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, 2016, unadjusted trial balance of Business Solutions (reflecting its transactions for October and November of 2016) follows.

No.	Account Title	Debit			Credit
101	Cash	$	38,764
106	Accounts receivable		12,918
126	Computer supplies		2,645
128	Prepaid insurance		2,160
131	Prepaid rent		3,280
163	Office equipment		8,300
164	Accumulated depreciation—Office equipment				$	0
167	Computer equipment		22,400
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		5,700
403	Computer services revenue					35,779
612	Depreciation expense—Office equipment		0
613	Depreciation expense—Computer equipment		0
623	Wages expense		2,325
637	Insurance expense		0
640	Rent expense		0
652	Computer supplies expense		0
655	Advertising expense		1,708
676	Mileage expense		654
677	Miscellaneous expenses		220
684	Repairs expense—Computer		705
	Totals	$	101,779		$	101,779

Business Solutions had the following transactions and events in December 2016.

Dec.		2		Paid $950 cash to Hillside Mall for Business Solutions’s share of mall advertising costs.
		3		Paid $440 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’s bid of $7,100 on a proposed project has been accepted. Alex’s paid a $2,500 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 $6,525 cash.
22–26				Took the week off for the holidays.
		28		Received $3,400 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 $1,300 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:

The December 31 inventory count of computer supplies shows $590 still available.

Three months have expired since the 12-month insurance premium was paid in advance.

As of December 31, Lyn Addie has not been paid for four days of work at $105 per day.

The computer system, acquired on October 1, is expected to have a four-year life with no salvage value.

The office equipment, acquired on October 1, is expected to have a five-year life with no salvage value.

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.)

Journal entry worksheet

.....

Sent a reminder to Gomez Co. to pay the fee for services recorded on November 8.

Note: Enter debits before credits.

	Date General Journal Debit Credit Dec 16 No journal entry required

Journal entry worksheet

The December 31 inventory count of computer supplies shows $590 still available.

Note: Enter debits before credits.

	Transaction General Journal Debit Credit a. Computer supplies expense Computer supplies

2.2 Post the journal entries to record each of the December transactions, adjusting entries to the accounts in the ledger.

General Ledger Accounts

Cash Accounts Receivable Date Debit Credit Balance Date Debit Credit Balance Dec. 01 Dec. 01 Computer Supplies Prepaid Insurance Date Debit Credit Balance Date Debit Credit Balance Dec. 01 Dec. 01 Prepaid Rent Office Equipment Date Debit Credit Balance Date Debit Credit Balance Dec. 01 Dec. 01 Accumulated Depreciation—Office Equipment Computer Equipment Date Debit Credit Balance Date Debit Credit Balance Dec. 01 0 Dec. 01 Accumulated Depreciation—Computer Equipment Accounts Payable Date Debit Credit Balance Date Debit Credit Balance Dec. 01 0 Dec. 01 0 Wages Payable Unearned Computer Services Revenue Date Debit Credit Balance Date Debit Credit Balance Dec. 01 0 Dec. 01 0 Common Stock Retained Earnings Date Debit Credit Balance Date Debit Credit Balance Dec. 01 Dec. 01 0 Dividends Computer Services Revenue Date Debit Credit Balance Date Debit Credit Balance Dec. 01 Dec. 01 Depreciation Expense—Computer Equipment Depreciation Expense—Office Equipment Date Debit Credit Balance Date Debit Credit Balance Dec. 01 0 Dec. 01 0 Insurance Expense Rent Expense Date Debit Credit Balance Date Debit Credit Balance Dec. 01 0 Dec. 01 0 Computer Supplies Expense Advertising Expense Date Debit Credit Balance Date Debit Credit Balance Dec. 01 0 Dec. 01 Mileage Expense Miscellaneous Expenses Date Debit Credit Balance Date Debit Credit Balance Dec. 01 Dec. 01 Repairs Expense — Computer Wages Expense Date Debit Credit Balance Date Debit Credit Balance Dec. 01 Dec. 01 Income Summary Date Debit Credit Balance Dec. 01 0

Prepare an adjusted trial balance as of December 31, 2016.

3. Prepare an adjusted trial balance as of December 31, 2016.

4. Prepare an income statement for the three months ended December 31, 2016.

5. Prepare a statement of retained earnings equity for the three months ended December 31, 2016.

6. Prepare a balance sheet as of December 31, 2016.

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.)

Journal entry worksheet

Record the entry to close the revenue account.

Note: Enter debits before credits.

	Date General Journal Debit Credit Dec 31 Journal entry worksheet Record the entry to close the expense accounts. Note: Enter debits before credits. 8. Prepare a post-closing trial balance as of December 31, 2016.

Answer 1

Answer 1.
Journal Entry
Date	Particulars	Dr. Amt.	Cr. Amt.
2-Dec	Advertising Expenses	950.00
	Cash		950.00
	(record the advertising exp.)
3-Dec	Repair Expense - Computer	440.00
	Cash		440.00
	(record the repair exp. - Computer)
4-Dec	Cash	4,550.00
	Accounts Receivable		4,550.00
	(record the cash recevied)
10-Dec	Wages Expense	630.00
	Cash		630.00
	(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	1,400.00
	Accounts Payable		1,400.00
	(record the supplies purchased on credit)
16-Dec	No Entry
20-Dec	Cash	6,525.00
	Computer Service Revenue		6,525.00
	(Record the revenue earnes)
22-Dec	No Entry
28-Dec	Cash	3,400.00
	Accounts Receivable		3,400.00
	(record the cash recd)
29-Dec	Mileage Expense	192.00
	Cash		192.00
	(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	3,455.00		$4,045 - $590
	Computer Supplies		3,455.00	$4,045 - $580
	(record the supplies expense)
b.	Insurance Expense	540.00		$2,160 X 3/12
	Prepaid Insurance		540.00	$2,160 X 3/12
	(record the insurance Expense for 3 months)
c.	Wages Expense	420.00		$105 X 4
	Wages Payable		420.00	$105 X 4
	(record the wages expense)
d.	Depreciation Expense - Computer Equip.	1,400.00		$22,400 / 4 Years X (3/12)
	Accum. Dep. - Comp. Equip		1,400.00	$22,400 / 4 Years X (3/12)
	(record the dep. Expense)
e.	Depreciation Expense - Office Equip.	415.00		$8,300 / 5 Years X (3/12)
	Accum. Dep. - Office Equip		415.00	$8,300 / 5 Years X (3/12)
	(record the dep. Expense)
f.	Rent Expense	2,460.00		$3,280 X 3/4
	Prepaid Insurance		2,460.00	$3,280 X 3/4
	(record the rent expense)

Answer 2-b.
Cash					Accounts Receivable					Computer Supplies
Beg. Bal.	38,764.00	950.00	2-Dec		Beg. Bal.	12,918.00	4,550.00	4-Dec		Beg. Bal.	2,645.00	3,455.00	a.
4-Dec	4,550.00	440.00	3-Dec				3,400.00	28-Dec		15-Dec	1,400.00
14-Dec	2,500.00	630.00	10-Dec
20-Dec	6,525.00	192.00	29-Dec
28-Dec	3,400.00	1,300.00	31-Dec
End. Bal.	52,227.00				End. Bal.	4,968.00				End. Bal.	590.00
Prepaid Insurance					Prepaid Rent					Office Equipment
Beg. Bal.	2,160.00	540.00	b.		Beg. Bal.	3,280.00	2,460.00	f.		Beg. Bal.	8,300.00
End. Bal.	1,620.00				End. Bal.	820.00				End. Bal.	8,300.00
Accumulated Dep.- Equipment					Computer Equipment					Accumulated Dep.- Computer Equipment
Beg. Bal.		-			Beg. Bal.	22,400.00				Beg. Bal.		-
		415.00	e.									1,400.00	d.
End. Bal.		415.00			End. Bal.	22,400.00				End. Bal.		1,400.00
Accounts Payable					Wages Payable					Unearned Computer Service Revenue
Beg. Bal.		-			Beg. Bal.		-			Beg. Bal.		-
		1,400.00	15-Dec				420.00	c.				2,500.00	14-Dec
End. Bal.		1,400.00			End. Bal.		420.00			End. Bal.		2,500.00
Common Stock					Dividends					Computer Service Revenue
Beg. Bal.		66,000.00			Beg. Bal.	5,700.00				Beg. Bal.		35,779.00
					31-Dec	1,300.00						6,525.00	20-Dec
End. Bal.		66,000.00			End. Bal.	7,000.00				End. Bal.		42,304.00
Dep. Exp. - Office Equipment					Dep. Exp. - Computer Equipment					Wages Expense
Beg. Bal.	-				Beg. Bal.	-				Beg. Bal.	2,325.00
e.	415.00				d.	1,400.00				10-Dec	630.00
										c.	420.00
End. Bal.	415.00				End. Bal.	1,400.00				End. Bal.	3,375.00
Insurance Expense					Rent Expense					Computer Supplies Expense
Beg. Bal.	-				Beg. Bal.	-				Beg. Bal.	-
b.	540.00				f.	2,460.00				a.	3,455.00
End. Bal.	540.00				End. Bal.	2,460.00				End. Bal.	3,455.00
Advertising Expense					Mileage Expense					Misc. Expense
Beg. Bal.	1,708.00				Beg. Bal.	654.00				Beg. Bal.	220.00
2-Dec	950.00				29-Dec	192.00
End. Bal.	2,658.00				End. Bal.	846.00				End. Bal.	220.00
Repair Expense - Computer
Beg. Bal.	705.00
3-Dec	440.00
End. Bal.	1,145.00

Answer 3.
Business Solution
Adjusted Trial Balance
Dec 31, 2016
Accounts Title	Debits	Credits
Cash	52,227.00
Accounts Receivable	4,968.00
Computer Supplies	590.00
Prepaid Insurance	1,620.00
Prepaid Rent	820.00
Office Equipment	8,300.00
Accumulated Dep.- Equipment		415.00
Computer Equipment	22,400.00
Accumulated Dep.- Computer Equipment		1,400.00
Accounts Payable		1,400.00
Wages Payable		420.00
Unearned Computer Service Revenue		2,500.00
Common Stock		66,000.00
Dividends	7,000.00
Computer Service Revenue		42,304.00
Dep. Exp. - Office Equipment	415.00
Dep. Exp. - Computer Equipment	1,400.00
Wages Expense	3,375.00
Insurance Expense	540.00
Rent Expense	2,460.00
Computer Supplies Expense	3,455.00
Advertising Expense	2,658.00
Mileage Expense	846.00
Misc. Expense	220.00
Repair Expense - Computer	1,145.00
Total	114,439.00	114,439.00
		-
Answer 4.
Business Solution
Income Statement
For Three Months Ended Dec 31, 2016
Revenues:
Computer Service Revenue		42,304.00
Expenses
Dep. Exp. - Office Equipment	415.00
Dep. Exp. - Computer Equipment	1,400.00
Wages Expense	3,375.00
Insurance Expense	540.00
Rent Expense	2,460.00
Computer Supplies Expense	3,455.00
Advertising Expense	2,658.00
Mileage Expense	846.00
Misc. Expense	220.00
Repair Expense - Computer	1,145.00
Total Expenses		16,514.00
Net Income (Loss)		25,790.00