COURSE-LONG PROJECT: PART III (Modules 5 and 6)
Scenario: After the success of the company’s first two months, Santana Rey continues to operate Business Solutions. (Transactions for the first two months are described in the serial problem of Chapter 2.) The November 30, 2015, unadjusted trial balance of Business Solutions (reflecting its transactions for October and November of 2015) 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
236
Unearned computer services revenue
0
301
S. Rey, Capital
73,000
302
S. Rey, Withdrawals
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 2015.
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.
22-26
Took the week off for the holidays.
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
S. Rey withdrew $1,500 cash from the company for personal use.
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 $580 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.
Please complete the following:
- Prepare journal entries to record each of the December transactions and events for Business Solutions. Post those entries to the accounts in the ledger.
- Prepare adjusting entries to reflect a through f. Post those entries to the accounts in the ledger.
- Prepare an adjusted trial balance as of December 31, 2015.
- Prepare an income statement for the three months ended December 31, 2015.
- Prepare a statement of owner’s equity for the three months ended December 31, 2015.
- Prepare a balance sheet as of December 31, 2015.
Note: You will submit your work at the end of the Module 6 Homework Assignment.