Question

After the success of the company’s first two months, Santana Rey continues to operate Business Solutions. The November 30, 2019, unadjusted trial balance of Business Solutions (reflecting its transactions for October and November of 2019) follows.

No. Credit 101 Debit $ 38,364 13,118 2,545 2,040 2,940 8,400 23,600 68,000 106 126 128 131 163 164 167 168 201 210 236 307 318 319 403 612 613 623 637 640 652 655 676 677 684 Account Title Cash Accounts receivable Computer supplies Prepaid insurance Prepaid rent Office equipment Accumulated depreciation-office equipment Computer equipment Accumulated depreciation-Computer equipment Accounts payable Wages payable Unearned computer services revenue Common stock Retained earnings Dividends Computer services revenue Depreciation expense-office equipment Depreciation expense-Computer equipment Wages expense Insurance expense Rent expense Computer supplies expense Advertising expense Mileage expense Miscellaneous expenses Repairs expense-Computer Totals 6,300 35,029 00 ouoo 1,718 654 200 775 $103,029 $103,029

Business Solutions had the following transactions and events in December 2019.   

Dec.	2		Paid $935 cash to Hillside Mall for Business Solutions’ share of mall advertising costs.
	3		Paid $490 cash for minor repairs to the company’s computer.
	4		Received $4,050 cash from Alex’s Engineering Co. for the receivable from November.
	10		Paid cash to Lyn Addie for six days of work at the rate of $120 per day.
	14		Notified by Alex’s Engineering Co. that Business Solutions’ bid of $7,600 on a proposed project has been accepted. Alex’s paid a $1,600 cash advance to Business Solutions.
	15		Purchased $1,600 of computer supplies on credit from Harris Office Products.
	16		Sent a reminder to Gomez Co. to pay the fee for services recorded on November 8.
	20		Completed a project for Liu Corporation and received $6,525 cash.
	22–26		Took the week off for the holidays.
	28		Received $3,300 cash from Gomez Co. on its receivable.
	29		Reimbursed S. Rey for business automobile mileage (500 miles at $0.31 per mile).
	31		The company paid $1,200 cash in dividends.

The following additional facts are collected for use in making adjusting entries prior to preparing financial statements for the company’s first three months.

1. The December 31 inventory count of computer supplies shows $590 still available.
2. Three months have expired since the 12-month insurance premium was paid in advance.
3. As of December 31, Lyn Addie has not been paid for four days of work at $120 per day.
4. The computer system, acquired on October 1, is expected to have a four-year life with no salvage value.
5. The office equipment, acquired on October 1, is expected to have a five-year life with no salvage value.
6. Three of the four months' prepaid rent have expired.

Required:
1. Prepare journal entries to record each of the December transactions and events for Business Solutions.
2-a. Prepare adjusting entries to reflect a through f.
2-b. Post the journal entries to record each of the December transactions, adjusting entries to the accounts in the ledger.
3. Prepare an adjusted trial balance as of December 31, 2019.
4. Prepare an income statement for the three months ended December 31, 2019.
5. Prepare a statement of retained earnings for the three months ended December 31, 2019.
6. Prepare a balance sheet as of December 31, 2019.
7. Record and post the necessary closing entries as of December 31, 2019.
8. Prepare a post-closing trial balance as of December 31, 2019.

Answer 1

Journal Entries Date Account Title and Explaination Debit Post. Ref. Credit Dec.2 935.00 Advertising Expenses Cash (To record advertising expenses paid) 935.00 490.00 Dec.3 |Repair Expense - Computer Cash (To record Computer repair expenses paid) $ 490.00 Dec.4 4,050.00 Cash Accounts Receivable (To record collection of receivables) 4,050.00 Dec. 10 Wages Expense (6 days x $120) 720.00 Cash 720.00 |(To record Payment of Wages Expense) Dec.14 $ 1,600.00 $ 1,600.00 Cash Unearned Computer Service Revenue (To record collection of advance for service to be performed)

Dec.15 1,600.00 Computer Supplies Accounts Payable (To record computer Supplies purchased on account) $ 1,600.00 Dec.16 No Journal Entry required for sending reminder 6,525.00 Dec.20 Cash Computer Service Revenue (To record service provided and cash received) 6,525.00 Dec.22 No Journal Entry Required for taking week offs $ 3,300.00 Dec.28 Cash Accounts Receivable (To record collection of receivables) 3,300.00 Dec.29 Mileage Expense (500 miles x $0.31) 155.00 Cash 155.00 (To record Mileage expenses paid) 1,200.00 Dec.31 Dividends Cash (To record Cash Dividends Paid) $ 1,200.00

3,555.00 Adjusting Entries Dec.31 Computer Supplies Expense ($2545+1600-590) Computer Supplies (To record adjusting entry for consumption of computer supplies) 3,555.00 510.00 Dec.31 Insurance Expense ($2040/12 x 3) Prepaid Insurance (To record expired portion of prepaid insurance) 510.00 480.00 Dec.31 Wages Expense (4 x $120) Wages Payable |(To record accrued wages expense) 480.00 1,475.00 Dec.31 Depreciation Expense (23600/4yrs x 3/12) Accumulated Depreciation - Computer Equipment |(To record Depreciation expense on computer equipment) $ 1,475.00 420.00 Dec.31 Depreciation Expense ($8400/5yrs x 3/12) Accumulated Depreciation - Office Equipment (To record Depreciation expense on office equipment) 420.00