After the success of the company’s first two months, Santana Rey continues to operate Business Solutions. The November 30, 2019, unadjusted trial balance of Business Solutions (reflecting its transactions for October and November of 2019) follows. No. Account Title Debit Credit 101 Cash $ 38,364 106 Accounts receivable 12,818 126 Computer supplies 2,545 128 Prepaid insurance 1,920 131 Prepaid rent 2,960 163 Office equipment 8,000 164 Accumulated depreciation—Office equipment $ 0 167 Computer equipment 23,200 168 Accumulated depreciation—Computer equipment 0 201 Accounts payable 0 210 Wages payable 0 236 Unearned computer services revenue 0 307 Common stock 68,000 318 Retained earnings 0 319 Dividends 5,700 403 Computer services revenue 33,069 612 Depreciation expense—Office equipment 0 613 Depreciation expense—Computer equipment 0 623 Wages expense 2,275 637 Insurance expense 0 640 Rent expense 0 652 Computer supplies expense 0 655 Advertising expense 1,658 676 Mileage expense 634 677 Miscellaneous expenses 210 684 Repairs expense—Computer 785 Totals $ 101,069 $ 101,069 Business Solutions had the following transactions and events in December 2019. Dec. 2 Paid $970 cash to Hillside Mall for Business Solutions’ share of mall advertising costs. 3 Paid $470 cash for minor repairs to the company’s computer. 4 Received $4,650 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 $120 per day. 14 Notified by Alex’s Engineering Co. that Business Solutions’ bid of $7,700 on a proposed project has been accepted. Alex’s paid a $2,000 cash advance to Business Solutions. 15 Purchased $1,300 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 $5,875 cash. 22–26 Took the week off for the holidays. 28 Received $3,600 cash from Gomez Co. on its receivable. 29 Reimbursed S. Rey for business automobile mileage (500 miles at $0.31 per mile). 31 The company paid $1,100 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. The December 31 inventory count of computer supplies shows $630 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 $120 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 lif
The Effect Of Prepaid Taxes On Assets And Liabilities
Many businesses estimate tax liability and make payments throughout the year (often quarterly). When a company overestimates its tax liability, this results in the business paying a prepaid tax. Prepaid taxes will be reversed within one year but can result in prepaid assets and liabilities.
Final Accounts
Financial accounting is one of the branches of accounting in which the transactions arising in the business over a particular period are recorded.
Ledger Posting
A ledger is an account that provides information on all the transactions that have taken place during a particular period. It is also known as General Ledger. For example, your bank account statement is a general ledger that gives information about the amount paid/debited or received/ credited from your bank account over some time.
Trial Balance and Final Accounts
In accounting we start with recording transaction with journal entries then we make separate ledger account for each type of transaction. It is very necessary to check and verify that the transaction transferred to ledgers from the journal are accurately recorded or not. Trial balance helps in this. Trial balance helps to check the accuracy of posting the ledger accounts. It helps the accountant to assist in preparing final accounts. It also helps the accountant to check whether all the debits and credits of items are recorded and posted accurately. Like in a balance sheet debit and credit side should be equal, similarly in trial balance debit balance and credit balance should tally.
Adjustment Entries
At the end of every accounting period Adjustment Entries are made in order to adjust the accounts precisely replicate the expenses and revenue of the current period. It is also known as end of period adjustment. It can also be referred as financial reporting that corrects the errors made previously in the accounting period. The basic characteristics of every adjustment entry is that it affects at least one real account and one nominal account.
After the success of the company’s first two months, Santana Rey continues to operate Business Solutions. The November 30, 2019, unadjusted
| No. | Account Title | Debit | Credit | |||
| 101 | Cash | $ | 38,364 | |||
| 106 | 12,818 | |||||
| 126 | Computer supplies | 2,545 | ||||
| 128 | Prepaid insurance | 1,920 | ||||
| 131 | Prepaid rent | 2,960 | ||||
| 163 | Office equipment | 8,000 | ||||
| 164 | $ | 0 | ||||
| 167 | Computer equipment | 23,200 | ||||
| 168 | Accumulated depreciation—Computer equipment | 0 | ||||
| 201 | Accounts payable | 0 | ||||
| 210 | Wages payable | 0 | ||||
| 236 | Unearned computer services revenue | 0 | ||||
| 307 | Common stock | 68,000 | ||||
| 318 | 0 | |||||
| 319 | Dividends | 5,700 | ||||
| 403 | Computer services revenue | 33,069 | ||||
| 612 | Depreciation expense—Office equipment | 0 | ||||
| 613 | Depreciation expense—Computer equipment | 0 | ||||
| 623 | Wages expense | 2,275 | ||||
| 637 | Insurance expense | 0 | ||||
| 640 | Rent expense | 0 | ||||
| 652 | Computer supplies expense | 0 | ||||
| 655 | Advertising expense | 1,658 | ||||
| 676 | Mileage expense | 634 | ||||
| 677 | Miscellaneous expenses | 210 | ||||
| 684 | Repairs expense—Computer | 785 | ||||
| Totals | $ | 101,069 | $ | 101,069 | ||
Business Solutions had the following transactions and events in December 2019.
| Dec. | 2 | Paid $970 cash to Hillside Mall for Business Solutions’ share of mall advertising costs. | |
| 3 | Paid $470 cash for minor repairs to the company’s computer. | ||
| 4 | Received $4,650 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 $120 per day. | ||
| 14 | Notified by Alex’s Engineering Co. that Business Solutions’ bid of $7,700 on a proposed project has been accepted. Alex’s paid a $2,000 cash advance to Business Solutions. | ||
| 15 | Purchased $1,300 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 $5,875 cash. | ||
| 22–26 | Took the week off for the holidays. | ||
| 28 | Received $3,600 cash from Gomez Co. on its receivable. | ||
| 29 | Reimbursed S. Rey for business automobile mileage (500 miles at $0.31 per mile). | ||
| 31 | The company paid $1,100 cash in dividends. | ||
The following additional facts are collected for use in making
- The December 31 inventory count of computer supplies shows $630 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 $120 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 have expired.
Required:
1. Prepare
2-a. Prepare adjusting entries to reflect a through f.
2-b.
3. Prepare an adjusted trial balance as of December 31, 2019.
4. Prepare an income statement for the three months ended December 31, 2019.
5. Prepare a statement of retained earnings for the three months ended December 31, 2019.
6. Prepare a
7. Record the necessary closing entries as of December 31, 2019 and then post the closing entries to the general ledger in Requirement 2B.
8. Prepare a post-closing trial balance as of December 31, 2019.
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