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, 2017, unadjusted trial balance of Business Solutions (reflecting its transactions for October and November of 2017) follows.

No.	Account Title	Debit			Credit
101	Cash	$	39,264
106	Accounts receivable		13,418
126	Computer supplies		2,645
128	Prepaid insurance		2,040
131	Prepaid rent		2,920
163	Office equipment		8,100
164	Accumulated depreciation—Office equipment				$	0
167	Computer equipment		23,200
168	Accumulated depreciation—Computer equipment					0
201	Accounts payable					0
210	Wages payable					0
236	Unearned computer services revenue					0
307	Common stock					66,000
318	Retained earnings					0
319	Dividends		6,100
403	Computer services revenue					37,474
612	Depreciation expense—Office equipment		0
613	Depreciation expense—Computer equipment		0
623	Wages expense		2,450
637	Insurance expense		0
640	Rent expense		0
652	Computer supplies expense		0
655	Advertising expense		1,638
676	Mileage expense		664
677	Miscellaneous expenses		250
684	Repairs expense—Computer		785
	Totals	$	103,474		$	103,474

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

Dec.	2		Paid $960 cash to Hillside Mall for Business Solutions’ share of mall advertising costs.
	3		Paid $430 cash for minor repairs to the company’s computer.
	4		Received $4,750 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 $120 per day.
	14		Notified by Alex’s Engineering Co. that Business Solutions’ bid of $7,500 on a proposed project has been accepted. Alex’s paid a $2,100 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 $6,425 cash.
	22–26		Took the week off for the holidays.
	28		Received $3,600 cash from Gomez Co. on its receivable.
	29		Reimbursed S. Rey for business automobile mileage (600 miles at $0.25 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 $120 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 retained earnings for the three months ended December 31, 2017.
6. Prepare a balance sheet as of December 31, 2017.
7. Record and post the necessary closing entries as of December 31, 2017.
8. Prepare a post-closing trial balance as of December 31, 2017.

Answer 1

I am answering for the first two parts

1. Prepare journal entriesto record each of the december transactions and events for business solutions.

Date	Journal entry	Debit	Credit
Dec 2	Advertising expense. Dr.	$960
	To cash		$960
Dec 3	Computer Repair expense. Dr	430
	To cash		430
Dec 4	Cash a/c. Dr	4750
	To Accounts receivable		4750
Dec 10	Wages. Dr. (6days * 120)	720
	To cash a/c		720
Dec 14	Cash a/c Dr.	2100
	To unearned service revenue		2100
Dec 15	Computer supplies Dr	1500
	To Accounts payable		1500
Dec 16	No entry
Dec 20	Cash Dr	6425
	To computer service revenue		6425
Dec 28	Cash Dr	3600
	To Accounts receivable		3600
Dec 29	Mileage expenses Dr	150
	To cash		150
Dec 31	Dividends Dr	1300
	To Cash		1300

2 - a) Prepare adjusting entries to reflect a through f

Date	Journal entry	Debit	Credit
Dec 31	Computer supplies expense Dr	3495
	To Computer Supplies		3495
Dec 31	Insurance expense. Dr (2040*3/12)	510
	To prepaid insurance		510
Dec 31	Wage expense Dr ( 4 * 120)	480
	To wages payable		480
Dec 31	Computer depreciation Dr (23200/4)*3/12	1450
	To accumulated computer depreciation		1450
Dec 31	Office equipment depreciation. Dr (8100/5)*3/12	405
	To Accumulated equipment depreciation		405
Dec 31	Rent expense Dr	2190
	To prepaid rent		2190

2 - b) Post the journal entries

to record each of the December transactions ,adjusting entries to the accounts in the ledger

General ledger accounts:

1. Cash A/c:

Date	Debit	Credit	Balance
Dec 1	0	0	39264
Dec 2	0	960	38304
Dec 3	0	430	37874
Dec 4	4750	0	42624
Dec 10	0	720	41904
Dec 14	2100	0	44004
Dec 20	6425	0	50429
Dec 28	3600	0	54029
Dec 29	0	150	53879
Dec 31	0	1300	52579

Accounts receivable :

Date	Debit	Credit	Balance
Dec 1	0	0	13418
Dec 4	0	4750	8668
Dec 28	0	3600	5068

Computer supplies

Date	Debit	Credit	Balance
Dec 1	0	0	2645
Dec 15	1500	0	4145
Dec 31	0	3495	650

Prepaid insurance

Date	Debit	Credit	Balance
Dec 1	0	0	2040
Dec 31	0	510	1530

Prepaid rent

Date	Debit	Credit	Balance
Dec 1	0	0	2920
Dec 31	0	2190	730

Office equipment

Date	Debit	Credit	Balance
Dec 1	0	0	8100

Accumulated depreciation - office equipment

Date	Debit	Credit	Balance
Dec 1	0	0	0
Dec 31	0	1450	1450

Computer equipment

Date	Debit	Credit	Balance
Dec 1	0	0	23200

Accumulated depreciation - computer equipment

Date	Debit	Credit	Balance
Dec 1	0	0	0
Dec 31	0	405	405

Accounts payable

Date	Debit	Credit	Balance
Dec 1	0	0	0
Dec 15	0	1500	1500

Wages payable

Date	Debit	Credit	Balance
Dec 1	0	0	0
Dec 31	0	480	480

Unearned computer service revenue

Date	Debit	Credit	Balance
Dec 1	0	0	0
Dec14	0	2100	2100

Common stock

Date	Debit	Credit	Balance
Dec 1	0	0	66000

Retained earnings

Date	Debit	Credit	Balance
Dec 1	0	0	0

Dividends

Date	Debit	Credit	Balance
Dec 1	0	0	6100
Dec 31	1300	0	4800

Computer services revenue

Date	Debit	Credit	Balance
Dec 1	0	0	37474
Dec 20	0	6425	43899

Depreciation expense - office equipment

Date	Debit	Credit	Balance
Dec 1	0	0	0
Dec 31	405	0	405

Depreciation - computer equipment

Date	Debit	Credit	Balance
Dec 1	0	0	0
Dec 31	1450	0	1450

Wages expense

Date	Debit	Credit	Balance
Dec 1	0	0	2450
Dec 10	720	0	3170
Dec 31	480	0	3650

Insurance expense

Date	Debit	Credit	Balance
Dec 1	0	0	0
Dec 31	510	0	510

Rent expense

Date	Debit	Credit	Balance
Dec 1	0	0	0
Dec 31	2190	0	2190

Computer supplies expense

Date	Debit	Credit	Balance
Dec 1	0	0	0
Dec 31	3495	0	3495

Advertising expense

Date	Debit	Credit	Balance
Dec 1	0	0	1638
Dec 2	960	0	2598

Mileage expense

Date	Debit	Credit	Balance
Dec 1	0	0	664
Dec 29	150	0	814

Miscellaneous expense

Date	Debit	Credit	Balance
Dec 1	0	0	250
Dec 31	0	250	0

Repairs expense - computer

Date	Debit	Credit	Balance
Dec 1	0	0	785
Dec 3	430	0	1215
Dec 31	0	1215	0