Question

PLEASE MAKE SURE ALL THE NUMBERS ARE CORRECT.

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	$	39,164
106	Accounts receivable		13,118
126	Computer supplies		2,645
128	Prepaid insurance		1,980
131	Prepaid rent		2,960
163	Office equipment		8,900
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					71,000
318	Retained earnings					0
319	Dividends		6,400
403	Computer services revenue					32,094
612	Depreciation expense—Office equipment		0
613	Depreciation expense—Computer equipment		0
623	Wages expense		2,200
637	Insurance expense		0
640	Rent expense		0
652	Computer supplies expense		0
655	Advertising expense		1,688
676	Mileage expense		684
677	Miscellaneous expenses		160
684	Repairs expense—Computer		795
	Totals	$	103,094		$	103,094

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

Dec.	2		Paid $935 cash to Hillside Mall for Business Solutions’ share of mall advertising costs.
	3		Paid $440 cash for minor repairs to the company’s computer.
	4		Received $4,950 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 $105 per day.
	14		Notified by Alex’s Engineering Co. that Business Solutions’ bid of $7,900 on a proposed project has been accepted. Alex’s paid a $2,100 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 $5,925 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 $0.24 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:

a. The December 31 inventory count of computer supplies shows $610 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 $105 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 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.

Answer 1

Dec	2	Advertising expense	Debit	935
Dec		Cash	Credit		935
Dec	3	Repairs expense—Computer	Debit	440
Dec		Cash	Credit		440
Dec	4	Cash	Debit	4950
Dec		Accounts receivable	Credit		4950
Dec	10	Wages expense	Debit	630
Dec		Cash	Credit		630
Dec	14	Cash	Debit	2100
Dec		Unearned computer services revenue	Credit		2100
Dec	15	Computer supplies	Debit	1400
Dec		Accounts payable	Credit		1400
Dec	16	No Entry
Dec	20	Cash	Debit	5925
Dec		Computer services revenue	Credit		5925
Dec	22–26	No Entry
Dec	28	Cash	Debit	3400
Dec		Accounts Receivable	Credit		3400
Dec	29	Mileage expense	Debit	144
Dec		Cash	Credit		144
Dec	31	Dividends	Debit	1500
Dec		Cash	Credit		1500

a	Computer supplies expense	Debit	3435
	Computer supplies	Credit		3435
b	Insurance expense	Debit	495
	Prepaid Insurance	Credit		495
c	Wages expense	Debit	420
	Wages payable	Credit		420
d	Depreciation expense—Computer equipment	Debit	467
	Accumulated depreciation—Computer equipment	Credit		467
e	Depreciation expense—Office equipment	Debit	445
	Accumulated depreciation—Office equipment	Credit		445
f	Rent Expense		2220
	Prepaid rent			2220

		Adjusted Trial Balance
No.	Account Title	Debit	Credit
101	Cash	51,890
106	Accounts receivable	4,768
126	Computer supplies	610
128	Prepaid insurance	1,485
131	Prepaid rent	740
163	Office equipment	8,900
164	Accumulated depreciation—Office equipment		445
167	Computer equipment	22,400
168	Accumulated depreciation—Computer equipment		467
201	Accounts payable		1,400
210	Wages payable		420
236	Unearned computer services revenue		2,100
307	Common stock	-	71,000
318	Retained earnings	-
319	Dividends	7,900
403	Computer services revenue		38,019
612	Depreciation expense—Office equipment	445
613	Depreciation expense—Computer equipment	467
623	Wages expense	3,250
637	Insurance expense	495
640	Rent expense	2,220
652	Computer supplies expense	3,435
655	Advertising expense	2,623
676	Mileage expense	828
677	Miscellaneous expenses	160
684	Repairs expense—Computer	1,235
	Totals	113,851	113,851