Question

After the success of the company’s first two months, Santana Rey continues to operate Business Solutions. The November 30, 2017, unadjusted trial balance of Business Solutions (reflecting its transactions for October and November of 2017) 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 2017.

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 has 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, 2017.
4. Prepare an income statement for the three months ended December 31, 2017.
5. Prepare a statement of retained earnings for the three months ended December 31, 2017.
6. Prepare a balance sheet as of December 31, 2017.
7. Record and post the necessary closing entries as of December 31, 2017.
8. Prepare a post-closing trial balance as of December 31, 2017.

Paid $1,025 cash to Hillside Mall for Business Solutions' share of mall advertising costs. Note: Enter debits before credits. Date General Journal Debit Credit Dec 02

Answer 1

Business Solutions Journal entries Date Account 2-Dec Advertising expense Cash Credit Calculation Debit $ 1,025 $ 1,025 $ 500 3-Dec Repairs expense-Computer Cash $ 500 $ 3,950 4-Dec Cash Accounts Receivable $ 3,950 $ 750 =6*125 10-Dec Wages expense Cash $ 750 $ 1,500 14-Dec Cash Unearned Computer Services Revenue $ 1,500 $ 1,100 15-Dec Computer Supplies Accounts Payable $ 1,100 16-Dec No entry $ 5,625 20-Dec Cash Computer Services Revenue $ 5,625 Dec 22-26 No entry $ 3,000 28-Dec Cash Accounts Receivable $ 3,000 $ 192 =600*0.32 29-Dec Mileage expense Cash $ 192 $ 1,500 31-Dec Dividends Cash $ 1,500 Adjusting entries 31-Dec Computer supplies expense Computer Supplies $ 3,065 =2,545+1,100-580 $ 3,065 $ 555 =2,220/12*3 31-Dec Insurance expense Prepaid Insurance $ 555 $ 500 -4*125 31-Dec Wages expense Wages Payable $ 500 1,250 =20,000/4*3/12 31-Dec Depreciation expense-Computer Equipment Accumulated Depreciation-Computer Equipment $ 1,250 400 =8,000/5*3/12 31-Dec Depreciation expense-Office Equipment Accumulated Depreciation Office Equipment $ 400 $ 2,475 =3,300/4*3 31-Dec Rent expense Prepaid Rent $ 2,475 Closing entries 31-Dec Computer Services Revenue Income Summary $ 31,284 $ 31,284 $ 16,824 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 $ $ $ $ $ $ $ $ $ $ 400 1,250 3,875 555 2,475 3,065 2,753 896 250 1,305 $ 14,460 =31,284-16,824 31-Dec Income Summary Retained Earnings $ 14,460 $ 7,100 31-Dec Retained Earnings Dividends $ 7,100

Date Date Business Solutions T Accounts Date Debit Date Credit Cash Op bal $38,264 2-Dec $ 1,025 4-Dec $ 3,950 3-Dec $ 500 14-Dec $ 1,500 10-Dec $ 750 20-Dec $ 5,625 29-Dec $ 192 28-Dec $ 3,000 31-Dec $ 1,500 Debit Date Credit Accounts Receivable $ 12,618 4-Dec $ 3,950 28-Dec $ 3,000 Date Debit Date Credit Computer Supplies Op bal $ 2,545 15-Dec $ 1,100 31-Dec $ 3,065 Debit Date Credit Prepaid Insurance $2,220 31-Dec $ 555 Op bal Op bal Bal. Bal. Bal. $ 48,372 Office Equip $ 8,000 $ 5,668 Accum. Depr. - Office Equip 31-Dec $ $ 580 Computer Equipment $20,000 Bal. $ 1,665 Accum. Depr. - Computer Equip 31-Dec $ 1,250 Op bal 400 Op bal Bal. Bal. $ 8,000 Prepaid Rent $ 3,300 31-Dec $ 2,475 Bal. $ 400 Accounts Payable 15-Dec $ 1,100 $ 20,000 Wages Payable 31-Dec $ Bal. $ 1,250 Unearned Computer Services Revenue 14-Dec $ 1,500 Op bal 500 Bal. $ Bal. 825 Common Stock Op bal $ 1,100 Dividends $ 73,000 Op bal $ 5,600 31-Dec $ 1,500 31-Dec $ 7,100 Bal. $ 500 Income Smmary 31-Dec $ 16,824 31-Dec $ 31,284 31-Dec $ 14,460 Bal. $ 1,500 Retained Earnings 31-Dec $ 7,100 Op bal $ . 31-Dec $ 14,460 Bal. $ 73,000 Computer Services Revenue Op bal $ 25,659 20-Dec $ 5,625 31-Dec $ 31,284 Bal. $ Bal. $ - Depreciation expense-Office Equipment Depreciation expense-Computer Equip 31-Dec $ 400 31-Dec $ 1,250 $ 7,360 Wages expense Op bal $ 2,625 10-Dec $ 750 31-Dec $ 500 31-Dec $ 3,875 31-Dec $ 400 31-Dec $ 1,250 - Bal. $ Insurance expense 31-Dec $ 555 31-Dec $ Bal. $ Rent expense 31-Dec $ 2,475 31-Dec $ 2,475 Bal. $ - Computer supplies expense 31-Dec $ 3,065 31-Dec $ 3,065 Bal. $ Advertising expense Op bal $ 1,728 2-Dec $ 1,025 31-Dec $ 2,753 555 Bal. Bal. $ . Bal. $ . Mileage expense Op bal $ 704 29-Dec $ 192 31-Dec $ $ . Miscellaneous expense $ 250 31-Dec $ Bal. $ Repairs expense-Computer Op bal $ 805 3-Dec $ 500 31-Dec $ 1,305 Op bal 896 250 Bal. $- Bal. $ Bal. $

Opening TB Debit Credit 38,264 12,618 2,545 2,220 3,300 8,000 Adjusted TB Debit Credit 48,372 5,668 580 1,665 825 8,000 Post Closing TB Debit Credit 48,372 5,668 580 1,665 825 8,000 400 20,000 1,250 1,100 500 1,500 73,000 7,360 400 20,000 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 20,000 1,250 1,100 500 1,500 73,000 73,000 5,600 7,100 25,659 31,284 2,625 400 1,250 3,875 555 2,475 3,065 2,753 896 250 1,305 109,034 1,728 704 250 805 98,659 98,659 109,034 85,110 85,110

31,284 Business Solutions Income Statement For three months ended Dec 31, 2017 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 400 1,250 3,875 555 2,475 3,065 2,753 896 250 1,305 16,824 14,460 Statement of Retained Earnings For three months ended Dec 31, 2017 Retained Earnings, Oct 1, 2017 Net Income Less Dividends Retained Earnings, Dec 31, 2017 14,460 (7,100) 7,360

Business Solutions Balance Sheet As of Dec 31, 2017 Assets Current Assets Cash Accounts Receivable Computer Supplies Prepaid Insurance Prepaid Rent Total Current Assets 48,372 5,668 580 1,665 825 57,110 8,000 (400) 7,600 Fixed Assets Office Equipment Accumulated Depreciation Office Equipment Office Equipment, Net Computer Equipment Accumulated Depreciation-Computer Equipment Computer Equipment, Net Total Fixed Assets Total Assets 20,000 (1,250) 18,750 26,350 83,460 Liabilities & Equity Current Liabilities Accounts Payable Wages Payable Unearned Computer Services Revenue Total Current Liabilities 1,100 500 1,500 3,100 Equity Common Stock Retained Earnings Total Equity Total Liabilities & Equity 73,000 7,360 80,360 83,460