Question

AAEE Normal No Spacing Heading 11 Heading 2 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 $ 38,364 13,318 2,645 1,980 3,100 8,900 21,600 168 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 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 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 Repairs expense-Computer Totals 68,000 5,900 33, 419 613 2,325 0 1,628 674 190 795 $101,419 $101, 419

Business Solutions had the following transactions and events in December 2018.   

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 $4,550 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 $7,900 on a proposed project has been accepted. Alex’s paid a $2,200 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 $3,200 cash from Gomez Co. on its receivable.
	29		Reimbursed S. Rey for business automobile mileage (600 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 $660 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, 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.

What would be the Unadjusted Trial Balance?

Answer 1

Part 1: Date General Journal Advertising expense Cash Debit Credit 930 930 Dec-03 Repairs expense-Computer 500 Cash 500 Dec-04 4,550 Cash Accounts receivable 4,550 Dec-10 Wages expense 720 1720 Cash (120*6) Dec-14 2,200 Cash Uneamed computer services revenue 2,200 Dec-15 1,600 Computer supplies Accounts payable 1,600 Dec-16 No journal entry required Dec-20 6,525 Cash Computer services revenue 6,525 Dec-28 3,200 Cash Accounts receivable 3,200 162 Dec-29 Mileage expense Cash | 162 (600*0.27) 1,100 Dec-31 Dividends Cash 1,100

b. Part 2a: Transaction General Journal Debit Credit a. Computer supplies expense 3,585 Computer supplies 3,585 2645+1600-660 Insurance expense 495 Pre paid insurance 495 (1980*3/12) Wages expense 480 Wages payable 480 (120*4) d. Depreciation expense-Computer equipment 1,350 Accumulated depreciation-Computer equipment 1,350 (21600*3/48) Depreciation expense-Office equipment 445 Accumulated depreciation Office equipment 445 (8900*3/60) Rent expense 2,325 Prepaid rent 2,325 (3100*3/4)

Part 2b: Cash Debit Credit Date Dec. 01 Dec. 04 Dec. 28 Accounts Receivable Debit Credit Balance 13,318 4,550 8 768 3 ,200 5568 930 500 4,550 Date Dec. 01 Dec. 02 Dec. 03 Dec. 04 Dec. 10 Dec. 14 Dec. 20 Dec. 28 Dec. 29 Dec. 31 720 Balance 38,364 37434 36934 41484 40764 42964 49489 52689) 52527 51427 2,200 6,525 3,200 162 1,100 Computer Supplies Debit Credit Date Dec. 01 Dec. 15 Dec. 31 Balance 2,645 4245 Date Dec. 01 Dec. 31 Pre paid Insurance Debit Credit Balance 1,980 495 1485 1,600 3,585 660 Prepaid Rent Debit Credit Office Equipment Debit Credit Date Dec. 01 Dec. 31 Balance 3,100 775 Date Dec. 01 Balance 8,900 2,325 Accumulated Depreciation Office Equipment Date Debit Credit Balance Dec. 01 Dec. 31 445 Date Dec. 01 Computer Equipment Debit Credit Balance 21,600 Accounts Payable Debit Credit Balance Accumulated Depreciation-Computer Equipment Date Debit Credit Balance Dec. 01 Dec. 31 1,350 1350 Date Dec. 01 Dec. 15 1,600 1600 Wages Payable Debit Credit Balance Date Dec. 01 Dec. 31 Uneared Computer Services Revenue Date Debit Credit Balance Dec. 01 Dec. 14 2,200 2200 480 480 Common Stock Debit Credit Retained Earnings Debit Credit Balance Date Dec. 01 Balance 68,000 Date Dec. 01 Dec. 31 Dec. 31 23,340 23340 16340 7,000

Dividends Debit Credit Balance 5,900 Date Dec. 01 Dec. 20 Dec. 31 Computer Services Revenue Date Debit Credit Balance Dec. 01 33,419 Dec. 31 6,525 39944 Dec. 31 39,944 1,100 70001 7,000 Depreciation Expense-Computer Equipment Date Debit Credit Balance Dec. 01 Dec. 31 1,350 Dec. 31 1,350 | Depreciation Expense-Office Equipment Date Debit Credit Balance Dec. 01 Dec. 10 4 45 Dec. 31 T 445 0 445 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 2,325 2325 495 14951 2,325 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 1,628 930 2558 2,558 3,585 3585 3,585 Mileage Expense Debit Credit Balance Date Dec. 01 Dec. 29 Dec. 31 Miscellaneous Expenses Date Debit Credit Balance Dec. 01 190 Dec. 31 1900 162 836 836 Wages Expense Debit Credit Repairs Expense - Computer Date Debit Credit Balance Dec. 01 795 Dec. 03 500 12951 Dec. 31 1,295 Balance 2,325 Date Dec. 01 Dec. 31 Dec. 31 Dec. 31 3045 720 480 | 3,525 3525 0 Income Summary Debit Credit Balance Date Dec. 01 Dec. 31 Dec. 31 Dec. 31 39,944 23,340 16,604 39,944 16,604

Cr | Debit 51,427 5,568 660 1,485 775 8,900 445 21,600 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 1,350 1,600 480 2,200 68,000 7,000 39,944 4451 1,350 3,525 495 2,325 3,585 2,558 836 1901 1,295 1140191 114019

Part 4: BUSINESS SOLUTIONS Income Statement For Three Months Ended December 31, 2018 Revenue Computer services revenue 39,944 Expenses Depreciation expense-Office equipment | 445|| Depreciation expense - Computer equipment 1350 Wages expense Insurance expense 495 Rent expense 2325 Computer supplies expense 3585 Advertising expense 2558 Mileage expense 836 Miscellaneous expenses 190 Repairs expense-Computer 3525 1295 Total expenses Net income 16604 23,340 Part 5: BUSINESS SOLUTIONS Statement of Retained Earings For Three Months Ended December 31, 2018 Retained earings, December 1, 2018 0 Add: Net income 23,340 23340 Less: Dividends 7,000 Retained earings, December 31, 2018 16,340

Part 6: BUSINESS SOLUTIONS Balance Sheet December 31, 2018 Assets Cash 51,427 Accounts receivable 5,568 Computer supplies 660 Prepaid insurance 1,485 Prepaid rent 775 Office equipment 8,900 Accumulated depreciation-Office equipment -445 8455 Computer equipment 21,600 Accumulated depreciation Computer equipment -1,350 20250 Total Assets 88620 Liabilities Accounts payable 1,600 Wages payable 480 Unearned computer services revenue 2,200 Total Liabilities 4280 Equity Common stock 68,000 Retained earnings 16,340 Total equity 84340 Total Liabilities and Equity 88620

Debit Credit 39,944 39,944 16,604 445 1350 3525 4951 2325 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) 3585 2558 836 190 1295 23,340 23,340 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 51,427 5,568 660 1,485 775 8,900 445 21,600 1,350 1,600 480 2,200 68,000 16,340 90415 90415