Accounting Cycle Project 3 - Financial Accounting Fundamentals

9/30/12

Check Your Work

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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. 101 106 126 128 131 163 164 167 168 201 210 236 307 318 319 403 612 613 623 637 640 652 655 676 677 684

Account Title Cash Accounts receivable Computer supplies Prepaid insurance Prepaid rent Office equipment Accumulated depreciation—Office equipment Computer equipment Accumulated depreciation—Computer equipment Accounts payable Wages payable Unearned computer services revenue Common stock Retained earnings Dividends Computer services revenue Depreciation expense—Office equipment Depreciation expense—Computer equipment Wages expense Insurance expense Rent expense Computer supplies expense Advertising expense Mileage expense Miscellaneous expenses Repairs expense—Computer

Debit $ 38,264 12,618 2,545 2,220 3,300 8,000

Totals

$ 98,659

Credit

$

0

20,000 0 0 0 0 73,000 0 5,600 25,659 0 0 2,625 0 0 0 1,728 704 250 805 $ 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 20 22– 26 28 29 31

Sent a reminder to Gomez Co. to pay the fee for services recorded on November 8. Completed a project for Liu Corporation and received $5,625 cash. Took the week off for the holidays. Received $3,000 cash from Gomez Co. on its receivable. Reimbursed S. Rey for business automobile mileage (600 miles at $0.32 per mile). 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. b. c. d. e. f.

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 company's computer is expected to have a four-year life with no salvage value. The office equipment 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. (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 Dec. 2

General Journal Advertising expense

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Debit

Credit

1025

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1025

Advertising expense

1025

Cash 3

Repairs expense-computer

500 500

Cash 4

3950

Cash

3950

Accounts receivable 10

750

Wages expense

750

Cash 14

1500

Cash

1500

Unearned computer services revenue 15

1100

Computer supplies

1100

Accounts payable 16

No journal entry required

0 0

No journal entry required 20

5625

Cash

5625

Computer services revenue

28

3000

Cash

3000

Accounts receivable 29

192

Mileage expense

192

Cash 31

1500

Dividends

1500

Cash 2.1 Prepare adjusting entries to reflect a through f. (Omit the "$" sign in your response.) Date Dec. 31

General Journal Computer supplies expense

Debit 3065

Credit

3065

Computer supplies

Insurance expense

555 555

Prepaid insurance Wages expense

500 500

Wages payable Depreciation expense-computer equipment

1250 1250

Accumulated depreciation-computer equipment

Depreciation expense-office equipment

400 400

Accumulated depreciation-office equipment

Rent expense

2475

Prepaid rent

2475

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 Date Dec.

Debit 0

1

0

2

0

3 4

3950 0

10 14 20 28

1500 5625 3000 0

29

0

31

Date Dec.

1

Accounts Receivable Debit 0 0

4

0

28

Date Dec.

1 15

Computer Supplies Debit 0 1100 0

31

Date Dec.

1

Credit

Prepaid Insurance Debit 0 0

31

0

38264

1025

37239

500

36739

0

40689

750

39939

0

41439

0

47064

0

50064

192

49872

1500

48372

Credit

Dec.

Debit 1

12618

3950

8668

3000

5668

Credit

31

Date Dec.

1

Date Dec.

2545

0

3645

3065

580

Credit

Office Equipment Debit 0

Date 1

0

Computer Equipment Debit 0

2220

555

1665 Acct. No. 131 Balance

0

3300

2475

825

Credit 0

400

Credit 0

Accumulated Depreciation—Computer Equipment

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Acct. No. 128 Balance

0

Accumulated Depreciation—Office Equipment Debit Credit 0 1 0

31

Dec.

0

Acct. No. 126 Balance

0

Credit 0

Acct. No. 106 Balance

0

Prepaid Rent Date

Acct. No. 101 Balance

Acct. No. 163 Balance 8000 Acct. No. 164 Balance 0 400 Acct. No. 167 Balance 20000 Acct. No. 168

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Debit

0

31

Accounts Payable Debit 0

Date Dec.

1

0

15

Wages Payable Debit 0

Date Dec.

1

0

31

Date Dec.

1

0

Date 1

Date Dec.

1

0

1250

1250

Credit

0

1100

1100

Credit

0

500

500

Credit

Retained Earnings Debit 0

Credit

7100

31

0

Dec.

Debit

0

31

0

31

Dec.

1

0

20

31284

31

Date Dec.

1

31

Date Dec.

400 0

31

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1250 0

73000

Acct. No. 318 Balance

0

7360 Acct. No. 319 Balance

0

5600

1500

7100

7100

0 Acct. No. 403 Balance 25659

5625

31284

0

0 Acct. No. 612 Balance 0

0

400

400

0

Depreciation Expense—Computer Equipment Debit Credit 0 1 0

31

Acct. No. 307 Balance

14460

Depreciation Expense—Office Equipment Debit Credit 0 0

31

1500

14460

Computer Services Revenue Debit Credit 0 0

Date

0

0

Credit 0

1

Acct. No. 236 Balance

0

Dividends Date

Acct. No. 210 Balance

0

1500

0

Acct. No. 201 Balance

0

Common Stock Debit 0

31

Balance

0

Unearned Computer Services Revenue Debit Credit 0 0

14

Dec.

Credit 0

1

Acct. No. 613 Balance 0

0

1250

1250

0

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Date Dec.

1 10 31

Wages Expense Debit 0 750 500

Credit

Acct. No. 623 Balance

0

2625

0

3375

0

3875

3875

0

0 31

Date Dec.

1 31

Insurance Expense Debit 0 555 0

31

Credit 0

0

0

555

555

0

Rent Expense Date Dec.

Debit 1

31 31

Date Dec.

1 31 31

Date Dec.

1 2 31

Date Dec.

1 29 31

Date Dec.

1 31

Date Dec.

1 3 31

Date

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Credit 0

2475 0

0

Advertising Expense Debit 0 1025 0

Mileage Expense Debit 0 192 0

0

0

2475

2475

0

0

Income Summary Debit

0 3065

3065

0

Credit

Acct. No. 655 Balance

0

1728

0

2753

2753

0

Credit

Acct. No. 676 Balance

0

704

0

896

896

0

250

Repairs Expense - Computer Debit Credit 0 0 500

Acct. No. 652 Balance

0

Miscellaneous Expenses Debit Credit 0 0 0

Acct. No. 640 Balance

0

Computer Supplies Expense Debit Credit 0 0 3065

Acct. No. 637 Balance

Acct. No. 677 Balance 250 0

Acct. No. 684 Balance 805

0

1305

1305

0

Credit

Acct. No. 901 Balance

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0 16824 14460

31284

31284

0

14460

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 Cash

$

Accounts receivable Computer supplies Prepaid insurance Prepaid rent Office equipment Accumulated depreciation-office equipment Computer equipment Accumulated depreciation-computer equipment Accounts payable Wages payable Unearned computer services revenue

Common stock Dividends Computer services revenue Depreciation expense-office equipment Depreciation expense-computer equipment Wages expense Insurance expense Rent expense Computer supplies expense Advertising expense Mileage expense Miscellaneous expenses Repairs expense-computer

Totals

$

Debit 48372

Credit $

0

5668

0

580

0

1,665

0

825

0

8,000

0

0

400

20000

0

0

1250

0

1100

0

500

0

1500

0

73000

7100

0

0

31284

400

0

1,250

0

3,875

0

555

0

2,475

0

3,065

0

2,753

0

896

0

250

0

1,305

0

109034

$

109034

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 $

Computer services revenue

31284

Expenses $

Depreciation expense-office equipment

400 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 $

Net income

14460

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 $ Retained earnings, October 1, 2011

0 14460

Add: Net income

14460 7100

Less: Dividends $

Retained earnings, December 31, 2011

7360

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 $

Cash

48372

Accounts receivable

5668

Prepaid insurance

1,665

Prepaid rent

825

Computer supplies

580

Office equipment Accumulated depreciation-office equipment Computer equipment

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$

8000 -400

7600

20000

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-1250

Total Assets

18750 $

83460

$

1100

Liabilities Accounts payable Wages payable

500

Unearned computer services revenue

1,500

Total Liabilities Equity

3100 73000

Common stock

7360

Retained earnings Total Equity

80360 $

Total Liabilities and Equity

83460

7. Record and post the necessary closing entries for Business Solutions. (Omit the "$" sign in your response.) Date Dec. 31, 2011

General Journal Computer services revenue

Debit 31284

Income summary

Dec. 31, 2011

31284

Income summary

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

Dec. 31, 2011

Income summary

1,305

14460

Retained earnings

Dec. 31, 2011

Credit

Retained earnings

14460

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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$

Cash

Debit 48372

0

5668

Accounts receivable Computer supplies

580

Prepaid insurance

1,665

Prepaid rent

0 0 0 0

825

Office equipment

0

8,000 0

Accumulated depreciation-office equipment Computer equipment Accumulated depreciation-computer equipment Accounts payable Wages payable

Unearned computer services revenue Common stock Retained earnings

Totals

Credit

$

$

400

20000

0

0

1250

0

1100

0

500

0

1500

0

73000

0

7360

85110

$

85110

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

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