Serial Problem Business Solutions LO P1, P2, P3, P4, P5 After the success of the
ID: 2516087 • Letter: S
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, 2017, unadjusted trial balance of Business Solutions (reflecting its transactions for October and November of 2017) follows. No. Account Title Debit Credit 101 Cash $ 38,664 106 Accounts receivable 12,818 126 Computer supplies 2,645 128 Prepaid insurance 2,040 131 Prepaid rent 3,240 163 Office equipment 8,700 164 Accumulated depreciation—Office equipment $ 0 167 Computer equipment 20,400 168 Accumulated depreciation—Computer equipment 0 201 Accounts payable 0 210 Wages payable 0 236 Unearned computer services revenue 0 307 Common stock 64,000 318 Retained earnings 0 319 Dividends 6,200 403 Computer services revenue 36,129 612 Depreciation expense—Office equipment 0 613 Depreciation expense—Computer equipment 0 623 Wages expense 2,125 637 Insurance expense 0 640 Rent expense 0 652 Computer supplies expense 0 655 Advertising expense 1,678 676 Mileage expense 644 677 Miscellaneous expenses 250 684 Repairs expense—Computer 725 Totals $ 100,129 $ 100,129 Business Solutions had the following transactions and events in December 2017. Dec. 2 Paid $1,025 cash to Hillside Mall for Business Solutions’ share of mall advertising costs. 3 Paid $460 cash for minor repairs to the company’s computer. 4 Received $4,750 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 $120 per day. 14 Notified by Alex’s Engineering Co. that Business Solutions’ bid of $7,800 on a proposed project has been accepted. Alex’s paid a $2,200 cash advance to Business Solutions. 15 Purchased $2,000 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 $6,125 cash. 22–26 Took the week off for the holidays. 28 Received $3,800 cash from Gomez Co. on its receivable. 29 Reimbursed S. Rey for business automobile mileage (400 miles at $0.26 per mile). 31 The company paid $1,200 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 $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 $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.
Explanation / Answer
1.
2-a
BUSINESS SOLUTIONS
2-b.
3.
4., 5, 6 and 7
8.
BUSINESS SOLUTIONS Journal Entries for the months of December 2017 Date Account & Desrcipiton Ref Debit Credit 2017 Dec.2 Advertising 655 1025 Cash 101 1025 (Payment to Hill side mall for adverting expenses) Dec.3 Repair expense - Computer 684 460 Cash 101 460 (Repair expense for computer ) Dec.4 Cash 101 4750 Accounts receivable 106 4750 (Receipt from Alex's Engineering company on account) Dec.10 Wages expense 623 720 Cash 101 720 (Wages to lynn for six days) Dec.14 Cash 101 2200 Unearned revenue - computer services 236 2200 (Advance receipt from Alex's Engineering company) Dec.15 Computer supplies 126 2000 Accounts payable 201 2000 (Computer supplies purchased on account) Dec.16 No entry required Dec.20 Cash 101 6125 Computer services revenue 403 6125 (Cash received from Liu Corporation for services) Dec.22 No entry required Dec.26 No entry required Dec.28 Cash 101 3800 Accounts Receivable 106 3800 (Receipt from Gomex Corp. On account) Dec.29 Mileage expenses 676 104 Cash 101 104 (Reimbursement of mileage expense for 400 miles @$0.26) Dec.31 Dividends 302 1200 Cash 101 1200 (Cash withdrawn by S.rey)2-a
BUSINESS SOLUTIONS
Adjustment Journal Entries for the months of December 2017 a Computer supplies expense 652 4005 Computer supplies 126 4005 (Computer supplies expense accounted) b Insurance expense 637 510 Prepaid insurance 128 510 (Insurance expense for 3 months accounted) c Wages expense 623 480 Wages payable 210 480 (Wages to Lynn for four days not paid) d Depreciation expense - computer equipment 613 1275 Accumulated depreciation - computer equipment 168 1275 (Depreciation expense on computer for three months ) e Depreciation expense - office equipment 612 435 Accumulated depreciation - office equipment 164 435 (Depreciation expense on office eqpt.for three months ) f Rent expense 2430 Prepaid rent 2430 (Rent expense for three months) 1. Insurance expense for three months = ($2,040/12)*3 = $510 2.Wages payable for four days @120 per day = $120 * 4 = $480 3.Depreciation on computer system. Purchase value = $20,400 Life = 4 years Salvage value =0 Annual depreciation = $20,400 / 4 = $5,100 Depreciation for three months (From Oct.17 to Dec.'17) = ($5,100/12)*3 = 1275 4.Depreciation on office equipment. Purchase value = $8,700 Life = 5 years Salvage value =0 Annual depreciation = $8,700 / 5 = $1,740 Depreciation for three months (From Oct.17 to Dec.'17) = ($1,740/12)*3 = 435 5. Rent expense Prepaid rent = $3,240 Period = 4 months Rent for three months = ($3,240/4)*3 =$2,430Related Questions
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