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In: Accounting

After the success of the company’s first two months, Santana Rey continues to operate Business Solutions....

After the success of the company’s first two months, Santana Rey continues to operate Business Solutions. The November 30, 2018, unadjusted trial balance of Business Solutions (reflecting its transactions for October and November of 2018) follows.

No. Account Title Debit Credit
101 Cash $ 38,964
106 Accounts receivable 12,918
126 Computer supplies 2,645
128 Prepaid insurance 1,980
131 Prepaid rent 3,240
163 Office equipment 8,400
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 70,000
318 Retained earnings 0
319 Dividends 6,500
403 Computer services revenue 32,179
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 1,678
676 Mileage expense 684
677 Miscellaneous expenses 230
684 Repairs expense—Computer 715
Totals $ 102,179 $ 102,179

Business Solutions had the following transactions and events in December 2018.   

Dec. 2 Paid $1,020 cash to Hillside Mall for Business Solutions’ share of mall advertising costs.
3 Paid $410 cash for minor repairs to the company’s computer.
4 Received $4,550 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 $7,400 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 $5,825 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 $0.28 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:

  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 have 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, 2018.
4. Prepare an income statement for the three months ended December 31, 2018.
5. Prepare a statement of retained earnings for the three months ended December 31, 2018.
6. Prepare a balance sheet as of December 31, 2018.
7. Record and post the necessary closing entries as of December 31, 2018.
8. Prepare a post-closing trial balance as of December 31, 2018.

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