Question

In: Accounting

Serial Problem Business Solutions LO P1, P2, P3, P4, P5 After the success of the company’s...

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, 2015, unadjusted trial balance of Business Solutions (reflecting its transactions for October and November of 2015) follows.

No. Account Title Debit Credit
101   Cash $ 39,164
106   Accounts receivable 12,918
126   Computer supplies 2,645
128   Prepaid insurance 1,980
131   Prepaid rent 2,960
163   Office equipment 8,400
164   Accumulated depreciation—Office equipment $ 0
167   Computer equipment 21,200
168   Accumulated depreciation—Computer equipment 0
201   Accounts payable 0
210   Wages payable 0
236   Unearned computer services revenue 0
307   Common stock 68,000
318   Retained earnings 0  
319   Dividends 6,400
403   Computer services revenue 33,474
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 1,698
676   Mileage expense 694
677   Miscellaneous expenses 200
684   Repairs expense—Computer 715
   
  Totals $ 101,474   $ 101,474  
  

   

Business Solutions had the following transactions and events in December 2015.
Dec. 2   Paid $995 cash to Hillside Mall for Business Solutions’ share of mall advertising costs.
3   Paid $460 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 $115 per day.
14

  Notified by Alex’s Engineering Co. that Business Solutions’ bid of $7,600 on a proposed    project has been accepted. Alex’s paid a $2,500 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 $5,775 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 (500 miles at $0.32 per mile).
31   The company paid $1,300 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:

a. The December 31 inventory count of computer supplies shows $640 still available.
b. Three months have expired since the 12-month insurance premium was paid in advance.
c. As of December 31, Lyn Addie has not been paid for four days of work at $115 per day.
d. The computer system, acquired on October 1, is expected to have a four-year life with no salvage value.
e. The office equipment, acquired on October 1, is expected to have a five-year life with no salvage value.
f. 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. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

        

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, 2015.

        

4.

Prepare an income statement for the three months ended December 31, 2015.

        

5.

Prepare a statement of owner’s equity for the three months ended December 31, 2015..

        

6.

Prepare a balance sheet as of December 31, 2015.

        

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.)

     

8.

Prepare a post-closing trial balance as of December 31, 2015.

     

Solutions

Expert Solution

Answer 1.
Journal Entry
Date Particulars Dr. Amt. Cr. Amt.
2-Dec Advertising Expenses          995.00
Cash          995.00
(record the advertising exp.)
3-Dec Repair Expense - Computer          460.00
Cash          460.00
(record the repair exp. - Computer)
4-Dec Cash      4,050.00
Accounts Receivable      4,050.00
(record the cash recevied)
10-Dec Wages Expense          690.00
Cash          690.00
(record the wage expense)
14-Dec Cash      2,500.00
Unearned Computer Service Revenue      2,500.00
(record the advance received)
15-Dec Computer Supplies      1,100.00
Accounts Payable      1,100.00
(record the supplies purchased on credit)
16-Dec No Entry
20-Dec Cash      5,775.00
Computer Service Revenue      5,775.00
(Record the revenue earnes)
22-Dec No Entry
28-Dec Cash      3,500.00
Accounts Receivable      3,500.00
(record the cash recd)
29-Dec Mileage Expense          160.00
Cash          160.00
(record the mileage expense)
31-Dec Dividends      1,300.00
Cash      1,300.00
(record the cash withdrawl)
Answer 2-a
Adjusting Journal Entry
Date Particulars Dr. Amt. Cr. Amt
a. Computer Supplies Expense      3,105.00 $3,745 - $640
Computer Supplies      3,105.00
(record the supplies expense)
b. Insurance Expense          495.00 $1,980 X 3/12
Prepaid Insurance          495.00
(record the insurance Expense for 3 months)
c. Wages Expense          460.00 $115 X 4
Wages Payable          460.00
(record the wages expense)
d. Depreciation Expense - Computer Equip.      1,325.00 $21,200 / 4 Years X (3/12)
Accum. Dep. - Comp. Equip      1,325.00
(record the dep. Expense)
e. Depreciation Expense - Office Equip.          420.00 $8,400 / 5 Years X (3/12)
Accum. Dep. - Office Equip          420.00
(record the dep. Expense)
f. Rent Expense      2,220.00 $2,960 X 3/4
Prepaid Insurance      2,220.00 $2,960 X 3/4
(record the rent expense)
Answer 2-b.
Cash Accounts Receivable Computer Supplies
Beg. Bal.      39,164.00            995.00 2-Dec Beg. Bal.      12,918.00      4,050.00 4-Dec Beg. Bal.      2,645.00        3,105.00 a.
4-Dec        4,050.00            460.00 3-Dec      3,500.00 28-Dec 15-Dec      1,100.00
14-Dec        2,500.00            690.00 10-Dec
20-Dec        5,775.00            160.00 29-Dec
28-Dec        3,500.00        1,300.00 31-Dec
End. Bal.      51,384.00 End. Bal.        5,368.00 End. Bal.          640.00
Prepaid Insurance Prepaid Rent Office Equipment
Beg. Bal.        1,980.00            495.00 b. Beg. Bal.        2,960.00      2,220.00 f. Beg. Bal.      8,400.00
End. Bal.        1,485.00 End. Bal.            740.00 End. Bal.      8,400.00
Accumulated Dep.- Equipment Computer Equipment Accumulated Dep.- Computer Equipment
Beg. Bal.                     -   Beg. Bal.      21,200.00 Beg. Bal.                     -  
           420.00 e.        1,325.00 d.
End. Bal.            420.00 End. Bal.      21,200.00 End. Bal.        1,325.00
Accounts Payable Wages Payable Unearned Computer Service Revenue
Beg. Bal.                     -   Beg. Bal.                   -   Beg. Bal.                     -  
       1,100.00 15-Dec          460.00 c.        2,500.00 14-Dec
End. Bal.        1,100.00 End. Bal.          460.00 End. Bal.        2,500.00
Common Stock Dividends Computer Service Revenue
Beg. Bal.      68,000.00 Beg. Bal.        6,400.00 Beg. Bal.      33,474.00
31-Dec        1,300.00        5,775.00 20-Dec
End. Bal.      68,000.00 End. Bal.        7,700.00 End. Bal.      39,249.00
Dep. Exp. - Office Equipment Dep. Exp. - Computer Equipment Wages Expense
Beg. Bal.                     -   Beg. Bal.                     -   Beg. Bal.      2,500.00
e.            420.00 d.        1,325.00 10-Dec          690.00
c.          460.00
End. Bal.            420.00 End. Bal.        1,325.00 End. Bal.      3,650.00
Insurance Expense Rent Expense Computer Supplies Expense
Beg. Bal.                     -   Beg. Bal.                     -   Beg. Bal.                   -  
b.            495.00 f.        2,220.00 a.      3,105.00
End. Bal.            495.00 End. Bal.        2,220.00 End. Bal.      3,105.00
Advertising Expense Mileage Expense Misc. Expense
Beg. Bal.        1,698.00 Beg. Bal.            694.00 Beg. Bal.          200.00
2-Dec            995.00 29-Dec            160.00
End. Bal.        2,693.00 End. Bal.            854.00 End. Bal.          200.00
Repair Expense - Computer
Beg. Bal.            715.00
3-Dec            460.00
End. Bal.        1,175.00
Answer 3.
Business Solution
Adjusted Trial Balance
Dec 31, 2015
Accounts Title Debits Credits
Cash      51,384.00
Accounts Receivable        5,368.00
Computer Supplies            640.00
Prepaid Insurance        1,485.00
Prepaid Rent            740.00
Office Equipment        8,400.00
Accumulated Dep.- Equipment            420.00
Computer Equipment      21,200.00
Accumulated Dep.- Computer Equipment        1,325.00
Accounts Payable        1,100.00
Wages Payable            460.00
Unearned Computer Service Revenue        2,500.00
Common Stock      68,000.00
Dividends        7,700.00
Computer Service Revenue      39,249.00
Dep. Exp. - Office Equipment            420.00
Dep. Exp. - Computer Equipment        1,325.00
Wages Expense        3,650.00
Insurance Expense            495.00
Rent Expense        2,220.00
Computer Supplies Expense        3,105.00
Advertising Expense        2,693.00
Mileage Expense            854.00
Misc. Expense            200.00
Repair Expense - Computer        1,175.00
Total    113,054.00    113,054.00
                    -  
Answer 4.
Business Solution
Income Statement
For Three Months Ended Dec 31, 2015
Revenues:
Computer Service Revenue      39,249.00
Expenses
Dep. Exp. - Office Equipment            420.00
Dep. Exp. - Computer Equipment        1,325.00
Wages Expense        3,650.00
Insurance Expense            495.00
Rent Expense        2,220.00
Computer Supplies Expense        3,105.00
Advertising Expense        2,693.00
Mileage Expense            854.00
Misc. Expense            200.00
Repair Expense - Computer        1,175.00
Total Expenses      16,137.00
Net Income (Loss)      23,112.00
Answer 5.
Business Solution
Statement of Retained Earnings
For Three Months Ended Dec 31, 2015
Beginning Balance                     -  
Net Income (Loss)      23,112.00
Sub-total      23,112.00
Dividends      (7,700.00)
Ending Balance - Dec 31, 2016      15,412.00
Answer 6.
Business Solution
Balance Sheet
Dec 31, 2017
Assets
Current Assets
Cash      51,384.00
Accounts Receivable        5,368.00
Computer Supplies            640.00
Prepaid Insurance        1,485.00
Prepaid Rent            740.00
Total Current Assets    59,617.00
Property, Plant & Equipment
Office Equipment        8,400.00
Accumulated Dep.- Equipment          (420.00)        7,980.00
Computer Equipment      21,200.00
Accumulated Dep.- Computer Equipment      (1,325.00)      19,875.00
Total Property, Plant & Equipment    27,855.00
Total Assets    87,472.00
Liabilities & Owners' Equity
Liabilities
Current Liabilities
Accounts Payable        1,100.00
Wages Payable            460.00
Unearned Computer Service Revenue        2,500.00
Total Current Liabilities      4,060.00
Long-Term Liabilities                   -  
Total Liabilities      4,060.00
Total StockHolders' Equity
Common Stock      68,000.00
Retained Earnings      15,412.00
Total Stockholders' Equity    83,412.00
Total Liabilities & Stockholders' Equity    87,472.00
                  -  
Answer 8.
Business Solution
Closing Trial Balance
Dec 31, 2016
Accounts Title Debits Credits
Cash      51,384.00
Accounts Receivable        5,368.00
Computer Supplies            640.00
Prepaid Insurance        1,485.00
Prepaid Rent            740.00
Office Equipment        8,400.00
Accumulated Dep.- Equipment            420.00
Computer Equipment      21,200.00
Accumulated Dep.- Computer Equipment        1,325.00
Accounts Payable        1,100.00
Wages Payable            460.00
Unearned Computer Service Revenue        2,500.00
Common Stock      68,000.00
Retained Earnings      15,412.00
Total      89,217.00      89,217.00
Answer 7.
Closing Journal Entry
Date Particulars Dr. Amt. Cr. Amt
a. Computer Service Revenue    39,249.00
Income Summary
(Record to close the revenue accounts)
b. Income Summary    16,137.00
Dep. Exp. - Office Equipment          420.00
Dep. Exp. - Computer Equipment      1,325.00
Wages Expense      3,650.00
Insurance Expense          495.00
Rent Expense      2,220.00
Computer Supplies Expense      3,105.00
Advertising Expense      2,693.00
Mileage Expense          854.00
Misc. Expense          200.00
Repair Expense - Computer      1,175.00
(Record to close the expense accounts)
c. Income Summary    23,112.00
Retained Earnings    23,112.00
(Record to close the Income Summary)
d. Retained Earnings      7,700.00
Dividends      7,700.00
(Record the close of dividends)

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