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Record and post the necessary closing entries for Business Solutions.
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Prepare a post closing trial balance as of December 31, 2011.
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.
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
167 Computer equipment 20,000
168 Accumulated depreciation”Computer equipment
201 Accounts payable
210 Wages payable
236 Unearned computer services revenue
301 S. Rey, Capital 73,000
302 S. Rey, Withdrawals 5,600
403 Computer services revenue 25,659
612 Depreciation expense”Office equipment
613 Depreciation expense”Computer equipment
623 Wages expense 2,625
637 Insurance expense
640 Rent expense
652 Computer supplies expense
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.
22’26 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:
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.