Question

Serial Problem Business Solutions LO P1, P2, P3, P4, P5, P6

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		13,118
126	Computer supplies		2,545
128	Prepaid insurance		2,040
131	Prepaid rent		2,940
163	Office equipment		8,400
164	Accumulated depreciation—Office equipment				$	0
167	Computer equipment		23,600
168	Accumulated depreciation—Computer equipment					0
201	Accounts payable					0
210	Wages payable					0
236	Unearned computer services revenue					0
307	Common stock					68,000
318	Retained earnings					0
319	Dividends		6,300
403	Computer services revenue					35,029
612	Depreciation expense—Office equipment		0
613	Depreciation expense—Computer equipment		0
623	Wages expense		2,375
637	Insurance expense		0
640	Rent expense		0
652	Computer supplies expense		0
655	Advertising expense		1,718
676	Mileage expense		654
677	Miscellaneous expenses		200
684	Repairs expense—Computer		775
	Totals	$	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.

Prepare a post-closing trial balance as of December 31, 2019. BUSINESS SOLUTIONS Post-Closing Trial Balance December 31, 2019 Debit Credit 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 Totals 0 S

Answer 1

Business Solutions Account Names 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 Totals Req8 Post Closing TB Debit Credit 50,339 5,768 590 1,530 735 8,400 420 23,600 1,475 1,600 480 1,600 68,000 17,387 90,962 90,962

Req7 Closing entries 31-Dec Computer Services Revenue Income Summary $ 41,554 $ 41,554 $ 16,667 31-Dec Income Summary Depreciation expense-Office Equipment Depreciation expense-Computer Equipment Wages expense Insurance expense Rent expense Computer supplies expense Advertising expense Mileage expense Miscellaneous expense Repairs expense-Computer $ $ $ $ $ $ $ $ $ $ 420 1,475 3,575 510 2,205 3,555 2,653 809 200 1,265 $ 24,887 31-Dec Income Summary Retained Earnings $ 24,887 $ 7,500 31-Dec Retained Earnings Dividends $ 7,500

Business Solutions Req 1 Journal entries Date Account 2-Dec Advertising expense Credit Calculation Debit $ 935 Cash $ 935 $ 490 3-Dec Repairs expense-Computer Cash $ 490 $ 4,050 4-Dec Cash Accounts Receivable $ 4,050 $ 720 =6*120 10-Dec Wages expense Cash $ 720 $ 1,600 14-Dec Cash Unearned Computer Services Revenue $ 1,600 $ 1,600 15-Dec Computer Supplies Accounts Payable $ 1,600 16-Dec No entry $ 6,525 20-Dec Cash Computer Services Revenue $ 6,525 Dec 22-26 No entry $ 3,300 28-Dec Cash Accounts Receivable $ 3,300 $ 155 =500*0.31 29-Dec Mileage expense Cash $ 155 $ 1,200 31-Dec Dividends Cash $ 1,200

Req 2-a Adjusting entries 31-Dec Computer supplies expense Computer Supplies $ 3,555 =2,545+1,600-590 $ 3,555 $ 510 =2,040/12*3 31-Dec Insurance expense Prepaid Insurance $ 510 $ 480 -4*120 31-Dec Wages expense Wages Payable $ 480 $ 1,475 =23,600/4 yrs *3/12 31-Dec Depreciation expense-Computer Equipment Accumulated Depreciation-Computer Equipment $ 1,475 $ 420 =8,400/5 yrs * 3/12 31-Dec Depreciation expense-Office Equipment Accumulated Depreciation Office Equipment $ 420 $ 2,205 =2,940/4*3 31-Dec Rent expense Prepaid Rent $ 2,205

Business Solutions Req 2-b T Accounts Date Debit Credit Balance Date Debit Credit Balance Date Debit Credit Balance Date Debit Credit Balance Cash Accounts Receivable Computer Supplies Prepaid Insurance Op bal $ 38,364 $ 38,364 Op bal $13,118 $ 13,118 Op bal $ 2,545 $ 2,545 Op bal $ 2,040 $ 2,040 2-Dec $ 935 $ 37,429 4-Dec $ 4,050 $ 9,068 15-Dec $ 1,600 $ 4,145 31-Dec $ 510 $ 1,530 3-Dec $ 490 $ 36,939 28-Dec $ 3,300 $ 5,768 31-Dec $ 3,555 $ 590 4-Dec $ 4,050 $ 40,989 10-Dec $ 720 $ 40,269 14-Dec $ 1,600 $ 41,869 20-Dec $ 6,525 $ 48,394 28-Dec $ 3,300 $ 51,694 29-Dec $ 155 $ 51,539 31-Dec $ 1,200 $50,339 Office Equip Accum. Depr. - Office Equip Computer Equipment Accum. Depr. - Computer Equip Op bal $ 8,400 $ 8,400 31-Dec $ 420 $ 420 Op bal $ 23,600 $ 23,600 31-Dec $ 1,475 $ 1,475 Prepaid Rent Accounts Payable Wages Payable Unearned Computer Services Revenue Op bal $ 2,940 $ 2,940 15-Dec $ 1,600 $ 1,600 31-Dec $ 480 $ 480 14-Dec $ 1,600 $ 1,600 31-Dec $ 2,205 $ 735 Common Stock Dividends Income Summary Retained Earnings Op bal $ 68,000 $68,000 Op bal $ 6,300 $ 6,300 31-Dec $ 41,554 $ 41,554 Op bal $ - $ - 31-Dec $ 1,200 $ 7,500 31-Dec $ 16,667 $ 24,887 31-Dec $ 24,887 $ 24,887 31-Dec $ 7,500 $ - 31-Dec $ 24,887 31-Dec $ 7,500 $ 17,387 Computer Services Revenue Depreciation expense-Office Equipment Depreciation expense-Computer Equip Wages expense Op bal $ 35,029 $ 35,029 31-Dec $ 420 $ 420 31-Dec $ 1,475 $ 1,475 Op bal $ 2,375 $ 2,375 20-Dec $ 6,525 $ 41,554 31-Dec $ 420 $ - 31-Dec $ 1,475 $ - 10-Dec $ 720 $ 3,095 31-Dec $ 41,554 31-Dec $ 480 $ 3,575 31-Dec $ 3,575 $ - Insurance expense Rent expense Computer supplies expense Advertising expense 31-Dec $ 510 $ 510 31-Dec $ 2,205 $ 2,205 31-Dec $ 3,555 $ 3,555 Op bal $ 1,718 $ 1,718 31-Dec $ 510 $ - 31-Dec $ 2,205 $ - 31-Dec $ 3,555 $ - 2-Dec $ 935 $ 2,653 31-Dec $ 2,653 $ - Mileage expense Miscellaneous expense Repairs expense-Computer Op bal $ 654 $ 654 Op bal $ 200 $ 200 Op bal $ 775 $ 775 29-Dec $ 155 $ 809 31-Dec $ 200 $ - 3-Dec $ 490 $ 1,265 31-Dec $ 809 $- 31-Dec $ 1,265 $

Business Solutions Account Names 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 expense Repairs expense-Computer Totals Req3 Adjusted TB Debit Credit 50,339 5,768 590 1,530 735 8,400 420 23,600 1,475 1,600 480 1,600 68,000 7,500 41,554 420 1,475 3,575 510 2,205 3,555 2,653 809 200 1,265 115,129 115,129