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	$	38,864
106	Accounts receivable		12,618
126	Computer supplies		2,645
128	Prepaid insurance		2,100
131	Prepaid rent		3,180
163	Office equipment		8,700
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					64,000
318	Retained earnings					0
319	Dividends		5,700
403	Computer services revenue					36,974
612	Depreciation expense—Office equipment		0
613	Depreciation expense—Computer equipment		0
623	Wages expense		2,350
637	Insurance expense		0
640	Rent expense		0
652	Computer supplies expense		0
655	Advertising expense		1,698
676	Mileage expense		614
677	Miscellaneous expenses		160
684	Repairs expense—Computer		745
	Totals	$	100,974		$	100,974

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

Dec.	2		Paid $965 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 $4,650 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 $7,600 on a proposed project has been accepted. Alex’s paid a $2,100 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 $5,825 cash.
	22–26		Took the week off for the holidays.
	28		Received $3,000 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 $1,000 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.

1. The December 31 inventory count of computer supplies shows $680 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 $110 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 from Requirement 1 and adjusting entries from Requirement 2A. After completing Requirement 7, post the closing entries to the general ledger accounts.
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 the necessary closing entries as of December 31, 2019 and then post the closing entries to the general ledger in Requirement 2B.
8. Prepare a post-closing trial balance as of December 31, 2019.

Answer 1

Note - As per HOMEWORKLIB POLICY we are allowed to attempt 4 questions in a multiple questions -

1. Journal Entries -

Date Credit Business Solutions Journal Entries Accounts Title Advertising Expense Cash (Being Advertising Expense paid) Debit $ 965 Dec 2 $ 965 Dec 3 $ 490 Repairs Expense - Computer Cash (Being Repair Expense Paid) $ 490 Dec 4 $ 4,650 Cash Accounts Receivable (Being amount received on account) $ 4,650 $ 660 Dec 10 Wages Expense Cash $ 660 (Being Wages Paid) Dec 14 Cash $ 2,100 $ 2,100 Unearned Computer Service Revenue (Being Cash received in advance) $ 1,500 Dec 15 Computer Supplies Accounts Payable (Being Supplies Purchased on account) $ 1,500 Dec 16 No Entry Dec 20 5,825 Cash $ Computer Service Revenue (Being service revenue earned through cash) $ 5,825 Dec 22 No Entry $ 3,000 Dec 28 Cash Accounts Receivable (Being Amount received on account) $ 3,000 $ 155 Dec 29 Mileage Expense Cash (Being Mileage expense paid) $ 155 $ 1,000 Dec 31 Dividend Cash $ 1,000 (Being Dividend Paid)

2. Unadjusted Trial Balance -

Credit Debit $ 51,169 $ 4,968 $ 4,145 $ 2,100 $ 3,180 $ 8,700 $ 21,600 $ 1,500 Business Solutions Unadjusted Trial Balance As on December 31, 2019 Accounts 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 Service Revenue Common Stock Retained Earnings Dividends Computer Service Revenue Depreciation Expenses - Office Equipment Depreciation Expenses - Computer Equipment Wages Expense Insurance Expense Rent Expense Computer Supplies Expense Advertising Expense Mileage Expense Miscellaneous Expense Repair Expense - Computer $ 2,100 $ 64,000 $ 6,700 $ 42,799 $ 3,010 $ 2,663 $ 769 $ 160 $ 1,235 Total $ 110,399 $ 110,399

3. Ledgers -

Dec. 1 Dividends $ 5,700 $ 1,000 Dec 31 Dec. 1 Dec 4 Dec 14 Dec 20 Dec 28 Cash $ 38,564 Dec 2 $ 4,650 Dec 3 $ 2,100 Dec 10 $ 5,825 Dec 29 $ 3,000 Dec 31 $ 965 $ 490 $ 660 $ 155 $ 1,000 Dec 31 $ 6,700 Dec 31 $ 50,869 $ 54,139 $ 54,139 Computer Service Revenue Dec. 1 $36,974 Dec 20 $ 5,825 Dec. 1 Accounts Receivable $ 12,618 Dec 4 Dec 28 Dec 31 $ 42,799 $ 4,650 $ 3,000 Dec 31 $ 4,968 Depr. Expenses - Office Equipment e $ 435 Dec 31 $ 435 Computer Supplies $ 2,645 $ 1,500 a Dec. 1 Dec 15 $ 3,465 Dec 31 $ 680 Depr. Expenses - Computer Equipment d $ 1,350 Dec 31 $ 1,350 Prepaid Insurance $ 2,100 b b Dec. 1 $ 525 Dec 31 $ 1,575 Wages Expense Dec. 1 $ 2,350 Dec 10$ 660 с $ 440 Dec 31 $ 3,450 Prepaid Rent $ 3,180 f Dec. 1 $ 2,385 Dec 31 $ 795 Insurance Expense $ 525 b Office Equipment $ 8,700 Dec. 1 Dec 31 $ 525 Dec 31 $ 8,700 Rent Expense $ 2,385 f Accumulated Depr. - Office Equipment $ 435 Dec 31 $ 2,385 Dec 31 $ 435 Computer Supplies Expense $ 3,465 a Computer Equipment $ 21,600 Dec. 1 Dec 31 $ 3,465 Dec 31 $ 21,600 Dec. 1 Advertising Expense $ 2,663 $ 965 Dec. 2 Accumulated Depr. - Computer Equipment d$ 1,350 Dec 31 $ 3,628 Dec 31 $ 1,350 Dec. 1 Dec 29 Mileage Expense $ 614 $ 155 Accounts Payable Dec 15 $ 1,500 Dec 31 $ 769 Dec 31 $ 1,500 Miscellaneous Expense $ 160 Dec. 1 Wages Payable с $ 440 Dec 31 $ 160 Dec 31 $ 440 Repair Expense - Computer Dec. 1 $ 745 Dec 3 $ 490 Unearned Computer Service Revenue Dec 14 $ 2,100 Dec 31 $ 1,235 Dec 31 $ 2,100 Common Stock Dec. 1 $ 64,000 Dec 31 $ 64,000

4. Adjusted Entries -

Date Credit Business Solutions Adjusted Entries Accounts Title Computer Supplies Expense Computer Supplies (Being Supplies Utilised) Debit $ 3,465 a $ 3,465 b $ 525 Insurance Expense Prepaid Insurance (Being 3 months insurance expired) $ 525 C $ 440 Wages Expense Wages Payable (Being wages expense accrued) $ 440 d $ 1,350 Depreciation Expenses - Computer Equipment Accumulated Depreciation - Computer Equipment (Being Depreciation Expense incurred) $ 1,350 e $ 435 Depreciation Expenses - Office Equipment Accumulated Depreciation - Office Equipment (Being Depreciation Expense incurred) $ 435 f $ 2,385 Rent Expense Prepaid Rent $ 2,385 (Being Rent Expense Incurred)

5. Adjusted Trial Balance -

Credit Debit $ 51,169 $ 4,968 $ 680 $ 1,575 $ 795 $ 8,700 $ 435 $ 21,600 Business Solutions Adjusted Trial Balance As on December 31, 2019 Accounts 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 Service Revenue Common Stock Retained Earnings Dividends Computer Service Revenue Depreciation Expenses - Office Equipment Depreciation Expenses - Computer Equipment Wages Expense Insurance Expense Rent Expense Computer Supplies Expense Advertising Expense Mileage Expense Miscellaneous Expense Repair Expense - Computer $ 1,350 $ 1,500 $ 440 $ 2,100 $ 64,000 $ 6,700 $ 42,799 $ 435 $ 1,350 $ 3,450 $ 525 $ 2,385 $ 3,465 $ 2,663 $ 769 $ 160 $ 1,235 Total $ 112,624 $112,624

6. Income Statement -

Business Solutions Income Statement For the Quarter ended December 31, 2019 Computer Service Revenue $ 42,799 Expenses: Depreciation Expenses - Office Equipment Depreciation Expenses - Computer Equipment Wages Expense Insurance Expense Rent Expense Computer Supplies Expense Advertising Expense Mileage Expense Miscellaneous Expense Repair Expense - Computer Total Expenses $ 435 $ 1,350 $ 3,450 $ 525 $ 2,385 $ 3,465 $ 2,663 $ 769 $ 160 $ 1,235 $ 16,437 Net Income $ 26,362