Question

On October 1, 2019, Santana Rey launched a computer services company called Business Solutions, which provides consulting services, computer system installations, and custom program development. Rey adopts the calendar year for reporting purposes and expects to prepare the company’s first set of financial statements on December 31, 2019. 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.	Account Title	Debit	Credit
101	Cash	$38,364
106	Accounts receivable	12,718
126	Computer supplies	2,645
128	Prepaid insurance	1,860
131	Prepaid rent	3,080
163	Office equipment	8,900
164	Accumulated depreciation- Office equipment		$0
167	Computer equipment	21,600
168	Accumulated depreciation-Computer equipment		0
201	Accounts payable		0
210	Wages payable		0
236	Unearned computer services revenue		0
307	Common stock		67,000
318	Retained earnings		0
319	Dividends	6,300
403	Computer services revenue		33,914
612	Depreciation expense- Office equipment	0
613	Depreciation expense- Computer equipment	0
623	Wages expense	2,150
637	Insurance expense	0
640	Rent expense	0
652	Computer supplies expense	0
655	Advertising expense	1,668
676	Mileage expense	654
677	Miscellaneous expenses	230
684	Repairs expense- Computer	745
	Totals	$100,914	$100,914

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

Dec.	2	Paid $930 cash to Hillside Mall for Business Solutions’ share of mall advertising costs.
	3	Paid $450 cash for minor repairs to the company’s computer.
	4	Received $4,350 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 $115 per day.
	14	Notified by Alex’s Engineering Co. that Business Solutions’ bid of $7,500 on a proposed project has been accepted. Alex’s paid a $1,600 cash advance to Business Solutions.
	15	Purchased $1,900 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 $6,225 cash.
	22-26	Took the week off for the holidays.
	28	Received $3,400 cash from Gomez Co. on its receivable
	29	Reimbursed S. Rey for business automobile mileage (500 miles at $0.30 per mile).
	31	The company paid $1,100 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.

a	The December 31 inventory count of computer supplies shows $590 still available.
b	Three months have expired since the 12-month insurance premium was paid in advance.
c	As of December 31, Lyn Addie has not been paid for four days of work at $115 per day.
d	The computer system, acquired on October 1, is expected to have a four-year life with no salvage value
e	The office equipment, acquired on October 1, is expected to have a five-year life with no salvage value.
f	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

From the information given above, I have prepared Journal entries, Adjusting entries, ledger Accounts, Adjusted Trial Balance of Business solutions for period ending 31, December 2019.

Cr 1 Business Solutions 2 3 Journal Entries for the month of December 2019. Particulars Cash To Computer service revenue Dr 6225 20, Dec 6225 Dr Cr 28, Dec 3400 5 6 2, Dec Particulars Advertising expense To Cash Cash To Accounts Receivable 3400 7 930 150 9 3, Dec 10 Repairs expense - Computer To Cash 29, Dec Mileage expense To Cash (500 miles @ $0.30 per mile= 500*0.30 = 150) 150 450 11 31, Dec 1100 Dividends To Cash 4350 1100 12 4, Dec Cash 13 To Accounts Receivable 14 15 10, Dec Wages expesne 16 To Cash 17 ( wages paid for 6days work @ 115 per day 115*6 = 690) 690 18 19 1600 21 1600 2014, Dec Cash To Unearned computer service revenue 22 23 15, Dec Computer supplies 24 To Accounts Payable 25 26 16, Dec No journal entry 1900 1900

31, Dec 445 3955 Depreciation - Office 445 To Accumulated depreciation - office office equipment value 8900 acquired on 1, Oct 2019 useful life = 5 years 8900/5= 1780 * 3/12=445 for Oct 19 to dec 19) 3955 2310 2310 31, Dec Rent expense To Prepaid rent (prepaid rent for 4 months = 3080 for oct 2019 to dec 2019= 3080*3/4=2310) 465 28 Adjusting entries 29 Particulars Dr Cr 31 31, Dec Computer Supplies expense 3955 TO Computer supplies (Balance as on 30, november 2019 2645 Add: purchases 1900 Less: Closing balance as on 31, Dec 590 Supplies expense 37 38 31, Dec Insurance expense 465 39 To Prepaid insurance 40 ( Insurance paid for 12 months $1860 From Oct19 to Dec19: 1860*3/12 = 465) 42 43 31, Dec Wages expesne 460 To Wages payable 460 45 ( wages has not been paid for 4days work @ 115 per day 46 115*4-460) 47 48 31, Dec Depreciation - Computer 1350 49 To Accumulated depreciation - Computer 1350 (Computer equipment value 21600 acquired on 1, Oct 2019 useful life = 4 years 21600/4=5400 * 3/12= 1350 for Oct 19 to dec 19)

1 Ledger Accounts Amount 3300 3 Particulars TO Balance b/d cash wages payable Wages expense Amount Particulars 2150 by Profit & Loss Account 690 460 33001 Amount 930 450 3300 4 Particulars 5 TO Balance b/d 6 Accounts Receivable 7 Unearned service revenue 8 Computer service revenue 9 Accounts Receivable Cash Amount Particulars 38364 By Advertising expense 4350 Repairs expense - Computer 1600 Wages expense 6225 Mileage expense 3400 Dividends By Balance c/d 53939 690 150 1100 50619 53939 Particulars cash Unearned computer service revenue Amount Particulars 1600 By Balance b/d 1600 10 Amount 1600 1600 11 14 Particulars 15 TO Balance b/d 16 To cash Repairs expense - Computer Amount Particulars 745 by Profit & Loss Account 450 1195 Amount 1195 Particulars TO Balance b/d Accounts Payable Computer Supplies Amount Particulars Amount 2645 By Computer Supplies expense 3955 1900 By Balance c/d 590 4545 4545 20 Particulars 21 TO Balance b/d Accounts Receivable Amount Particulars 12718 by cash by cash By Balance c/d 12718 Amount 4350 3400 4968 12718 Particulars To Computer Supplies Computer Supplies expense Amount Particulars 1 3955 by Profit & Loss Account 3955 Amount 3955 3955

Particulars To Balance c/d Accounts Payable Amount Particulars 1900 by Computer Supplies 1900 Amount 1900 1900 Particulars To Balance c/d Prepaid Insurance Amount Particulars 1860 By Prepaid Insurance By Balance c/d 1860 Amount 465 1395 1860) Particulars To Profit & Loss Account Computer service revenue Amount Particulars 6225 by Cash 6225 Amount 6225 6225 Particulars To Prepaid Rent Rent expense Amount Particulars 2310 by Profit & Loss Account 2310 Amount 2310 2310 Particulars TO Balance b/d Cash Mileage expense Amount Particulars 654 by Profit & Loss Account 150 804 Amount 804 Particulars To Balance c/d Prepaid Rent Amount Particulars 3080 By Prepaid Insurance By Balance c/d 3080 Amount 2310 770 3080 804 Amount Particulars TO Balance b/d Cash Dividends Amount Particulars 6300 by Retained earnings 1100 7400 Particulars To Balance c/d Wages Payable Amount Particulars 460 by Wages expense 460 Amount 460 460 7400 Particulars To Prepaid Insurance Insurance expense Amount Particulars 465 by Profit & Loss Account Amount 465 465 465

Depreciation - Computer Particulars Amount Particulars To Accumulated Depreciation 1350 by Profit & Loss Account Computer 1350 Amount 1350 1350 Particulars ToBalance c/d Accumulated Depreciation - Computer Amount Particulars 1350 By Depreciation - Computer Amount 1350 1350 1350 Depreciation - Office equipment Particulars Amount Particulars To Accumulated Depreciation 445 by Profit & Loss Account Computer 445 Amount 445 Particulars ToBalance c/d Accumulated Depreciation - Office Equipment Amount Particulars 445 By Depreciation - office euipment 445 Amount 445 445

IN Business Solutions Adjusted Trial Balance as on 31, December 2019 Account Trial Balance Dr 50619 4968 590 1395 770 8900 445 21600 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 service revenue Common Stock Retained Earnings Accumulated Depreciation - Rafts Dividend Computer service revenue Depreciation - Computer Depreciation - Office equipment Wages expense Insurance expense 1350 1900 460 1600 67000 7400 40139 1350 445 3300 465 22101 Dont oynonco

Wages expense Insurance expense Rent expense Computer Supplies expense Advertising Expense Mileage expense Miscelleneous expense Repairs expense - Computer Total м NO 3300 465 2310 3955 2598 804 2301 1195 112894 112894