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 $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 $120 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 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.

No. Account Title Debit Credit 101 Cash $ 38,364 106 Accounts receivable 13,318 126 Computer supplies 2,645 128 Prepaid insurance 1,980 131 Prepaid rent 3,080 163 Office equipment 8,600 164 Accumulated depreciation—Office equipment $ 0 167 Computer equipment 24,000 168 Accumulated depreciation—Computer equipment 0 201 Accounts payable 0 210 Wages payable 0 236 Unearned computer services revenue 0 307 Common stock 72,000 318 Retained earnings 0 319 Dividends 6,600 403 Computer services revenue 32,419 612 Depreciation expense—Office equipment 0 613 Depreciation expense—Computer equipment 0 623 Wages expense 2,525 637 Insurance expense 0 640 Rent expense 0 652 Computer supplies expense 0 655 Advertising expense 1,708 676 Mileage expense 644 677 Miscellaneous expenses 160 684 Repairs expense—Computer 795 Totals $ 104,419 $ 104,419

Explanation / Answer

1. In the books of Business Solutions:

2-a. Adjusting Entries:

3. Business Solutions

Adjusted Trial Balance

December 31 2017

4. Business Solutions

Income Statement

For the Three Months Ending December 31, 2017

Operating Expenses:

5. Business Solutions

Statement of Retained Earnings

For the three months ended December 31, 2017

6. Business Solutions

Balance Sheet

December 31, 2017

7. Closing Entries:

8. Business Solutions

Post Closing Trial Balance

December 31 2017

Date Account Titles Debit Credit $ $ Dec 2 Advertising Expense 945 Cash 945 Dec 3 Repairs Expense: Computer 490 Cash 490 Dec 4 Cash 3,950 Accounts Receivable 3,950 Dec 10 Wages Expense 720 Cash 720 Dec 14 Cash 1,600 Unearned Computer Services Revenue 1,600 Dec 15 Computer Supplies 2,000 Accounts Payable 2,000 Dec 16 No journal entry required Dec 20 Cash 6,525 Computer Service Revenue 6,525 Dec 28 Cash 3,100 Accounts Receivable 3,100 Dec 29 Mileage Expense 120 Cash 120 Dec 31 Dividends 1,500 Cash 1,500

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