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	$	38,964
106	Accounts receivable		12,818
126	Computer supplies		2,645
128	Prepaid insurance		2,160
131	Prepaid rent		2,920
163	Office equipment		8,500
164	Accumulated depreciation—Office equipment				$	0
167	Computer equipment		23,600
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					40,189
612	Depreciation expense—Office equipment		0
613	Depreciation expense—Computer equipment		0
623	Wages expense		2,275
637	Insurance expense		0
640	Rent expense		0
652	Computer supplies expense		0
655	Advertising expense		1,698
676	Mileage expense		634
677	Miscellaneous expenses		170
684	Repairs expense—Computer		805
	Totals	$	103,189		$	103,189

Business Solutions had the following transactions and events in December 2017.   

Dec.	2		Paid $940 cash to Hillside Mall for Business Solutions’ share of mall advertising costs.
	3		Paid $410 cash for minor repairs to the company’s computer.
	4		Received $4,050 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 $7,700 on a proposed project has been accepted. Alex’s paid a $1,700 cash advance to Business Solutions.
	15		Purchased $1,900 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 $6,075 cash.
	22–26		Took the week off for the holidays.
	28		Received $3,700 cash from Gomez Co. on its receivable.
	29		Reimbursed S. Rey for business automobile mileage (500 miles at $0.30 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 $600 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 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.

Answer 1

Part 1: Debit Credit General Journal Date Advertising expense Cash Dec-02 940 940 Repairs expense-Computer Cash Dec-03 410 410 Cash Accounts receivable 4,050 Dec-04 4,050 Wages expense Cash Dec-10 660 660 (110*6) Cash Dec-14 1,700 Unearned computer services revenue 1,700 Computer supplies Accounts payable 1,900 Dec-15 1,900 No journal entry required Dec-16 Cash Computer services revenue 6,075 Dec-20 6,075 Cash Accounts receivable Dec-28 3,700 3,700 Mi leage expense Cash Dec-29 150 150 (500*0.24) Dividends Dec-31 1,100 Cash 1,100

Part 2a: Debit Credit General Journal Transaction Computer supplies expense 3,945 а. Computer supplies 3,945 (2645+1900-600) b. Insurance expense 540 Prepaid insurance 540 (2160* 3/12) Wages expense 440 C. Wages paya ble 440 (110 4) d. 1,475 Depreciation expense-Computerequipment Accumulated depreciation-Computer equipment 1,475 (23600* 3/48) De preciation expense-Office equipment 425 e. Accumulated depreciation-Office equi pment 425 (8500*3/60) f. 2,190 Rent expense |Prepaid rent 2,190 (2920*3/4)

Part 2b: Cash Accounts Receivable Debit Credit Balance Debit Credit Balance Date Date Dec. 01 Dec. 02 Dec. 03 38,964 940 37614 Dec. 01 Dec. 04 Dec. 28 12,818 4,050 3,700 38024 8768 410 5068 Dec. 04 4,050 41664 Dec. 10 660 41004 Dec. 14 1,700 42704 Dec. 20 6,075 48779 Dec. 28 52479 3,700 Dec, 29 150 52329 1,100 51229 Dec. 31 Computer Supplies Debit Credit Balance Prepaid Insurance Debit Credit Balance Date Date Dec. 01 Dec. 15 Dec. 01 Dec. 31 2,645 2,160 1620 1.900 540 4545 Dec. 31 600 3,945 Office Equipment Debit Credit Balance 8,500 Prepaid Rent Debit Credit Balance Date Date Dec. 01 Dec. 31 2,920 Dec. 01 2,190 730 ula ted Deprecia tion-Office Equi Debit Credit Balance Computer Equipme nt Debit Credit Balance Date Date Dec. 01 Dec. 31 Dec. 01 23,600 425 425 la ted Depreciation-Computer Eq Accounts Paya ble Debit Credit Balance Credit Balance Date Debit Date Dec. 01 0 Dec. 01 1,900 Dec. 31 1,475 Dec. 15 1475 1900 earned Computer Services Reven Credit Balance Wages Payable Debit Credit Balance Debit Date Date Dec. 01 Dec. 31 Dec. 01 Dec. 14 0 440 1,700 440 1700 Retained Earni ngs Common Stock Debit Credit Balance Credit Balance Debit Date Date Dec. 01 Dec. 01 63,000 Dec. 31 Dec. 31 7,100 29,507 29507 22407

Dividends Computer Services Revenue Debit Credit Balance 6,000 7100 Debit Credit Balance 40,189 46264 Date Date Dec. 01 Dec. 31 Dec. 31 46,264 Dec. 01 Dec. 20 Dec. 31 1,100 6,075 7,100 reciation Expense-Office Equipn ciation Expense-Computer Equi Debit Credit Balance Debit Credit Balance Date Date Dec. 01 Dec. 31 Dec. 31 Dec. 01 1475 Dec. 10 Dec. 31 425 1,475 425 425 1,475 C Insurance Expense Rent Expense Debit Credit Balance Debit Credit Balance Date Date Dec. 01 Dec. 31 Dec. 01 Dec. 31 0 C 540 540 2,190 2190 Dec. 31 Dec. 31 540 0 2,190 Computer Supplies Expense Credit Balance Advertising Expe ns Debit Credit Balance Debit Date Date Dec. 01 Dec. 31 Dec. 31 Dec. 01 1,698 Dec. 02 3,945 3945 940 2638 Dec. 31 3,945 2,638 Miscellane ous Expenses Debit Credit Balance Mileage Expense Debit Credit Balance Date Date Dec. 01 634 Dec. 01 170 Dec. 31 170 Dec. 29 784 150 C Dec. 31 784 Repairs Expense - Computer Debit Credit Balance Wages Expense Debit Credit Balance Date Date Dec. 01 Dec. 03 Dec. 31 Dec. 01 Dec. 31 805 2,275 660 2935 410 1215 Dec. 31 Dec. 31 440 1,215 3375 3,375 Income Summary Debit Credit Balance Date Dec. 01 C Dec. 31 46,264 46,264 Dec. 31 29,507 Dec. 31 16,757 16,757

Part 3: Part 4: BUSINESS SOLUTIONS BUSINESS SOLUTIONS Income Stateme nt For Three Mon ths Ended December 31, 2017 Adjusted Trial Balance December 31, 2017 Debit Credit Revenue Account Title 51,229 46,264 Cash Computer services revenue Expenses Depreciation expense-Office equipment Accounts receivable 5,068 Computer supplies Prepaid insurance Prepaid rent Office equipment Accumulated de preciation -Office equipment Computer equipme nt Accumulated depreciation-Computer equi pment Accounts payable Wages payable Unearned computer services revenue 600 425 1,620 Depreciation expense-Computer equipment Wages expense Insurance expense Rent expense 1475 730 3375 540 2190 8,500 425 Computer supplies expense Advertising expense Mileage expens e Miscellane ous expenses Repairs expense-Computer 23,600 3945 1,475 2638 784 1,900 440 170 1215 1,700 63,000 Common stock Retained earmings 0 Total expenses Dividends 7,100 16757 46,264 Computer services revenue Depreciation expense-Office equipment Depreciation expe nse-Computer equipment Wages expense Insurance expense Net income 29,507 425 1,475 3,375 Part 5: BUSINESS SOLUTIONS Statement of Retained Earnings 540 2,190 For Three Mont hs Ended December 31, 2017 Rent expense 3,945 2,638 Computer supplies expense Advertising expense Mileage expens e Miscellane ous expenses Repairs expense-Computer Totals Retained earnings, October 1, 2017 Add: Net income 29,507 784 29507 170 Less: Dividends 7,100 Retained earnings, December 31, 2017 1,215 22,407 115204 115204

Part 6 BUSINESS SOLUTIONS Part 7: Debit Credit Balance Sheet Gene ral Journal Date December 31, 2017 46,264 Dec-31 Computer services revenue 46,264 Assets Income summary Cash Accounts receivable Computer suppl ies Pre paid ins ura nce Prepaid rent Office equipment Accumul ated de preciation-Office equipment Computer equipme nt Accumulated de preciation-Computer equipment 51,229 Dec-31 Income summary 5,068 16,757 De preciation expense-Office equipment Depreciation expe nse-Computer equipment Wages expense 425 600 1475 1,620 3375 730 540 2190 3945 8,500 Ins urance expense Rent expense Computer supplies expense Advertising expense Mileage expense 425 23,600 8075 2638 -1,475 22125 Total Assets 89447 784 Liabili ties 170 Miscellaneous expenses 1,900 Accounts payable Repairs expe nse-Computer 1215 Wages payable 440 Dec-31 Income summary Unearned computer services revenue 1,700 29,507 Re tained eari ngs Total Liabilities 4040 29,507 Equity Dec-31 Retained eamings Dividends Common stock 63,000 7,100 Retained eamings 7,100 22,407 Total equity 85407 Total Liabilities and Equity 89447