After the success of the company’s first two months, Santana Rey continues to op

Question

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.

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

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 $640 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 $125 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.
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 owner’s equity for the three months ended December 31, 2017.
6. Prepare a balance sheet as of December 31, 2017.

No. Account Title Debit Credit 101 Cash $ 38,764 106 Accounts receivable 13,518 126 Computer supplies 2,645 128 Prepaid insurance 2,100 131 Prepaid rent 3,260 163 Office equipment 8,700 164 Accumulated depreciation—Office equipment $ 0 167 Computer equipment 22,800 168 Accumulated depreciation—Computer equipment 0 201 Accounts payable 0 210 Wages payable 0 236 Unearned computer services revenue 0 301 S. Rey, Capital 73,000 302 S. Rey, Withdrawals 6,500 403 Computer services revenue 31,149 612 Depreciation expense—Office equipment 0 613 Depreciation expense—Computer equipment 0 623 Wages expense 2,575 637 Insurance expense 0 640 Rent expense 0 652 Computer supplies expense 0 655 Advertising expense 1,718 676 Mileage expense 634 677 Miscellaneous expenses 200 684 Repairs expense—Computer 735 Totals $ 104,149 $ 104,149 Req 1 Req 2A Req 2B Req 3 Req 4 Req 5 Req 6 Prepare an income statement for the three months ended December 31, 2017. BUSINESS SOLUTIONS Income Statement For Three Months Ended December 31, 2017 Revenue Expenses Total expenses

Explanation / Answer

1) Date General Journal Debit Credit Dec 2 Advertising expense $965.00 Cash $965.00 Dec 3 Repairs expense-computer $490.00 Cash $490.00 Dec 4 Cash $4,250.00 Accounts receivable $4,250.00 Dec 10 Wages expense (6 days x $125) $750.00 Cash $750.00 Dec 14 Cash $1,600.00 Unearned computer services revenue $1,600.00 Dec 15 Computer supplies $1,400.00 Accounts Payable $1,400.00 Dec 16 No journal entry Dec 20 Cash $6,275.00 Computer services revenue $6,275.00 Dec 28 Cash $3,900.00 Accounts receivables $3,900.00 Dec 29 Mileage expense (600 miles at $0.30 per mile) $180.00 Cash $180.00 Dec 31 S. Rey, Withdrawals $1,200.00 Cash $1,200.00

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