Question

Serial Problem Business Solutions LO P1, P2, P3, P4, P5

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	$	38,764
106	Accounts receivable		13,418
126	Computer supplies		2,545
128	Prepaid insurance		2,040
131	Prepaid rent		3,140
163	Office equipment		8,000
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					71,000
318	Retained earnings					0
319	Dividends		5,900
403	Computer services revenue					29,989
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		1,718
676	Mileage expense		654
677	Miscellaneous expenses		230
684	Repairs expense—Computer		705
	Totals	$	100,989		$	100,989

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

Dec.	2		Paid $980 cash to Hillside Mall for Business Solutions’ share of mall advertising costs.
	3		Paid $480 cash for minor repairs to the company’s computer.
	4		Received $4,750 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 $7,900 on a proposed project has been accepted. Alex’s paid a $1,900 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 $5,975 cash.
	22–26		Took the week off for the holidays.
	28		Received $3,900 cash from Gomez Co. on its receivable.
	29		Reimbursed S. Rey for business automobile mileage (500 miles at $0.29 per mile).
	31		The company paid $1,200 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:

The December 31 inventory count of computer supplies shows $590 still available.

Three months have expired since the 12-month insurance premium was paid in advance.

As of December 31, Lyn Addie has not been paid for four days of work at $110 per day.

The computer system, acquired on October 1, is expected to have a four-year life with no salvage value.

The office equipment, acquired on October 1, is expected to have a five-year life with no salvage value.

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

	Business Solution
Date	Particular	Amount (Dr)	Amount (Cr)
2-Dec	Advertisement Expenses	$               980.00
	To Cash		$                                                980.00
	(Being amount of cash paid to hillside Mall for Advertisement)
3-Dec	Repair Expenses	$               480.00
	To Cash		$                                                480.00
	(Being amount paid for minor repairs for company's computer)
4-Dec	Cash	$           4,750.00
	To Accounts Receivable		$                                            4,750.00
	(Being amount received from Alex's Engineering Company)
10-Dec	Wages Expenses($110*6)	$               660.00
	To Cash		$                                                660.00
	(Being amount paid Lynn Addie for six days wages)
14-Dec	Cash	$           1,900.00
	To Unearned Service Revenue		$                                            1,900.00
	(Amount received as advance from Alex's Engineering)
15-Dec	Comuter supplies	$           1,500.00
	To Accounts Payable		$                                            1,500.00
	(Being amount of purchased of Computer supplies from Harris Office Products)
16-Dec	No Entry
20-Dec	Cash	$           5,975.00
	To Computer Service Revenue		$                                            5,975.00
	(Being Amount received from Liu Corporation)
28-Dec	Cash	$           3,900.00
	To Accounts Receivable		$                                            3,900.00
	(Being amount received from Gomez Co.)
29-Dec	Mileage Expenses(500*.29)	$               145.00
	To Cash		$                                                145.00
	(Being amount paid to S.Ray for mileage expenses)
31-Dec	Dividend	$           1,200.00
	To Cash		$                                            1,200.00
	(Being amount of dividend paid )
	Adjusting Entries
31-Dec	Computer Supplies Expenses($2545+$1500-$590)	$           3,455.00
	To Computer Supplies		$                                            3,455.00
	(Being amount of Computer supplies expenses)
31-Dec	Insurance ($2040*3/12)	$               510.00
	To Prepaid Insurance		$                                                510.00
	(Being amount of 3 months insurance expired)
31-Dec	Wages($110*4)	$               440.00
	To Wages Payable		$                                                440.00
	(Being amount of wages payable)
31-Dec	Depreciation-Computer Equipment($21600/4)*3/12	$           1,350.00
	To Accumulated Depreciation-Computer Equipment		$                                            1,350.00
	(Being amount of Depreciation on Equipment)
31-Dec	Depreciation-Office Equipment($8000/5)*3/12	$               400.00
	To Accumulated Depreciation-Office Equipment		$                                                400.00
	(Being amount of Depreciation on Office Equipment)
31-Dec	Rent($3140*3/4)	$           2,355.00
	To Prepaid Rent		$                                            2,355.00
	(Being amount of 3 months Rent)
	Cash A/c
Date	Particular	Amt (DR)	Amount (Cr)	Balance
1-Dec	Bal			$             38,764.00
2-Dec	Advertisement		$                                                980.00	$             37,784.00
3-Dec	Computer Repair		$                                                480.00	$             37,304.00
4-Dec	Accounts Receivable	$           4,750.00		$             42,054.00
10-Dec	Wages		$                                                660.00	$             41,394.00
14-Dec	Unearned Service Revenue	$           1,900.00		$             43,294.00
20-Dec	Computer Service Revenue	$           5,975.00		$             49,269.00
28-Dec	Accounts Receivable	$           3,900.00		$             53,169.00
29-Dec	Mileage Expenses		$                                                145.00	$             53,024.00
31-Dec	Dividend		$                                            1,200.00	$             51,824.00
	Accounts Receivable
Date	Particular	Amt (DR)	Amount (Cr)	Balance
1-Dec	Opening Balance			$             13,418.00
4-Dec	Cash		$                                            4,750.00	$                8,668.00
28-Dec	Cash		$                                            3,900.00	$                4,768.00
	Prepaid Rent
Date	Particular	Amt (DR)	Amount (Cr)	Balance
1-Dec	Opening Balance			$                3,140.00
31-Dec	Rent		$                                            2,355.00	785.00
	Prepaid Insurance
Date	Particular	Amt (DR)	Amount (Cr)	Balance
1-Dec	Opening Balance			2040
31-Dec	Insurance		$                                                510.00	1,530.00
	Rent
Date	Particular	Amt (DR)	Amount (Cr)	Balance
1-Dec	Opening Balance			$                             -
31-Dec	Rent	$           2,355.00		2,355.00
	Insurance
Date	Particular	Amt (DR)	Amount (Cr)	Balance
1-Dec	Opening Balance			$                             -
31-Dec	Prepaid Insurance	$               510.00		$                   510.00
	Wages Expenses
Date	Particular	Amt (DR)	Amount (Cr)	Balance
1-Dec	Opening Balance			$                2,275.00
10-Dec	Cash	$               660.00		$                2,935.00
31-Dec	Wages Payable	$               440.00		$                3,375.00
	Mileage Expenses
Date	Particular	Amt (DR)	Amount (Cr)	Balance
1-Dec	Opening Balance			$                   654.00
29-Dec	Cash	$               145.00		$                   799.00
	Depreciation Expense-Computer Equipment
Date	Particular	Amt (DR)	Amount (Cr)	Balance
31-Dec	Accumulated Depreciation	$           1,350.00		$                1,350.00
	Depreciation Expense-Office Equipment
Date	Particular	Amt (DR)	Amount (Cr)	Balance
31-Dec	Accumulated Depreciation	$               400.00		$                   400.00
	Accumulated Depreciation Expense-Computer Equipment
Date	Particular	Amt (DR)	Amount (Cr)	Balance
31-Dec	Depreciation-Computer Equipment	$           1,350.00		$                1,350.00
	Accumulated Depreciation-Office Equipment
Date	Particular	Amt (DR)	Amount (Cr)	Balance
31-Dec	Accumulated Depreciation	$               400.00		$                   400.00
	Unearned Service Revenue
Date	Particular	Amt (DR)	Amount (Cr)	Balance
31-Dec	Balance C/d	$           1,200.00	Cash	$                1,200.00
	Advertising Expenses
Date	Particular	Amt (DR)	Amount (Cr)	Balance
1-Dec	Balance			$                1,718.00
31-Dec	Cash	$               980.00		$                2,698.00
	S.Ray Capital
Date	Particular	Amt (DR)	Amount (Cr)	Balance
31-Dec	Opening Balance	$                        -		$             71,000.00
	Computer Supplies Expenses
Date	Particular	Amt (DR)	Amount (Cr)	Balance
1-Dec	Opening Balance			$                             -
31-Dec	Computer Supplies	$           3,455.00		$                3,455.00
	Computer Supplies
Date	Particular	Amt (DR)		Balance
1-Dec	Opening Balance			$                2,545.00
15-Dec	Accounts Payable	$           1,500.00		$                4,045.00
31-Dec	Supplies Expenes		$                                            3,455.00	$                   590.00
	Accounts Payable
Date	Particular	Amt (DR)	Amount (Cr)	Balance
1-Dec	Opening Balance			$                             -
31-Dec	Computer Supplies		$                                            1,000.00	$                1,000.00
	Dividend
Date	Particular	Amt (DR)	Amount (Cr)	Balance
1-Dec	Opening Balance			$                5,900.00
31-Dec	Cash	$           1,500.00		$                7,100.00
	Wages Payable
Date	Particular	Amt (DR)		Balance
1-Dec	Opening Balance			$                             -
31-Dec	Wages		$                                                440.00	$                   440.00
	Computer Service Revenue
Date	Particular	Amt (DR)		Balance
1-Dec	Opening Balance			$             29,989.00
14-Dec	Cash		$                                            5,975.00	$             35,964.00
	Business Solution
	Adjusted Trial Balance
	For the Three Months Ended December 31st,2017
Code	Account Title & Explaination	Amt (Dr)	Amt (Cr)
101	Cash	$         51,824.00
106	Accounts Receivable	$           4,768.00
126	Computer Supplies	$               590.00
128	Prepaid Insurance	$           1,530.00
131	Prepaid Rent	$               785.00
163	Office Equipment	$           8,000.00
164	Accumulated Depreciation-Office Equipment		$                                                400.00
167	Computer Equipment	$         21,600.00
168	Accumulated Depreciation-Computer Equipment		$                                            1,350.00
201	Accounts Payable		$                                            1,500.00
210	Wages Payable		$                                                440.00
236	Unearned Computer Service Revenue		$                                            1,900.00
301	S.Ray Capital		$                                          71,000.00
302	Dividend	$           7,100.00
403	Computer Service Revenue		$                                          35,964.00
612	Depreciation Expense-Office Equipment	$               400.00
613	Depreciation Expense-Computer Equipment	$           1,350.00
623	Wages Expenses	$           3,375.00
637	Insurance Expenses	$               510.00
640	Rent Expenses	$           2,355.00
652	Computer Supplies Expenses	$           3,455.00
655	Advertising Expenses	$           2,698.00
676	Mileage Expenses	$               799.00
677	Miscellaneous Expenses	$               230.00
684	Repair Expenses	$           1,185.00
	Total	$     1,12,554.00	$                                      1,12,554.00
	Business Solutions
	Income Statement		-
	For the three months ended December 31st,2017
	Computer Service Revenue=(A)		$                                          35,964.00
	Expenses
	Wages Expenses	$           3,375.00
	Computer Supplies Expenses	$           3,455.00
	Rent Expenses	$           2,355.00
	Insurance Expenses	$               510.00
	Advertising Expenses	$           2,698.00
	Mileage Expenses	$               799.00
	Repair Expenses	$           1,185.00
	Depreciation Expenses-Office Equipment	$               400.00
	Depreciation Expenses-Computer Equipment	$           1,350.00
	Miscellaneous Expenses	$               230.00
	Total Expenses=(B)		$                                          16,357.00
	Net Income(A)-(B)		$                                          19,607.00