Prepare All Journal Entries In Good Form For Two Months

Prepare all journal entries in good form for the two month period from November 1 through December 31, 2015.

Prepare all journal entries in good form for the two-month period from November 1 through December 31, 2015, including any adjusting entries needed during this period. Ensure that all transactions related to the company's incorporation, initial investments, purchases of assets, legal and accounting fees, and operational expenses are accurately recorded in accordance with GAAP standards. Do not include closing entries.

Paper For Above instruction

The initial two months of BTown Coach Service’s operations encompass a variety of foundational financial transactions necessary for establishing the company’s financial statements under US GAAP. A comprehensive set of journal entries must be prepared to reflect both the initial capitalization transactions and the ongoing expenses incurred during this startup phase.

First, the company’s incorporation on November 1, 2015, signifies the beginning of its accounting period. The issuance of 800,000 shares of common stock at $1 par value provides the primary capital foundation. Co-founders Ted and Tim each purchased 50,000 shares, with Ted paying $12 per share, which exceeds the par value, creating additional paid-in capital, and Tim contributing a building valued at $600,000 in exchange for stock. The building’s fair market value on acquisition is apportioned to land and building at $200,000 and $400,000, respectively, which establishes the asset base for depreciation.

Legal and accounting fees incurred for establishing the corporation, billed by Harbor Legal and Accounting Services, amount to $35,000. The company paid $10,000 in cash and issued 2,500 shares worth $10 per share (given the share’s initial value) in exchange for services, resulting in a credit to legal and professional expense and a corresponding increase in common stock and paid-in capital.

The purchase of buses on November 15, 2015, involves a significant asset acquisition. An initial cash payment of $125,000 is made, with the balance financed through a note payable over five years at 10% interest. The buses’ cost of $4,125,000 is recorded as property, plant, and equipment, with subsequent interest accrual and depreciation over their estimated useful life. The delivery and deployment of buses are recognized, including the related accounts payable and note payable entries.

Purchased reservation software and a computer system on December 5, 2015, are capitalized at their purchase price of $60,000, with a useful life of five years. The upfront payment of $3,600 for a one-year service contract is expensed immediately, while the monthly amortization begins in January 2016. Advertising costs of $10,000 paid in December relate to start-up marketing expenses, with a portion paid in advance. Refunds and returns are accounted for when applicable, such as unused parts delivered in January that were returned in December, requiring adjusting entries.

The period’s operating expenses include legal, professional, utilities, insurance, and general administrative costs. Accruals for December utilities and outstanding bills are recorded at month end. The payroll expenses for Martha’s billing services are accrued and paid in December, and any prepaid amounts are deferred accordingly.

Assets are depreciated systematically: the building and buses are recorded with straight-line depreciation based on their estimated useful lives, adjusted as per new estimates in March 2016, with the accumulated depreciation updated accordingly. This ensures initial and adjusted depreciation expense recognition, matching the expenses with the periods benefited.

Overall, these entries establish a complete and accurate set of journal entries for BTown’s initial startup period under US GAAP, providing a sound basis for subsequent financial statement preparation and analysis.

References

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