid with cash with the remaining balance on account. These assets are depreciated using the straight-line method. Â
Dr Fixed assets 120,000,000
 Cr Cash 20,000,000
 Cr Accounts payable 100,000,000
Adjusting entry:
January 31, 2019, depreciation expense Â
Dr Depreciation expense 1,000,000
 Cr Accumulated depreciation - fixed assets 1,000,000  Â
6) On January 2nd, Mason Automotive shipped an order to Corby Panther Company. The shipping terms were FOB shipping point and the value of the order was $50 Million and the inventory cost was $20 Million. Assume that this sale was made on account. Â Â Â Â Â
Dr Accounts receivable 50,000,000
 Cr Sales revenue 50,000,000
Dr Cost of goods sold 20,000,000
 Cr Inventory 20,000,000
Adjusting entry:
January 31, 2018, allowance for doubtful accounts (5%)
Dr Bad debt expense 2,500,000
 Cr Allowance for doubtful accounts 2,500,000
7) On January 3, Mason Automotive receives $75 Million advance payment from a customer, Michael Scott Paper Company, to manufacture 7,500 cars. Â Â Â Â
Dr Cash 75,000,000
 Cr Deferred revenue 75,000,000
Adjusting entry:
January 31, 2019, 4,000 cars were finished and delivered
Dr Deferred revenue 40,000,000
 Cr Sales revenue 40,000,000
Dr Cost of goods sold 32,000,000
  Cr Inventory: finished cars 32,000,000
8) Mason Automotive buys a patent from Apple for $24 Million on January 3rd, 2018. The patent has a legal life of 20 years, but a the useful life of 10. Record the necessary entry as of January 3rd, 2018. Assume the patent was purchased using cash. Â Â Â Â Â
Dr Patent 24,000,000
 Cr Cash 24,000,000
Adjusting entry:
January 31, 2018, patent amortization expense
Dr Patent amortization expense 200,000
 Cr Patent 200,000
9) Mason Automotive purchased $2 Million dollars worth of supplies on account on January 4, 2018. Â Â Â
Dr Supplies 2,000,000
  Cr Cash 1,500,000
  Cr Accounts payable 500,000
Adjusting entry
January 31, 2018, supplies expense
Dr Supplies expense 500,000
 Cr Supplies 500,000  Â
10) Mason Automotive pre-pays for Rent Expense for the next year of $12 Million and Insurance Expense of $2.4 Million on January 4, 2018. Â
Dr Prepaid rent 12,000,000
Dr Prepaid insurance 2,400,000
 Cr Cash 14,400,000
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 200,000
 Cr Prepaid insurance 200,000    Â
11) On January 20th, Mason Automotive decides to purchase 2,000,000 shares of Treasury stock at $25 per share.
Dr Treasury stock 50,000,000
 Cr Cash 50,000,000
Closing journal entries:
Dr Sales revenue 90,000,000
  Cr Income summary 90,000,000
Dr Income summary 71,006,66.66
  Cr Wages expense 12,000,000
  Cr FICA taxes expense 840,000
  Cr interest expense 766,666.66
  Cr Depreciation expense 1,000,000
  Cr Cost of goods sold 52,000,000
  Cr Bad debt expense 2,500,000
  Cr Patent amortization expense 200,000
  Cr Supplies expense 500,000
  Cr Rent expense 1,000,000
  Cr Insurance expense 200,000
Dr Income summary 18,993,333.34
  Cr Retained earnings 18,993,333.34
Step-by-step explanation:
