On october 1 2015 santana rey launched a computer services

Question

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.