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	$	38,264
106	Accounts receivable		12,618
126	Computer supplies		2,545
128	Prepaid insurance		2,220
131	Prepaid rent		3,300
163	Office equipment		8,000
164	Accumulated depreciation—Office equipment				$	0
167	Computer equipment		20,000
168	Accumulated depreciation—Computer equipment					0
201	Accounts payable					0
210	Wages payable					0
236	Unearned computer services revenue					0
307	Common stock					73,000
318	Retained earnings					0
319	Dividends		5,600
403	Computer services revenue					25,659
612	Depreciation expense—Office equipment		0
613	Depreciation expense—Computer equipment		0
623	Wages expense		2,625
637	Insurance expense		0
640	Rent expense		0
652	Computer supplies expense		0
655	Advertising expense		1,728
676	Mileage expense		704
677	Miscellaneous expenses		250
684	Repairs expense—Computer		805
	Totals	$	98,659		$	98,659

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

Dec.	2		Paid $1,025 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 $3,950 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 $7,000 on a proposed project has been accepted. Alex’s paid a $1,500 cash advance to Business Solutions.
	15		Purchased $1,100 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 $5,625 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 (600 miles at $0.32 per mile).
	31		The company paid $1,500 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 $580 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.

Prepare an adjusted trial balance as of December 31, 2019.

Answer 1

Dec	Journal Entries	Dr. ($)	Cr. ($)
2	advertising expenses	1025
	To cash		1025
3	repairs expense – computer	500
	To cash		500
4	cash	3950
	To accounts receivable		3950
10	wages expense	750
	To cash		750
14	cash	1500
	To unearned computer service revenue		1500
15	computer supplies	1100
	To accounts payable		1100
16	no entry
20	cash	5625
	To computer services revenue		5625
22-26	no entry
28	cash	3000
	To accounts receivable		3000
29	mileage expense	192
	To cash		192
31	dividends	1500
	To cash		1500

Transaction	Adjusting Entries	Dr. ($)	Cr. ($)
1	computer supplies expense	3065
	To computer supplies		3065
2	insurance expenses	555
	To prepaid insurance		555
3	wages expense	500
	To wages payable		500
4	depreciation expenses – computer system	1250
	To accumulated depreciation expenses – computer system		1250
5	depreciation expenses – office equipment	400
	To accumulated depreciation expenses – office equipment		400
6	rent expenses	2475
	To prepaid rent		2475

Adjusted Trial Balance

Business Solutions
Adjusted Trial Balance
As of Dec. 31, 2019
Accounts	Dr. ($)	Cr. ($)
Cash	48372
Accounts receivable	5668
Computer supplies	580
Prepaid insurance	1665
Prepaid rent	825
Office equipment	8000
Accumulated depreciation—Office equipment		400
Computer equipment	20000
Accumulated depreciation—Computer equipment		1250
Accounts payable		1100
Wages payable		500
Unearned computer services revenue		1500
Common stock		73000
Dividends	7100
Computer services revenue		31284
Depreciation expense—Office equipment	400
Depreciation expense—Computer equipment	1250
Wages expense	3875
Insurance expense	555
Rent expense	2475
Computer supplies expense	3065
Advertising expense	2753
Mileage expense	896
Miscellaneous expenses	250
Repairs expense—Computer	1305
Totals	109034	109034