Help! After the success of the company’s first two months, Santana Rey continues

Question

Help!

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 $105 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 $ 38,264 106 Accounts receivable 13,418 126 Computer supplies 2,645 128 Prepaid insurance 2,040 131 Prepaid rent 3,220 163 Office equipment 8,900 164 Accumulated depreciation—Office equipment $ 0 167 Computer equipment 21,600 168 Accumulated depreciation—Computer equipment 0 201 Accounts payable 0 210 Wages payable 0 236 Unearned computer services revenue 0 301 S. Rey, Capital 65,000 302 S. Rey, Withdrawals 6,500 403 Computer services revenue 37,139 612 Depreciation expense—Office equipment 0 613 Depreciation expense—Computer equipment 0 623 Wages expense 2,275 637 Insurance expense 0 640 Rent expense 0 652 Computer supplies expense 0 655 Advertising expense 1,648 676 Mileage expense 654 677 Miscellaneous expenses 170 684 Repairs expense—Computer 805 Totals $ 102,139 $ 102,139 Serial Problem Business Solutions LO P1, P2, P3 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 Account Title Credit Debit $ 38,264 13,418 2,645 2,040 3, 220 8,900 No 101 Cash 106 Accounts receivable 126 Computer supplies 128 Prepaid insurance 131 Prepaid rent 163 Office equipment 164 Accumulated depreciation-Office equipmenft 167 Computer equipment 168 Accumulated depreciation-Computer equipment 201 Accounts payable 210 Wages payable 236 Unearned computer services revenue 301 S. Rey, Capital 302 S. Rey, Withdrawals 403 Computer services revenue 612 Depreciation expense-Office equipment 613 Depreciation expense-Computer equipment 623 Wages expense 637Insurance expense 640 Rent expense 652 Computer supplies expense 655 Advertising expense 676 Mileage expense 677 Miscellaneous expenses 684 Repairs expense-Computer 21,600 65,000 6,500 37,139 2,275 1,648 654 805 Totals $102,139 $102,139 Business Solutions had the following transactions and events in December 2017 Dec. 2 Paid $980 cash to Hillside Mall for Business Solutions' share of mall advertising costs. 3 Paid $410 cash for minor repairs to the company' s computer. 4 Received $4,550 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 $7,600 on a proposed project has been accepted. Alex' s paid a $2,500 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- Took the week off for the holidays 26 28 Received $4,000 cash from Gomez Co. on its receivable 29 Reimbursed S. Rey for business automobile mileage (600 miles at $0.27 per mile) 31 S. Rey withdrew $1,200 cash from the company for personal use.

Explanation / Answer

Answer 1. Journal Entry Date Particulars Dr. Amt. Cr. Amt. 2-Dec Advertising Expenses          980.00 Cash          980.00 (record the advertising exp.) 3-Dec Repair Expense - Computer          410.00 Cash          410.00 (record the repair exp. - Computer) 4-Dec Cash      4,550.00 Accounts Receivable      4,550.00 (record the cash recevied) 10-Dec Wages Expense          630.00 Cash          630.00 (record the wage expense) 14-Dec Cash      2,500.00 Unearned Computer Service Revenue      2,500.00 (record the advance received) 15-Dec Computer Supplies      2,000.00 Accounts Payable      2,000.00 (record the supplies purchased on credit) 16-Dec No Entry 20-Dec Cash      6,125.00 Computer Service Revenue      6,125.00 (Record the revenue earnes) 22-Dec No Entry 28-Dec Cash      4,000.00 Accounts Receivable      4,000.00 (record the cash recd) 29-Dec Mileage Expense          162.00 Cash          162.00 (record the mileage expense) 31-Dec S. Rey, Withdrawl      1,200.00 Cash      1,200.00 (record the cash withdrawl) Answer 2-a Adjusting Journal Entry Date Particulars Dr. Amt. Cr. Amt a. Computer Supplies Expense      4,055.00 $4,645 - $590 Computer Supplies      4,055.00 $4,645 - $590 (record the supplies expense) b. Insurance Expense          510.00 $2,040 X 3/12 Prepaid Insurance          510.00 $2,040 X 3/12 (record the insurance Expense for 3 months) c. Wages Expense          420.00 $125 X 4 Wages Payable          420.00 $125 X 4 (record the wages expense) d. Depreciation Expense - Computer Equip.      1,350.00 $21,600 / 4 Years X (3/12) Accum. Dep. - Comp. Equip      1,350.00 $21,600 / 4 Years X (3/12) (record the dep. Expense) e. Depreciation Expense - Office Equip.          445.00 $8,900 / 5 Years X (3/12) Accum. Dep. - Office Equip          445.00 $8,900 / 5 Years X (3/12) (record the dep. Expense) f. Rent Expense      2,415.00 $3,220 X 3/4 Prepaid Insurance      2,415.00 $3,220 X 3/4 (record the rent expense) Answer 2-b. Cash Accounts Receivable Computer Supplies Beg. Bal.      38,264.00            980.00 2-Dec Beg. Bal.      13,418.00      4,550.00 4-Dec Beg. Bal.      2,645.00        4,055.00 a. 4-Dec        4,550.00            410.00 3-Dec      4,000.00 28-Dec 15-Dec      2,000.00 14-Dec        2,500.00            630.00 10-Dec 20-Dec        6,125.00            162.00 29-Dec 28-Dec        4,000.00        1,200.00 31-Dec End. Bal.      52,057.00 End. Bal.        4,868.00 End. Bal.          590.00 Prepaid Insurance Prepaid Rent Office Equipment Beg. Bal.        2,040.00            510.00 b. Beg. Bal.        3,220.00      2,415.00 f. Beg. Bal.      8,900.00 End. Bal.        1,530.00 End. Bal.            805.00 End. Bal.      8,900.00 Accumulated Dep.- Equipment Computer Equipment Accumulated Dep.- Computer Equipment Beg. Bal.                     -   Beg. Bal.      21,600.00 Beg. Bal.                     -              445.00 e.        1,350.00 d. End. Bal.            445.00 End. Bal.      21,600.00 End. Bal.        1,350.00 Accounts Payable Wages Payable Unearned Computer Service Revenue Beg. Bal.                     -   Beg. Bal.                   -   Beg. Bal.                     -          2,000.00 15-Dec          420.00 c.        2,500.00 14-Dec End. Bal.        2,000.00 End. Bal.          420.00 End. Bal.        2,500.00 S. Rey, Capital S. Rey, Withdrawls Computer Service Revenue Beg. Bal.      65,000.00 Beg. Bal.        6,500.00 Beg. Bal.      37,139.00 31-Dec        1,200.00        6,125.00 20-Dec End. Bal.      65,000.00 End. Bal.        7,700.00 End. Bal.      43,264.00 Dep. Exp. - Office Equipment Dep. Exp. - Computer Equipment Wages Expense Beg. Bal.                     -   Beg. Bal.                     -   Beg. Bal.      2,275.00 e.            445.00 d.        1,350.00 10-Dec          630.00 c.          420.00 End. Bal.            445.00 End. Bal.        1,350.00 End. Bal.      3,325.00 Insurance Expense Rent Expense Computer Supplies Expense Beg. Bal.                     -   Beg. Bal.                     -   Beg. Bal.                   -   b.            510.00 f.        2,415.00 a.      4,055.00 End. Bal.            510.00 End. Bal.        2,415.00 End. Bal.      4,055.00 Advertising Expense Mileage Expense Misc. Expense Beg. Bal.        1,648.00 Beg. Bal.            654.00 Beg. Bal.          170.00 2-Dec            980.00 29-Dec            162.00 End. Bal.        2,628.00 End. Bal.            816.00 End. Bal.          170.00 Repair Expense - Computer Beg. Bal.            805.00 3-Dec            410.00 End. Bal.        1,215.00 Answer 3. Business Solution Adjusted Trial Balance Dec 31, 2017 Accounts Title Debits Credits Cash      52,057.00 Accounts Receivable        4,868.00 Computer Supplies            590.00 Prepaid Insurance        1,530.00 Prepaid Rent            805.00 Office Equipment        8,900.00 Accumulated Dep.- Equipment            445.00 Computer Equipment      21,600.00 Accumulated Dep.- Computer Equipment        1,350.00 Accounts Payable        2,000.00 Wages Payable            420.00 Unearned Computer Service Revenue        2,500.00 S. Rey, Capital      65,000.00 S. Rey, Withdrawls        7,700.00 Computer Service Revenue      43,264.00 Dep. Exp. - Office Equipment            445.00 Dep. Exp. - Computer Equipment        1,350.00 Wages Expense        3,325.00 Insurance Expense            510.00 Rent Expense        2,415.00 Computer Supplies Expense        4,055.00 Advertising Expense        2,628.00 Mileage Expense            816.00 Misc. Expense            170.00 Repair Expense - Computer        1,215.00 Total    114,979.00    114,979.00                     -   Answer 4. Business Solution Income Statement For Three Months Ended Dec 31, 2017 Revenues: Computer Service Revenue      43,264.00 Expenses Dep. Exp. - Office Equipment            445.00 Dep. Exp. - Computer Equipment        1,350.00 Wages Expense        3,325.00 Insurance Expense            510.00 Rent Expense        2,415.00 Computer Supplies Expense        4,055.00 Advertising Expense        2,628.00 Mileage Expense            816.00 Misc. Expense            170.00 Repair Expense - Computer        1,215.00 Total Expenses      16,929.00 Net Income (Loss)      26,335.00 Answer 5-a. Business Solution Statement of Owners' Equity For Three Months Ended Dec 31, 2017 S. Rey Capital - Oct 1, 2017                     -   Capital introduced      65,000.00 Net Income (Loss)      26,335.00 S. Rey Withdrawls      (7,700.00) Retained Earnings - June 30, 2018      83,635.00 Answer 5-b. Business Solution Balance Sheet Dec 31, 2017 Assets Current Assets Cash      52,057.00 Accounts Receivable        4,868.00 Computer Supplies            590.00 Prepaid Insurance        1,530.00 Prepaid Rent            805.00 Total Current Assets    59,850.00 Property, Plant & Equipment Office Equipment        8,900.00 Accumulated Dep.- Equipment          (445.00)        8,455.00 Computer Equipment      21,600.00 Accumulated Dep.- Computer Equipment      (1,350.00)      20,250.00 Total Property, Plant & Equipment    28,705.00 Total Assets    88,555.00 Liabilities & Owners' Equity Liabilities Current Liabilities Accounts Payable        2,000.00 Wages Payable            420.00 Unearned Computer Service Revenue        2,500.00 Total Current Liabilities      4,920.00 Long-Term Liabilities                   -   Total Liabilities      4,920.00 Total Owners' Equity    83,635.00 Total Liabilities & Stockholders' Equity    93,475.00

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