Question

After the success of the company’s first two months, Santana Rey continues to operate Business Solutions. The November 30, 2019, unadjusted trial balance of Business Solutions (reflecting its transactions for October and November of 2019) 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 2019.

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 have expired.

Record the necessary closing entries as of December 31, 2019

Answer 1

		Debit	Credit
101	Cash	48,372
106	Accounts receivables	43
126	Computer supplies	580
128	Prepaid insurance	1,665
131	Prepaid rent	825
163	Office equipment	8,000
164	Accumulated depreciation- Office equipment		400
167	Computer equipments	20,000
168	Accumulated depreciation- Computer		1,250
201	Accounts payable		1,100
210	Wages payable		500
236	Un earned computer service revenue		1,500
307	Common stock		73,000
318	Retained earnings		0
319	Dividends	7,100
403	Computer services revenue		25,659
612	Depreciation - Office equipment	400
613	Depreciation - Computer equipment	1,250
623	Wages expense	3,875
637	Insurance expense	555
640	Rent expense	2,475
652	Computer supplies expenses	3,065
655	Advertising expenses	2,753
676	Milage expenses	896
677	Miscellaneous Expenses	250
684	Repairs expenses -Computer	1,305
	Total	103,409	103,409

Entries by point wise

SI No	Particulars	Dr	Credit
1	Advertisement Expense	1025
	Cash		1025
2	Repairs to computers	500
	Cash		500
3	Cash	3950
	A/c Receivables		3950
4	Wages Exp	750
	Cash		750
5	Cash	1500
	Un earned revenue		1500
6	Computer supplies expense	1100
	Accounts payable		1100
7	No entry
8	Cash	5625
	Accounts receivables		5625
	(Assumed that project related to previous month)
	Alternative entry
	Cash	5625
	Computer service revenue		5625
	(If it is the project of decmebr month then need to book as revenue)
9	Cash	3000
	Accounts receivables		3000
10	Milege expenses	192
	Cash		192
11	Divident paid	1500
	Cash		1500
	Adjustment entries
1	Now closing stock valued at 580 only so the balance of stock need to charge as computer supplies expenses
	Computer supplies exp	1965
	Computer supplies		1965
2	Insurance expense	555.00
	Prepaid insurance		555
	(2220*3/12)
3	Wages expense	500
	Wages payable		500
4	Depreciation	400
	Depreciation - Office equipment		400
	(8000/5*3/12)
5	Depreciation	1250
	Accumulated depreciation- Computer		1250
	(20000/4*3/12)
6	Rent expense	2,475.00
	Prepaid expense		2475
	(3300*3/4)