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 37,424 Computer services revenue Expenses Depreciation expense-Office equipment Depreciation expense -Computer equipment Wages expense Insurance expense Rent expense Computer supplies expense Advertising expense Mileage expense Miscellaneous expenses Repairs expense-Computer 435 1,425 3,825 525 2,445 3,405 2,683 814 200 1,225 Total expenses 16,982 Net income

Explanation / Answer

Answer -

1. Preparing journal entries to record each of the December transactions and events for Business Solutions-

2-a- Preparing adjusting entries to reflect a through f -

2-b. Posting the journal entries to record each of the December transactions, adjusting entries to the accounts in the ledger-

4. Income Statement for 3 months

5. Statement of Owner's Equity

6. Preparation of Balance Sheet -

Date (2017) General Journal Debit ($) Credit($) 2-Dec Advertising Expense               695 Cash               695 3-Dec Repairs Expense - Computer               490 Cash               490 4-Dec Cash           4,250 Accounts Receivable           4,250 10-Dec Wages Expense (125*6)               750 Cash               750 14-Dec Cash           1,600 Unearned Computer Services revenue           1,600 15-Dec Computer Supplies           1,400 Accounts Payable           1,400 16-Dec No Journal Entry Required 20-Dec Cash           6,275 Computer Services revenue           6,275 28-Dec Cash           3,900 Accounts Receivable           3,900 29-Dec Mileage Expense (600*0.32)               192 Cash               192 31-Dec S Rey, Withdrawals           1,200 Cash           1,200

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