Prepare journal entries to record each of given transaction

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Accounting cycle project Problems-

Q1. Serial Problem

On October 1, 2015, Santana Rey launched a computer services company called Business Solutions, which provides consulting services, computer system installations, and custom program development. Rey adopts the calendar year for reporting purposes and expects to prepare the company's first set of financial statements on December 31, 2015. The company's initial chart of accounts follows.

Account

No.


Account

No.

  Cash

101


  Common Stock

307

  Accounts Receivable

106


  Dividends

319

  Computer Supplies

126


  Computer Services Revenue

403

  Prepaid Insurance

128


  Wages Expense

623

  Prepaid Rent

131


  Advertising Expense

655

  Office Equipment

163


  Mileage Expense

676

  Computer Equipment

167


  Miscellaneous Expenses

677

  Accounts Payable

201


  Repairs Expense-Computer

684

 

Oct.

1  

S. Rey invested $45,000 cash, a $20,000 computer system, and $8,000 of office equipment in the company in exchange for its common stock.

 

2  

The company paid $3,300 cash for four months' rent. (Hint: Debit Prepaid Rent for $3,300.)

 

3  

The company purchased $1,420 of computer supplies on credit from Harris Office Products.

 

5  

The company paid $2,220 cash for one year's premium on a property and liability insurance policy. (Hint: Debit Prepaid Insurance for $2,220.)

 

6  

The company billed Easy Leasing $4,800 for services performed in installing a new Web server.

 

8  

The company paid $1,420 cash for the computer supplies purchased from Harris Office Products on October 3.

 

10  

The company hired Lyn Addie as a part-time assistant for $125 per day, as needed.

 

12  

The company billed Easy Leasing another $1,400 for services performed.

 

15  

The company received $4,800 cash from Easy Leasing as partial payment on its account.

 

17  

The company paid $805 cash to repair computer equipment that was damaged when moving it.

 

20  

The company paid $1,728 cash for advertisements published in the local newspaper.

 

22  

The company received $1,400 cash from Easy Leasing on its account.

 

28  

The company billed IFM Company $5,208 for services performed.

 

31  

The company paid $875 cash for Lyn Addie's wages for seven days' work.

 

31  

The company paid $3,600 cash in dividends.

Nov.

1  

The company reimbursed S. Rey in cash for business automobile mileage allowance (Rey logged 1,000 miles at $0.32 per mile).

 

2  

The company received $4,633 cash from Liu Corporation for computer services performed.

 

5  

The company purchased computer supplies for $1,125 cash from Harris Office Products.

 

8  

The company billed Gomez Co. $5,668 for services performed.

 

13  

The company received notification from Alex's Engineering Co. that Business Solutions' bid of $3,950 for an upcoming project is accepted.

 

18  

The company received $2,208 cash from IFM Company as partial payment of the October 28 bill.

 

22  

The company donated $250 cash to the United Way in the company's name.

 

24  

The company completed work for Alex's Engineering Co. and sent it a bill for $3,950.

 

25  

The company sent another bill to IFM Company for the past-due amount of $3,000.

 

28  

The company reimbursed S. Rey in cash for business automobile mileage (1,200 miles at $0.32 per mile).

 

30  

The company paid $1,750 cash for Lyn Addie's wages for 14 days' work.

 

30  

The company paid $2,000 cash in dividends.

Required:

1. Prepare journal entries to record each of the above transactions for Business Solutions.

2. Prepare ledger accounts (in balance column format) and post the journal entries from requirement 1 to them.

3. Prepare a trial balance as of the end of November.

Q2. Serial Problem

After the success of the company's first two months, Santana Rey continues to operate Business Solutions. 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
210   Wages payable
0
236   Unearned computer services revenue

307   Common stock
73,000
307   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 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

The company paid $1,500 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:

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 computer system, acquired on October 1, is expected to have a four-year life with no salvage value.

e. The office equipment, acquired on October 1, 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.

2.1- Prepare adjusting entries to reflect a through f.

2.2- 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, 2015.

4. Prepare an income statement for the three months ended December 31, 2015.

5. Prepare a statement of owner's equity for the three months ended December 31, 2015. (Enter all amounts as positive values.)

6. Prepare a balance sheet as of December 31, 2015.

7. Record and post the necessary closing entries for Business Solutions.

8. Prepare a post-closing trial balance as of December 31, 2015.

Accounting Cycle Problem:

Purpose:  The purpose of the written component of the accounting cycle problem is to apply the accounting knowledge you have gained this semester by analyzing Business Solutions' financial statements.  In addition, this memo gives you practice on your business writing skills.

Task: Prepare a business memo from yourself (as the accountant for Business Solutions) to Santana Rey, the owner analyzing the financial statements you prepared earlier in the term.   Throughout, you are required to use correct accounting terminology in your analysis as though you, the knowledgeable accountant for Business Solutions, are presenting this information to Santana Rey, an owner who does not have a financial background.

Reference no: EM131227797

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Reviews

len1227797

10/1/2016 5:37:20 AM

Explanation of the key accounting principles and assumptions behind the preparation of the financial statements. That is, explain (in your own words) to Santana Rey the general principles that determine: At what value information is recorded in the financial statements (i.e. the measurement principle). When and under what conditions revenue can be recognized in the financial statements. When and under what conditions expenses can be recognized in the financial statements. What the dates mean for each financial statement presented (i.e. the time period assumption). What else would be needed for the financials to be complete (i.e. the disclosure principle). Finally, your business memo should include an introductory paragraph (explaining the purpose of the memo) and a concluding paragraph that summarizes the key points, recommendations, and/or next steps. Format: 1-2 pages, single-spaced in proper business memo format.

len1227797

10/1/2016 5:37:12 AM

Your written analysis must include Computation of the current ratio for the three months ended December 31. At least one paragraph analyzing the current ratio calculated above. In this analysis, you should define the current ratio (in your own words) and explain why the current ratio is an important indicator of a company’s liquidity. Explanation of the prepared financial statements. Write at least a paragraph on each of the three financial statements you have prepared. Define the purpose of each financial statement and explain the information they uniquely provide to assist in decision making.

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