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	$	38,464
106	Accounts receivable		13,218
126	Computer supplies		2,645
128	Prepaid insurance		1,860
131	Prepaid rent		3,280
163	Office equipment		8,800
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
301	S. Rey, Capital					67,000
302	S. Rey, Withdrawals		6,100
403	Computer services revenue					36,849
612	Depreciation expense—Office equipment		0
613	Depreciation expense—Computer equipment		0
623	Wages expense		2,575
637	Insurance expense		0
640	Rent expense		0
652	Computer supplies expense		0
655	Advertising expense		1,648
676	Mileage expense		694
677	Miscellaneous expenses		250
684	Repairs expense—Computer		715
	Totals	$	103,849		$	103,849

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

Dec.	2		Paid $935 cash to Hillside Mall for Business Solutions’ share of mall advertising costs.
	3		Paid $440 cash for minor repairs to the company’s computer.
	4		Received $4,850 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 $105 per day.
	14		Notified by Alex’s Engineering Co. that Business Solutions’ bid of $7,300 on a proposed project has been accepted. Alex’s paid a $1,500 cash advance to Business Solutions.
	15		Purchased $1,400 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 $6,575 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 $0.30 per mile).
	31		S. Rey withdrew $1,100 cash from the company for personal use.

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 $650 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 $105 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 owner’s equity for the three months ended December 31, 2017.
6. Prepare a balance sheet as of December 31, 2017.

Answer 1

Prepare journal entry as follows:

Date	Account Titles	Debit	Credit
Dec. 02	Advertising Expense	$935
	Cash		$935
Dec. 03	Repairs expense-computer	$440
	Cash		$440
Dec. 04	Cash	$4,850
	Accounts Receivable		$4,850
Dec. 10	Wages expense	$630
	Cash [6 days * $105]		$630
Dec. 14	Cash	$1,500
	Unearned computer services revenue		$1,500
Dec. 15	Computer supplies	$1,400
	Accounts payable		$1,400
Dec. 16	No entry
Dec. 20	Cash	$6,575
	computer services revenue		$6,575
Dec. 20-26	No entry
Dec. 28	Cash	$3,900
	Accounts Receivable		$3,900
Dec. 29	Mileage expense	$150
	Cash [500 miles * $0.30]		$150
Dec. 31	S. Rey, Withdrawals	$1,100
	Cash		$1,100

_________________________________________________________

Prepare adjusted entries as follows:

Date	Account Titles	Debit	Credit
Dec. 31	Computer Supplies Expense	$3,395
	Computer Supplies [$2645 + $1400 - $650]		$3,395
Dec. 31	Insurance Expense [$1860/12] * 3 months	$465
	Prepaid Insurance		$465
Dec. 31	Wages expense [4 days * $105]	$420
	Wages payable		$420
Dec. 31	Depreciation expense - Office equipment	$550
	Accumulated depreciation - Office equipment		$550
	[$8800/4 years] * 3/12
Dec. 31	Depreciation expense - computer equipment	$1,180
	Accumulated depreciation - computer equipment		$1,180
	[$23600/5 years] * 3/12
Dec. 31	Rent Expense [$3280/4] * 3 months	$2,460
	Prepaid Rent		$2,460

_________________________________________________________________

Prepare adjusted trial balance as follows:

No.	Account Title	Debit	Credit
101	Cash [$38464 - $935 - $440 + $4850 -$630 + $1500 + $6575 + $3900 - $150 - $1100]	$52,034
106	Accounts receivable [$13218 -$4850 -$3900]	$4,468
126	Computer supplies	$650
128	Prepaid insurance [$1860 - $465]	$1,395
131	Prepaid rent [$3280 - $2460]	$820
163	Office equipment	$8,800
164	Accumulated depreciation—Office equipment		$550
167	Computer equipment	$23,600
168	Accumulated depreciation—Computer equipment		$1,180
201	Accounts payable		$1,400
210	Wages payable		$420
236	Unearned computer services revenue		$1,500
301	S. Rey, Capital		$67,000
302	S. Rey, Withdrawals [$6100 + $1100]	$7,200
403	Computer services revenue [$36849 + $6575]		$43,424
612	Depreciation expense—Office equipment	$550
613	Depreciation expense—Computer equipment	$1,180
623	Wages expense [$2575 + $630 + $420]	$3,625
637	Insurance expense	$465
640	Rent expense	$2,460
652	Computer supplies expense	$3,395
655	Advertising expense [$1648 + $935]	$2,583
676	Mileage expense [$694 + $150]	$844
677	Miscellaneous expenses	$250
684	Repairs expense—Computer [$715 + $440]	$1,155
	Totals	$115,474	$115,474

__________________________________________________________________

Prepare Income Statement as follows:

_______________________________________________________________

_____________________________________________________________

Dear student, Please feel free to ask any query regarding the solution. Give your valuable rating. Thank You!