Question

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		12,618
126	Computer supplies		2,545
128	Prepaid insurance		2,040
131	Prepaid rent		3,160
163	Office equipment		8,500
164	Accumulated depreciation—Office equipment				$	0
167	Computer equipment		23,200
168	Accumulated depreciation—Computer equipment					0
201	Accounts payable					0
210	Wages payable					0
236	Unearned computer services revenue					0
307	Common stock					63,000
318	Retained earnings					0
319	Dividends		6,000
403	Computer services revenue					39,269
612	Depreciation expense—Office equipment		0
613	Depreciation expense—Computer equipment		0
623	Wages expense		2,475
637	Insurance expense		0
640	Rent expense		0
652	Computer supplies expense		0
655	Advertising expense		1,688
676	Mileage expense		694
677	Miscellaneous expenses		190
684	Repairs expense—Computer		795
	Totals	$	102,269		$	102,269

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

Dec.	2		Paid $955 cash to Hillside Mall for Business Solutions’ share of mall advertising costs.
	3		Paid $420 cash for minor repairs to the company’s computer.
	4		Received $4,450 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 $115 per day.
	14		Notified by Alex’s Engineering Co. that Business Solutions’ bid of $7,800 on a proposed project has been accepted. Alex’s paid a $2,200 cash advance to Business Solutions.
	15		Purchased $1,700 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 $6,025 cash.
	22–26		Took the week off for the holidays.
	28		Received $3,400 cash from Gomez Co. on its receivable.
	29		Reimbursed S. Rey for business automobile mileage (500 miles at $0.32 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 $630 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 $115 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

Business Solutions Req1 Journal entries Date Account 2-Dec Advertising expense Cash Credit Calculation Debit $ 955 $ 955 $ 420 3-Dec Repairs expense-Computer Cash $ 420 $ 4,450 4-Dec Cash Accounts Receivable $ 4,450 $ 690 10-Dec Wages expense Cash 115*6 days $ 690 $ 2,200 14-Dec Cash Unearned Computer Services Revenue $ 2,200 $ 1,700 15-Dec Computer Supplies Accounts Payable $ 1,700 16-Dec No entry $ 6,025 20-Dec Cash Computer Services Revenue $ 6,025 Dec 22-26 No entry $ 3,400 28-Dec Cash Accounts Receivable $ 3,400 $ 160 =500*0.32 29-Dec Mileage expense Cash $ 160 $ 1,100 $ 1,100 31-Dec Dividends Cash Req 2-a Adjusting entries 12/31 (a) Computer supplies expense Computer Supplies $ 3,615 2545+1700-630 $ 3,615 $ 510 2040/12*3 12/31 (b) Insurance expense Prepaid Insurance $ 510 $ 460 115*4 days 12/31 (c) Wages expense Wages Payable $ 460 $ 1,450 23200/4 yrs * 3/12 12/31 (d) Depreciation expense-Computer Equipment Accumulated Depreciation-Computer Equipment $ 1,450 $ 425 8500/5 yrs *3/12 12/31 (e) Depreciation expense-Office Equipment Accumulated Depreciation Office Equipment $ 425 $ 2,370 3160/4*3 12/31 (f) Rent expense Prepaid Rent $ 2,370

3-Dec Office Equip Op bal 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 $ 12,618 $ 12,618 Op bal $ 2,545 $ 2,545 Op bal $ 2,040 $ 2,040 2-Dec $ 955 $ 37,409 4-Dec $ 4,450 $ 8,168 15-Dec $ 1,700 $ 4,245 12/31 (b) $ 510 $ 1,530 $ 420 $ 36,989 28-Dec $ 3,400 $ 4,768 12/31 (a) $ 3,615 $ 630 4-Dec $ 4,450 $ 41,439 10-Dec $ 690 $40,749 14-Dec $ 2,200 $ 42,949 20-Dec $ 6,025 $ 48,974 28-Dec $ 3,400 $ 52,374 29-Dec $ 160 $ 52,214 31-Dec $ 1,100 $ 51,114 Accum. Depr. - Office Equip Computer Equipment Accum. Depr. - Computer Equip Op bal $ 8,500 $ 8,500 12/31 (e) $ 425 $ 425 Op bal $ 23,200 $ 23,200 12/31 (d) $ 1,450 $ 1,450 Prepaid Rent Accounts Payable Wages Payable Unearned Computer Services Revenue $ 3,160 $ 3,160 15-Dec $ 1,700 $ 1,700 12/31 (c) $ 460 $ 460 14-Dec $ 2,200 $ 2,200 12/31 (f) $ 2,370 $ 790 Common Stock Dividends Income Summary Retained Earnings Op bal $ 63,000 $ 63,000 Op bal $ 6,000 $ 6,000 31-Dec $ 45,294 $ 45,294 Op bal $ $ 31-Dec $ 1,100 $ 7,100 31-Dec $ 16,897 $ 28,397 31-Dec $ 28,397 $ 28,397 31-Dec $ 7,100 $ 31-Dec $ 28,397 $ 31-Dec $ 7,100 $ 21,297 Computer Services Revenue Depreciation expense-Office Equipment Depreciation expense-Computer Equip Wages expense Op bal $ 39,269 $ 39,269 12/31 (e) $ 425 $ 425 12/31 (d) $ 1,450 $ 1,450 Op bal $ 2,475 $ 2,475 20-Dec $ 6,025 $ 45,294 31-Dec $ 425 $ 31-Dec $ 1,450 $ 10-Dec $ 690 $ 3,165 31-Dec $ 45,294 $ 12/31 (c) $ 460 $ 3,625 $ 3,625 $ Insurance expense Rent expense Computer supplies expense Advertising expense 12/31 (b) $ 510 $ 510 12/31 (f) $ 2,370 $ 2,370 12/31 (a) $ 3,615 $ 3,615 Op bal $ 1,688 $ 1,688 31-Dec $ 510 $ 31-Dec $ 2,370 $ 31-Dec $ 3,615 $ 2-Dec $ 955 $ 2,643 31-Dec $ 2,643 $ Mileage expense Miscellaneous expense Repairs expense-Computer Op bal $ 694 $ 694 Op bal $ 190 $ 190 Op bal $ 795 $ 795 29-Dec $ 160 $ 854 31-Dec $ 190 $ 3-Dec $ 420 $ 1,215 31-Dec $ 854 $ 31-Dec $ 1,215 $ 31-Dec -

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 51,114 4,768 630 1,530 790 8,500 425 23,200 1,450 1,700 460 2,200 63,000 7,100 45,294 425 1,450 3,625 510 2,370 3,615 2,643 854 190 1,215 114,529 114,529

45,294 Req 4 Business Solutions Income Statement For three months ended December 31, 2019 Computer Services Revenue Expenses 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 Total Expenses Net Income 425 1,450 3,625 510 2,370 3,615 2,643 854 190 1,215 16,897 28,397 Req5 Statement of Retained Earnings For three months ended December 31, 2019 Retained Earnings, October 1, 2019 Net Income Subtotal Less Dividends Retained Earnings, December 31, 2019 28,397 28,397 (7,100) 21,297

Reg 6 Business Solutions Balance Sheet As of December 31, 2019 Assets Current Assets Cash Accounts Receivable Computer Supplies Prepaid Insurance Prepaid Rent Total Current Assets 51,114 4,768 630 1,530 790 58,832 Fixed Assets Office Equipment Accumulated Depreciation Office Equipment Computer Equipment Accumulated Depreciation-Computer Equipment Total Fixed Assets Total Assets 8,500 (425) 8,075 23,200 (1,450) 21,750 29,825 88,657 Liabilities & Equity Liabilities Accounts Payable Wages Payable Unearned Computer Services Revenue Total Liabilities 1,700 460 2,200 4,360 Equity Common Stock Retained Earnings Total Equity Total Liabilities & Equity 63,000 21,297 84,297 88,657

Reqz Closing entries Date Account 31-Dec Computer Services Revenue Income Summary Credit Debit $ 45,294 $ 45,294 $ 16,897 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 $ 425 $ 1,450 $ 3,625 $ 510 $ 2,370 $ 3,615 $ 2,643 $ 854 $ 190 $ 1,215 $ 28,397 31-Dec Income Summary Retained Earnings $ 28,397 $ 7,100 31-Dec Retained Earnings Dividends $ 7,100

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 51,114 4,768 630 1,530 790 8,500 425 23,200 1,450 1,700 460 2,200 63,000 21,297 90,532 90,532