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.

Credit No. 101 106 126 128 131 Debit $ 39,064 12,618 2,545 2,040 2,980 8,200 22,000 69, 164 167 168 201 210 236 307 318 319 403 612 613 623 637 640 652 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 6,200 32,349 2,375 676 677 684 1,718 664 230 715 $ 101,349 $ 101,349

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 $500 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 $125 per day.
	14		Notified by Alex’s Engineering Co. that Business Solutions’ bid of $7,300 on a proposed project has been accepted. Alex’s paid a $1,800 cash advance to Business Solutions.
	15		Purchased $1,500 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 $6,375 cash.
	22–26		Took the week off for the holidays.
	28		Received $3,900 cash from Gomez Co. on its receivable.
	29		Reimbursed S. Rey for business automobile mileage (500 miles at $0.27 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.

1. The December 31 inventory count of computer supplies shows $600 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 $125 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

Part 1: Date Dec-02 General Journal Advertising expense Cash Debit Credit 930 930 Dec-03 500 Repairs expense-Computer Cash 500 Dec-04 4,350 Cash Accounts receivable 4,350 750 Dec-10 Wages expense Cash 750 (125*6) Dec-14 1,800 Cash Uneamed computer services revenue 1,800 Dec-15 1,500 Computer supplies Accounts payable 1,500 Dec-16 |No journal entry required Dec-20 6,375 Cash Computer services revenue 6,375 Dec-28 3,900 Cash Accounts receivable 3,900 135 Dec-29 Mileage expense Cash PT135 (500*0.27) Dec-31 1,100 Dividends Cash 1,100

b. Part 2a: Transaction General Journal Debit Credit Computer supplies expense 3,445 Computer supplies 3,445 2545+1500-600 Insurance expense 510 Pre paid insurance 5101 (2040*3/12) Wages expense 500 Wages payable 500 (125*4) d. Depreciation expense-Computer equipment 1,375 Accumulated depreciation-Computer equipment 1,375 (22000*3/48) Depreciation expense-Office equipment 410 Accumulated depreciation Office equipment 410 (8200*3/60) Rent expense 2,235 Prepaid rent 2,235 (2980*3/4)

Part 2b: Cash Debit Credit Date Dec. 01 Dec. 04 Dec. 28 Accounts Receivable Debit Credit Balance 12,618 4,350 8 268 3 ,900 4368 930 500 4,350 Date Dec. 01 Dec. 02 Dec. 03 Dec. 04 Dec. 10 Dec. 14 Dec. 20 Dec. 28 Dec. 29 Dec. 31 750 Balance 39,064 38134 37634 41984 41234 43034 49409 53309 53174 52074 1,800 6,375 3,900 135 1,100 Computer Supplies Debit Credit Date Dec. 01 Dec. 15 Dec. 31 Balance 2,545 4045 600 Date Dec. 01 Dec. 31 Pre paid Insurance Debit Credit Balance 2,040 510 1530 1,500 3,445 Prepaid Rent Debit Credit Office Equipment Debit Credit Date Dec. 01 Dec. 31 Balance 2,980 745 Date Dec. 01 Balance 8,200 2,235 Accumulated Depreciation Office Equipment Date Debit Credit Balance Dec. 01 Dec. 31 410 Date Dec. 01 Computer Equipment Debit Credit Balance 22,000 Accounts Payable Debit Credit Balance Accumulated Depreciation-Computer Equipment Date Debit Credit Balance Dec. 01 Dec. 31 1,375 1375 Date Dec. 01 Dec. 15 1,500 1500 Wages Payable Debit Credit Balance Date Dec. 01 Dec. 31 Uneared Computer Services Revenue Date Debit Credit Balance Dec. 01 Dec. 14 1800 500 1,800 Common Stock Debit Credit Retained Earnings Debit Credit Balance Date Dec. 01 Balance 69,000 Date Dec. 01 Dec. 31 Dec. 31 22,232 22232 14932 7,300

Depreciation Expense-Computer Equipment Date Debit Credit Balance Dec. 01 Dec. 31 1,375 1375 Dec. 31 1,375 Depreciation Expense-Office Equipment Date Debit Credit Dec. 01 Dec. 10 410 410 Dec. 31 410 Insurance Expense Debit Credit Rent Expense Debit Credit Balance Balance Date Dec. 01 Dec. 31 Dec. 31 Date Dec. 01 Dec. 31 Dec. 31 510 2,235 2235 510 2,235 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 1,718 930 2648 2,648 3,445 3445 3,445 Mileage Expense Debit Credit Balance Miscellaneous Expenses Date Debit Credit Balance Dec. 01 230 Dec. 31 230 Date Dec. 01 Dec. 29 Dec. 31 664 135 799 799 Wages Expense Debit Credit Repairs Expense – Computer Date Debit Credit Balance Dec. 01 Dec. 03 500 1215 Dec. 31 1.215 Balance 2,375 Date Dec. 01 Dec. 31 Dec. 31 Dec. 31 3125 750 500 | 3,625 3625 0 Income Summary Debit Credit Balance Date Dec. 01 Dec. 31 Dec. 31 Dec. 31 38,724 22,232 16,492 38,724 16,492

Credit Debit 52,074 4,368 600 1,530 745 8,200 22,000 Part 3: BUSINESS SOLUTIONS Adjusted Trial Balance December 31, 2019 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 1,375 1,500 500 1,800 69,000 7,300 38,724 410 1,3751 3,625 510 2,235 3,445) 2,648 7991 2300 1,215 1133091 113309

Debit Credit 38,724 38,724 16,492 600 410 1375 3625 510 2235 Part 6 BUSINESS SOLUTIONS Balance Sheet December 31, 2019 Assets Cash 52,074 Accounts receivable 4,368 Computer supplies Prepaid insurance 1,530 Prepaid rent 745 Office equipment 8,200 Accumulated depreciation - Office equipment -410 7790 Computer equipment 22,000 Accumulated depreciation - Computer equipment | -1,375 20625 Total Assets 87732 Liabilities Accounts payable 1,500 Wages payable 500 Unearned computer services revenue 1,800 Total Liabilities 3800 Equity Common stock 69,000 Retained earnings 14,932 Total equity 83932 Total Liabilities and Equity 87732 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) 3445 2648 799 230 1215 22.232 22,232 7,300 7,300

Part 8:. BUSINESS SOLUTIONS Post-Closing Trial Balance December 31, 2019 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 52,074 4,368 600 1,530 745 8,200 22,000 1,375 1,500 500 1,800 69,000 14,932 89517 89517