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, 2016, unadjusted trial balance of Business Solutions (reflecting its transactions for October and November of 2016) follows.

No.	Account Title	Debit			Credit
101	Cash	$	38,664
106	Accounts receivable		12,718
126	Computer supplies		2,545
128	Prepaid insurance		2,160
131	Prepaid rent		3,020
163	Office equipment		8,400
164	Accumulated depreciation—Office equipment				$	0
167	Computer equipment		22,000
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		6,200
403	Computer services revenue					38,374
612	Depreciation expense—Office equipment		0
613	Depreciation expense—Computer equipment		0
623	Wages expense		2,500
637	Insurance expense		0
640	Rent expense		0
652	Computer supplies expense		0
655	Advertising expense		1,628
676	Mileage expense		664
677	Miscellaneous expenses		150
684	Repairs expense—Computer		725
	Totals	$	101,374		$	101,374

Business Solutions had the following transactions and events in December 2016.

Dec.		2		Paid $940 cash to Hillside Mall for Business Solutions’s share of mall advertising costs.
		3		Paid $420 cash for minor repairs to the company’s computer.
		4		Received $4,350 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 $100 per day.
		14		Notified by Alex’s Engineering Co. that Business Solutions’s bid of $7,500 on a proposed project has been accepted. Alex’s paid a $1,800 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 $6,475 cash.
22–26				Took the week off for the holidays.
		28		Received $3,500 cash from Gomez Co. on its receivable.
		29		Reimbursed S. Rey for business automobile mileage (400 miles at $0.32 per mile).
		31		The company paid $1,400 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 $620 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 $100 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.

2.1 Prepare adjusting entries to reflect a through f.

2.2 Post the journal entries to record each of the December transactions, adjusting entries to the accounts in the ledger.

General Ledger Accounts

3. Prepare an adjusted trial balance as of December 31, 2016.

4. Prepare an income statement for the three months ended December 31, 2016.

5. Prepare a statement of retained earnings equity for the three months ended December 31, 2016.

6. Prepare a balance sheet as of December 31, 2016.

7. Record and post the necessary closing entries for Business Solutions. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.)

a) Record the entry to close the revenue account.
b)Record the entry to close the expense accounts.
c)Record the entry to close the income summary account.
d)Record the entry to close the dividends accounts.

8.Prepare a post-closing trial balance as of December 31, 2016.

Answer 1

Business Solutions
General journal for the month ended December 31, 2016
Date	Account Title	Debit	Credit
Dec.2	Advertising Expenses	940
	Cash		940
Dec.3	Repair Expense - Computers	420
	Cash		420
Dec.4	Cash	4350
	Accounts Receivable		4350
Dec.10	Wages Expense	600
	Cash		600
Dec.14	Cash	1800
	Unearned Service Revenue		1800
Dec.15	Computer Supplies	1500
	Accounts Payable		1500
Dec.16	No entry required
Dec.20	Cash	6475
	Computer Service Revenue		6475
Dec.28	Cash	3500
	Accounts Receivable		3500
Dec.29	Mileage Expense	128
	Cash		128
Dec.31	Dividends	1400
	Cash		1400

Adjusting Entries
Date	Account Title	Debit	Credit
Dec.31	Computer Supplies Expense	3425
	Computer Supplies		3425
Dec.31	Insruance Expense	540
	Prepaid Insurance		540
Dec.31	Wages Expense	400
	Wages Payable		400
Dec.31	Depreciation expense - Computer Equipment	1375
	Depreciation expense - Office Equipment	420
	Accumulated Depreciation - Computer Equipment		1375
	Accumulated Depreciation - Office Equipment		420
Dec.31	Rent Expense	2265
	Prepaid Rent		2265
	Computer supplies
	Unadjusted balance	4045
	Supplies on hand	620
	Computer Supplies Expense	3425
	Insurance Expense
	Prepaid insurance - for 12 months	2160
	Insurance Expense - for 3 months	540

Cash

Accounts Receivable

Date

Ref

Debit

credit

Balance

Date

Ref

Debit

credit

Balance

Debit

Credit

Debit

Credit

Dec.1

Balance

38664

Dec.1

Balance

12718

Dec.2

Advt.

940

37724

Dec.4

Cash

4350

8368

Dec.3

Repairs

420

37304

Dec.28

Cash

3500

4868

Dec.4

A/R

4350

41654

4868

Dec.10

Wages

600

41054

4868

Dec.14

Unearned

1800

0

42854

4868

Dec.20

Serv.Rev.

6475

49329

Dec.28

A/R

3500

52829

Computer Supplies

Dec.29

Mileage

128

52701

Date

Ref

Debit

credit

Balance

Dec.31

Dividend

1400

51301

Debit

Credit

51301

Dec.1

Bal.

2545

Dec.15

A/p

1500

4045

Dec.31

Exp.

3425

620

Office Equipment

Date

Ref

Debit

credit

Balance

Prepaid Insurance

Debit

Credit

Date

Ref

Debit

credit

Balance

Dec.1

Bal.

8400

Debit

Credit

8400

Dec.1

Bal.

2160

Dec.31

Expense

540

1620

Prepaid Rent

Date

Ref

Debit

credit

Balance

Accumuluated Depreciation - Office Equipment

Debit

Credit

Date

Ref

Debit

credit

Balance

Dec.1

Bal.

3020

Debit

Credit

Dec.31

2265

755

Dec.31

Dep.

420

420

755

Accumulated Depreciation - Computer Equipment

Computer Equipment

Date

Ref

Debit

credit

Balance

Date

Ref

Debit

credit

Balance

Debit

Credit

Debit

Credit

Dec.31

Dep.

1375

1375

Dec.1

Bal.

22000

1375

22000

Accounts Payable

Common stock

Date

Ref

Debit

credit

Balance

Date

Ref

Debit

credit

Balance

Debit

Credit

Debit

Credit

Dec.1

Bal.

0

Dec.1

Bal.

63000

Dec.15

Supplies

1500

1500

63000

1500

63000

Wages Payable

Dividends

Date

Ref

Debit

credit

Balance

Date

Ref

Debit

credit

Balance

Debit

Credit

Debit

Credit

Dec.1

Bal.

0

Dec.1

Bal.

6200

Dec.31

400

400

Dec.31

Cash

1400

7600

400

Unearned Service Revenue

Computer Service Revenue

Date

Ref

Debit

credit

Balance

Date

Ref

Debit

credit

Balance

Debit

Credit

Debit

Credit

Dec.1

Bal.

0

Dec.1

Bal.

38374

Dec.14

Cash

1800

1800

Dec.20

Cash

6475

44849

44849

Wages Expense

Date

Ref

Debit

credit

Balance

Computer Supplies Expense

Debit

Credit

Date

Ref

Debit

credit

Balance

Dec.1

Bal.

2500

Debit

Credit

Dec.10

Cash

600

3100

Dec.31

Supplies

3425

3425

Dec.31

400

3500

3425

Depreciation expense - Office Equipment

Insurance Expense

Date

Ref

Debit

credit

Balance

Date

Ref

Debit

credit

Balance

Debit

Credit

Debit

Credit

Dec.31

Exp.

420

420

Dec.31

Prepaid

540

2500

420

2500

Depreciation expense - Computer equipment

Rent Expense

Date

Ref

Debit

credit

Balance

Date

Ref

Debit

credit

Balance

Debit

Credit

Debit

Credit

Dec.31

Exp.

1375

1375

Dec.31

Bal.

0

1375

Dec.31

2265

2265

Advertising Expense

Mileage Expense

Date

Ref

Debit

credit

Balance

Date

Ref

Debit

credit

Balance

Debit

Credit

Debit

Credit

Dec.1

Bal.

1628

Dec.1

Bal.

664

Dec.2

Cash

940

2568

Dec.29

Cash

128

792

Miscellaneous Expense

Repairs Expense - Computers

Date

Ref

Debit

credit

Balance

Date

Ref

Debit

credit

Balance

Debit

Credit

Debit

Credit

Dec.1

Bal.

150

Dec.1

Bal.

725

150

Dec.3

Cash

420

1145

Business Solutions
Worksheet for the month of December 2016
	Unadjusted		Adjustments		Adjusted		Income statement		Post Closing
Account	Debit	Credit	Debit	Credit	Debit	Credit	Debit	Credit	Debit	Credit
Cash	51301				51301				51301
Accounts Receivable	4868				4868				4868
Computer Supplies	4045			3425	620				620
Prepaid Rent	3020			2265	755				755
Prepaid Insurance	2160			540	1620				1620
Office Equipment	8400				8400	0			8400
Accumulated Depreciation - Office Equipment				420		420				420
Computer Equipment	22000				22000	0			22000
Accumulated Depreciation - Computer Equipment Equipment				1375		1375				1375
Accounts Payable		1500				1500				1500
Wages Payable				400		400				400
Unearned Service Revenue		1800			0	1800				1800
Common stock		63000			0	63000				63000
Retained Earnings					0	0				21069
Dividends	7600				7600
Computer Service Revenue		44849				44849		44849
Wages Expense	3100		400		3500		3500
Rent Expense	0		2265		2265		2265
Computer Supplies Expense			3425		3425		3425
Advertising Expense	2568				2568		2568
Insurance Expense			540		540		540
Depreciation expense - Offie Equipment			420		420		420
Depreciation expense - Computer Equipment			1375		1375		1375
Mileage expense	792				792		792
Repairs expense	1145				1145		1145
Miscellaneous Expense	150				150		150
	111149	111149	8425	8425	113344	113344	16180	44849	89564	89564

Business Solutions
Income Statement
For the year ended December 31, 2016
Service Revenue	44849
Expenses:
Wages Expense	3500
Rent Expense	2265
Computer Supplies Expense	3425
Advertising Expense	2568
Insurance Expense	540
Depreciation expense - Offie Equipment	420
Depreciation expense - Computer Equipment	1375
Mileage expense	792
Repairs expense	1145
Miscellaneous Expense	150
Total Expenses	16180
Net Income	28669
Business Solutions
Statement of Retained Earnings
For the year ended December 31, 2016
Beginning Balance	0
Net income for the month	28669
Dividends	-7600
Balance as at July 31	21069
Eli's Consulting Services
Balance Sheet
as at December 31, 2016
Assets
Cash		51301
Accounts Receivable		4868
Computer Supplies		620
Prepaid Rent		755
Prepaid Insurance		1620
Total current Asets		59164
Office Equipment	8400
Accumulated Depreciation - Office Equipment	420	7980
Computer Equipment	22000
Accumulated Depreciation - Computer Equipment Equipment	1375	20625
Total Assets		87769
Liabilities and equity
Accounts Payable		1500
Wages Payable		400
Unearned Service Revenue		1800
Total Liabilities		3700
Stockholders' equity
Common Stock		63000
Retained Earnings		21069
Total Stockholders' equity		84069
Total Liabilities and stockholders' equity		87769