Question

After the success of the company’s first two months, Santana Rey continues to operate Business Solutions. The November 30, 2018, unadjusted trial
balance of Business Solutions (reflecting its transactions for October and November of 2018) follows.

After the success of the company's first two months, Santana Rey continues to operate Business Solutions. The November 30, 2018, unadjusted trial balance of Business Solutions (reflecting its transactions for October and November of 2018) follows. Credit Debit $ 38,564 12,818 2,645 1,980 3,300 8,400 22,400 65,000 No. Account Title 101 Cash 106 Accounts receivable 126 Computer supplies 128 Prepaid insurance 131 Prepaid rent 163 Office equipment 164 Accumulated depreciation–Office equipment 167 Computer equipment 168 Accumulated depreciation-Computer equipment 201 Accounts payable 210 Wages payable 236 Unearned computer services revenue 307 Common stock 318 Retained earnings 319 Dividends 403 Computer services revenue 612 Depreciation expense-Office equipment 613 Depreciation expense-Computer equipment 623 Wages expense 637 Insurance expense 640 Rent expense 652 Computer supplies expense 655 Advertising expense 676 Mileage expense 677 Miscellaneous expenses 684 Repairs expense-Computer Totals 6,000 36,494 2,200 1,648 624 200 715 $101,494 $101,494 Business Solutions had the following transactions and events in December 2018. Dec. 2 Paid $1,000 cash to Hillside Mall for Business Solutions' share of mall advertising costs. 3 Paid $460 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 $110 per day. 14 Notified by Alex's Engineering Co. that Business Solutions' bid of $7,200 on a proposed project has been accepted. Alex's paid a $2,500 cash advance to Business Solutions. 15 Purchased $2,100 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 $5,675 cash. 22-26 Took the week off for the holidays. 28 Received $3,500 cash from Gomez Co. on its receivable. 29 Reimbursed S. Rey for business automobile mileage (600 miles at $0.28 per mile). 31 The company paid $1,000 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 $650 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 $110 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, 2018. 4. Prepare an income statement for the three months ended December 31, 2018. 5. Prepare a statement of retained earnings for the three months ended December 31, 2018. 6. Prepare a balance sheet as of December 31, 2018 7. Record and post the necessary closing entries as of December 31, 2018 8. Prepare a post-closing trial balance as of December 31, 2018

Answer 1

Part 1: Date General Journal Dec-02 Advertising expense Cash Debit Credit 1,000 1,000 460 Dec-03 Repairs expense-Computer Cash 460 4,350 Dec-04 Cash Accounts receivable 4,350 660 660 Dec-10 Wages expense Cash (110*6) Dec-14 Cash Uneamed computer services revenue 2,500 2,500 2,100 Dec-15 Computer supplies Accounts payable 2,100 Dec-16 No journal entry required 5,675 Dec-20 Cash Computer services revenue 5,675 3,500 Dec-28 Cash Accounts receivable 3,500 168 Dec-29 Mileage expense Cash (600*0.28) 1,000 Dec-31 Dividends Cash 1,000

b. Part 2a: Transaction General Journal Debit Credit a. Computer supplies expense 4,095 Computer supplies 4,095 2645+2100-6501 Insurance expense 495 Pre paid insurance T 495 (1980*3/12) Wages expense 440 Wages payable 440 (110*4) d. Depreciation expense-Computer equipment 1,400 Accumulated depreciation-Computer equipment 1,400 (22400*3/48) Depreciation expense-Office equipment 420 Accumulated depreciation Office equipment (8400*3/60) Rent expense 2,475 Prepaid rent 2,475 (3300*3/4) 420

Part 2b: Cash Debit Credit Date Dec. 01 Dec. 04 Dec. 28 Accounts Receivable Debit Credit Balance 12,818 4,350 8468 3 ,500 4968 1,000 460 4,350 Date Dec. 01 Dec. 02 Dec. 03 Dec. 04 Dec. 10 Dec. 14 Dec. 20 Dec. 28 Dec. 29 Dec. 31 660 Balance 38,564 37564 37104 41454 40794 43294 48969 524691 52301 51301 2,500 5,675 3,500 168 1,000 Computer Supplies Debit Credit Date Dec. 01 Dec. 15 Dec. 31 Balance 2,645 4745 650 Date Dec. 01 Dec. 31 Pre paid Insurance Debit Credit Balance 1,980 495 1485 2,100 4,095 Prepaid Rent Debit Credit Office Equipment Debit Credit Date Dec. 01 Dec. 31 Balance 3,300 825 Date Dec. 01 Balance 8,400 2,475 Accumulated Depreciation Office Equipment Date Debit Credit Balance Dec. 01 Dec. 31 420 Date Dec. 01 Computer Equipment Debit Credit Balance 22,400 Accounts Payable Debit Credit Balance Accumulated Depreciation-Computer Equipment Date Debit Credit Balance Dec. 01 Dec. 31 1,400 1400 Date Dec. 01 Dec. 15 2 ,100 2100 Wages Payable Debit Credit Balance Date Dec. 01 Dec. 31 Uneared Computer Services Revenue Date Debit Credit Balance Dec. 01 Dec. 14 2,500 2500 440 440 Common Stock Debit Credit Retained Earnings Debit Credit Balance Date Dec. 01 Balance 65,000 Date Dec. 01 Dec. 31 Dec. 31 25,169 25169 18169 7,000

Dividends Debit Credit Date Dec. 01 Dec. 20 Dec. 31 Balance 6,000 7000 Computer Services Revenue Date Debit Credit Balance Dec. 01 36,494 Dec. 31 5,675 42169 Dec. 31 42,169 1,000 7,000 Depreciation Expense-Computer Equipment Date Debit Credit Balance Dec. 01 Dec. 31 1,400 Dec. 31 1,400 | Depreciation Expense-Office Equipment Date Debit Credit Balance Dec. 01 Dec. 10 4 20 Dec. 31 T 420 0 420 Insurance Expense Debit Credit Balance Rent Expense Debit Credit Balance Date Dec. 01 Dec. 31 Dec. 31 Date Dec. 01 Dec. 31 Dec. 31 4951 2,475 2475 495 14951 2,475 Computer Supplies Expense Debit Credit Balance Date Dec. 01 Dec. 31 Dec. 31 Date Dec. 01 Dec. 02 Dec. 31 Advertising Expense Debit Credit Balance 1,648 1,000 2,648 4,095 4095 2648 4,095 Mileage Expense Debit Credit Balance Date Dec. 01 Dec. 29 Dec. 31 Miscellaneous Expenses Date Debit Credit Balance Dec. 01 2001 Dec. 31 2000 168 797 792 Repairs Expense - Computer Date Debit Credit Balance Dec. 01 Dec. 03 460 1175 Dec. 31 1,175 Wages Expense Date Debit Credit Balance Dec. 01 2,200 Dec. 31 660 Dec. 31 440 3300 Dec. 313,3000 2860 Income Summary Debit Credit Balance Date Dec. 01 Dec. 31 Dec. 31 Dec. 31 42,169 25,169 17,000 42,169 17,000

Cr | Debit 51,301 4,968 650 1,485 825 8,400 22,400 Part 3: BUSINESS SOLUTIONS Adjusted Trial Balance December 31, 2018 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 1,400 2,100 440 2,500 65,000 7,000 42,169 420 1,4001 3,300 495 2,475 4,095) 2,648) 792 2001 1,175 114029 114029

Part 4: BUSINESS SOLUTIONS Income Statement For Three Months Ended December 31, 2018 Revenue Computer services revenue 42,169 Expenses Depreciation expense-Office equipment | 420|| Depreciation expense - Computer equipment 1400 Wages expense 3300 Insurance expense 495 Rent expense 2475 Computer supplies expense 4095 Advertising expense 2648 Mileage expense 792 Miscellaneous expenses 200 Repairs expense-Computer 1175 Total expenses Net income 17000 25,169 Part 5: BUSINESS SOLUTIONS Statement of Retained Earings For Three Months Ended December 31, 2018 Retained earings, December 1, 2018 0 Add: Net income 25,169 25169 Less: Dividends 7,000 Retained earnings, December 31, 2018 18,169

Debit Credit 42,169 42,169 17,000 420 1,485 1400 3300 Part 6: BUSINESS SOLUTIONS Balance Sheet December 31, 2018 Assets Cash 51.301 Accounts receivable 4,968 Computer supplies 650 Pre paid insurance Prepaid rent 825 Office equipment 8,400 Accumulated depreciation Office equipment -420 7980 Computer equipment 22,400 Accumulated depreciation-Computer equipment 1-1,400 21000 Total Assets 88209 Liabilities Accounts payable 2,100 Wages payable 440 Unearned computer services revenue 2,500 Total Liabilities 50401 Equity Common stock 65,000 Retained earnings 18,169 Total equity 83169 Total Liabilities and Equity 88209 Part 7: Date General Journal Dec-31 Computer services revenue Income summary (To close revenue account) Dec-31 Income summary 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 (to close expense account) Dec-31 Income summary Retained earnings (to close income summary account) Dec-31 Retained earnings Dividends (To close dividend account) 495 2475 4095 2648 792 200 1175 25,169 25,169 7,000 7,000

Part 8:. BUSINESS SOLUTIONS Post-Closing Trial Balance December 31, 2018 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 Totals Debit Credit 51,301 4,968 650 1,485 825 8,400 420 22,400 1,400 2,100 440 2,500 65,000 18,169 90029 90029