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1. value:
70.00 points

Serial Problem Business Solutions L.O. 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, 2011, unadjusted trial balance of Business Solutions (reflecting its
transactions for October and November of 2011) follows.

No. Account Title Debit Credit

101 Cash $ 38,264
106 Accounts receivable 12,618
126 Computer supplies 2,545
128 Prepaid insurance 2,220
131 Prepaid rent 3,300
163 Office equipment 8,000
164 Accumulated depreciation—Office equipment $ 0
167 Computer equipment 20,000
168 Accumulated depreciation—Computer equipment 0
201 Accounts payable 0
210 Wages payable 0
236 Unearned computer services revenue 0
307 Common stock 73,000
318 Retained earnings 0
319 Dividends 5,600
403 Computer services revenue 25,659
612 Depreciation expense—Office equipment 0
613 Depreciation expense—Computer equipment 0
623 Wages expense 2,625
637 Insurance expense 0
640 Rent expense 0
652 Computer supplies expense 0
655 Advertising expense 1,728
676 Mileage expense 704
677 Miscellaneous expenses 250
684 Repairs expense—Computer 805

Totals $ 98,659 $ 98,659

Business Solutions had the following transactions and events in December 2011.
Dec. 2 Paid $1,025 cash to Hillside Mall for Business Solutions’ share of mall advertising costs.
3 Paid $500 cash for minor repairs to the company’s computer.
4 Received $3,950 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 $125 per day.
14 Notified by Alex's Engineering Co. that Business Solutions’ bid of $7,000 on a proposed
project has been accepted. Alex’s paid a $1,500 cash advance to Business Solutions.
15 Purchased $1,100 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 $5,625 cash.
22–
Took the week off for the holidays.
26
28 Received $3,000 cash from Gomez Co. on its receivable.
29 Reimbursed S. Rey for business automobile mileage (600 miles at $0.32 per mile).
31 The business paid $1,500 cash for 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:

a. The December 31 inventory count of computer supplies shows $580 still available.
b. Three months have expired since the 12-month insurance premium was paid in advance.
c. As of December 31, Lyn Addie has not been paid for four days of work at $125 per day.
d. The company's computer is expected to have a four-year life with no salvage value.
e. The office equipment is expected to have a five-year life with no salvage value.
f. 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.
(In cases where no entry is required, please select the option "No journal entry required" for
your answer to grade correctly. Leave no cells blank - be certain to enter "0" wherever
required. Omit the "$" sign in your response.)

Date General Journal Debit Credit

Dec. 2 Advertising expense 1025

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Dec. 2 Advertising expense 1025
Cash 1025

3 Repairs expense-computer 500

Cash 500

4 Cash 3950
Accounts receivable 3950

10 Wages expense 750

Cash 750

14 Cash 1500
Unearned computer services revenue 1500

15 Computer supplies 1100

Accounts payable 1100

16 No journal entry required 0

No journal entry required 0

20 Cash 5625

Computer services revenue 5625

28 Cash 3000
Accounts receivable 3000

29 Mileage expense 192

Cash 192

31 Dividends 1500
Cash 1500

2.1 Prepare adjusting entries to reflect a through f. (Omit the "$" sign in your response.)

Date General Journal Debit Credit

3065
Dec. 31 Computer supplies expense

3065
Computer supplies

555
Insurance expense

555
Prepaid insurance

Wages expense 500

500
Wages payable

Depreciation expense-computer equipment 1250

1250
Accumulated depreciation-computer equipment

400
Depreciation expense-office equipment

400
Accumulated depreciation-office equipment

2475
Rent expense

2475
Prepaid rent

2.2 Post the journal entries to record each of the December transactions and adjusting entries to the
accounts in the ledger. (Leave no cells blank - be certain to enter "0" wherever required. Omit
the "$" sign in your response.)

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General Ledger Accounts

Cash Acct. No. 101

Date Debit Credit Balance
0
Dec. 1 0 38264

0
2 1025 37239

0
3 500 36739

3950
4 0 40689

0
10 750 39939

1500
14 0 41439

5625
20 0 47064

3000
28 0 50064

0
29 192 49872

0
31 1500 48372

Accounts Receivable Acct. No. 106

Date Debit Credit Balance
0
Dec. 1 0 12618

0
4 3950 8668

0
28 3000 5668

Computer Supplies Acct. No. 126

Date Debit Credit Balance
0
Dec. 1 0 2545

1100
15 0 3645

0
31 3065 580

Prepaid Insurance Acct. No. 128

Date Debit Credit Balance
0
Dec. 1 0 2220

0
31 555 1665

Prepaid Rent Acct. No. 131

Date Debit Credit Balance
0
Dec. 1 0 3300

0
31 2475 825

Office Equipment Acct. No. 163

Date Debit Credit Balance
0
Dec. 1 0 8000

Accumulated Depreciation—Office Equipment Acct. No. 164

Date Debit Credit Balance
0
Dec. 1 0 0

0
31 400 400

Computer Equipment Acct. No. 167

Date Debit Credit Balance
0
Dec. 1 0 20000

Accumulated Depreciation—Computer Equipment Acct. No. 168

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Date Debit Credit Balance

0
Dec. 1 0 0

0
31 1250 1250

Accounts Payable Acct. No. 201

Date Debit Credit Balance
0
Dec. 1 0 0

0
15 1100 1100

Wages Payable Acct. No. 210

Date Debit Credit Balance
0
Dec. 1 0 0

0
31 500 500

Unearned Computer Services Revenue Acct. No. 236

Date Debit Credit Balance
0
Dec. 1 0 0

0
14 1500 1500

Common Stock Acct. No. 307

Date Debit Credit Balance
0
Dec. 1 0 73000

Retained Earnings Acct. No. 318

Date Debit Credit Balance
0
Dec. 1 0 0

0
31 14460 14460

7100
31 0 7360

Dividends Acct. No. 319

Date Debit Credit Balance
0
Dec. 1 0 5600

0
31 1500 7100

0
31 7100 0

Computer Services Revenue Acct. No. 403

Date Debit Credit Balance
0
Dec. 1 0 25659

0
20 5625 31284

31284
31 0 0

Depreciation Expense—Office Equipment Acct. No. 612

Date Debit Credit Balance
0
Dec. 1 0 0

400
31 0 400

0
31 400 0

Depreciation Expense—Computer Equipment Acct. No. 613

Date Debit Credit Balance
0
Dec. 1 0 0

1250
31 0 1250

0
31 1250 0

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Wages Expense Acct. No. 623

Date Debit Credit Balance
0
Dec. 1 0 2625

750
10 0 3375

500
31 0 3875

0
31 3875 0

Insurance Expense Acct. No. 637

Date Debit Credit Balance
0
Dec. 1 0 0

555
31 0 555

0
31 555 0

Rent Expense Acct. No. 640

Date Debit Credit Balance
0
Dec. 1 0 0

2475
31 0 2475

0
31 2475 0

Computer Supplies Expense Acct. No. 652

Date Debit Credit Balance
0
Dec. 1 0 0

3065
31 0 3065

0
31 3065 0

Advertising Expense Acct. No. 655

Date Debit Credit Balance
0
Dec. 1 0 1728

1025
2 0 2753

0
31 2753 0

Mileage Expense Acct. No. 676

Date Debit Credit Balance
0
Dec. 1 0 704

192
29 0 896

0
31 896 0

Miscellaneous Expenses Acct. No. 677

Date Debit Credit Balance
0
Dec. 1 0 250

31 0 250 0

Repairs Expense - Computer Acct. No. 684

Date Debit Credit Balance
0
Dec. 1 0 805

500
3 0 1305

0
31 1305 0

Income Summary Acct. No. 901

Date Debit Credit Balance

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31 0 31284 31284

16824
31 0 14460

14460
31 0 0

3. Prepare an adjusted trial balance as of December 31, 2011. (The items in the Trial Balance should
be grouped as follows: Assets and Liabilities (in order of their liquidity) then Equity, Revenues,
and Expenses. Leave no cells blank - be certain to enter "0" wherever required. Omit the "$"
sign in your response.)

BUSINESS SOLUTIONS
Adjusted Trial Balance
December 31, 2011
Debit Credit
$ 48372 $ 0
Cash

5668 0
Accounts receivable

580 0
Computer supplies

1,665 0
Prepaid insurance

825 0
Prepaid rent

8,000 0
Office equipment

0 400
Accumulated depreciation-office equipment

20000 0
Computer equipment

0 1250
Accumulated depreciation-computer equipment

0 1100
Accounts payable

0 500
Wages payable

0 1500
Unearned computer services revenue

0 73000
Common stock

7100 0
Dividends

0 31284
Computer services revenue

400 0
Depreciation expense-office equipment

1,250 0
Depreciation expense-computer equipment

3,875 0
Wages expense

555 0
Insurance expense

2,475 0
Rent expense

3,065 0
Computer supplies expense

2,753 0
Advertising expense

896 0
Mileage expense

250 0
Miscellaneous expenses

1,305 0
Repairs expense-computer

$ 109034 $ 109034
Totals

4. Prepare an income statement for the three months ended December 31, 2011. (Input all amounts as
positive values. Omit the "$" sign in your response.)

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BUSINESS SOLUTIONS
Income Statement
For Three Months Ended December 31, 2011
Debit Credit
Revenue
$ 31284
Computer services revenue

Expenses
$ 400
Depreciation expense-office equipment

1,250
Depreciation expense-computer equipment

3,875
Wages expense

555
Insurance expense

2,475
Rent expense

3,065
Computer supplies expense

2,753
Advertising expense

896
Mileage expense

250
Miscellaneous expenses

1,305
Repairs expense-computer

16824
Total expenses

$ 14460
Net income

5. Prepare a statement of retained earnings for the three months ended December 31, 2011. (Leave no
cells blank - be certain to enter "0" wherever required. Input all amounts as positive values.
Omit the "$" sign in your response.)

BUSINESS SOLUTIONS
Statement of Retained Earnings
For Three Months Ended December 31, 2011
$ 0
Retained earnings, October 1, 2011

Add: Net income 14460

14460
Less: Dividends 7100

$ 7360
Retained earnings, December 31, 2011

6. Prepare a balance sheet as of December 31, 2011. (Be sure to list the assets and liabilities in order
of their liquidity. Amounts to be deducted should be indicated with minus sign. Omit the "$"
sign in your response.)

BUSINESS SOLUTIONS
Balance Sheet
December 31, 2011
Assets
$ 48372
Cash

Accounts receivable 5668

Prepaid insurance 1,665
Prepaid rent 825
Computer supplies 580

$ 8000
Office equipment

Accumulated depreciation-office equipment -400 7600

Computer equipment 20000

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Accumulated depreciation-computer equipment -1250 18750

$ 83460
Total Assets

Liabilities
$ 1100
Accounts payable

Wages payable 500

Unearned computer services revenue 1,500

Total Liabilities 3100

Equity
Common stock 73000
Retained earnings 7360

Total Equity 80360

$ 83460
Total Liabilities and Equity

7. Record and post the necessary closing entries for Business Solutions. (Omit the "$" sign in your
response.)

Date General Journal Debit Credit

Computer services revenue
Dec. 31, 2011 31284

Income summary
31284

Income summary
Dec. 31, 2011 16824

Depreciation expense–office equipment

400

Depreciation expense–computer equipment

1,250

Wages expense
3,875

Insurance expense
555

Rent expense
2,475

Computer supplies expense

3,065

Advertising expense
2,753

Mileage expense
896

Miscellaneous expenses
250

Repairs expense-computer
1,305

Income summary
Dec. 31, 2011 14460

Retained earnings
14460

Retained earnings
Dec. 31, 2011 7100

Dividends
7100

8. Prepare a post-closing trial balance as of December 31, 2011. (The items in the Trial Balance
should be grouped as follows: Assets and Liabilities (in order of their liquidity) then Equity,
Revenues, and Expenses. Leave no cells blank - be certain to enter "0" wherever required.
Omit the "$" sign in your response.)

BUSINESS SOLUTIONS
Post-Closing Trial Balance
December 31, 2011

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Debit Credit
$ 48372 0
Cash

5668 0
Accounts receivable

0
Computer supplies 580

0
Prepaid insurance 1,665

0
Prepaid rent 825

0
Office equipment 8,000

0 $ 400
Accumulated depreciation-office equipment

20000 0
Computer equipment

0 1250
Accumulated depreciation-computer equipment

0 1100
Accounts payable

0 500
Wages payable

0 1500
Unearned computer services revenue

0 73000
Common stock

0 7360
Retained earnings

$ 85110 $ 85110
Totals

© 2011 The McGraw-Hill Companies. All rights reserved.

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