No. Account Title Debit Credit 101 Cash . . . . . . . . . . . . . . . . . . . .
ID: 2376462 • Letter: N
Question
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%u2014Office equipment . . . . . . . . . . . . $ 0
167 Computer equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,000
168 Accumulated depreciation%u2014Computer equipment . . . . . . . . 0
201 Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0
210 Wages payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0
236 Unearned computer services revenue . . . . . . . . . . . . . . . . . . . 0
301 S. Rey, Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73,000
302 S. Rey, Withdrawals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,600
403 Computer services revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,659
612 Depreciation expense%u2014Office equipment . . . . . . . . . . . . . . . 0
613 Depreciation expense%u2014Computer 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%u2014Computer . . . . . . . . . . . . . . . . . . . . . . . . . 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%u2019 share of mall advertising costs.
3 Paid $500 cash for minor repairs to the company%u2019s computer.
4 Received $3,950 cash from Alex%u2019s 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%u2019s Engineering Co. that Business Solutions%u2019 bid of $7,000 on a proposed proj-
ect has been accepted. Alex%u2019s 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 %u201326 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%u2019s 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%u2019s 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%u2019 prepaid rent has expired.
Required
1. Prepare journal entries to record each of the December transactions and events for Business Solutions.
Post those entries to the accounts in the ledger.
2. Prepare adjusting entries to reflect a through f. Post those entries to the accounts in the ledger.
3. Prepare an adjusted trial balance as of December 31, 2011.
4. Prepare an income statement for the three months ended December 31, 2011.
5. Prepare a statement of owner%u2019s equity for the three months ended December 31, 2011.
6. Prepare a balance sheet as of December 31, 2011.
Explanation / Answer
The easiest way to see this is to set up "T" accounts for Accounts Receivable and Allowance for Doubtful Accounts and fill in the amounts.
Accounts recievable............63,000
Debit A/R 63,000
Less: Allowance for bad debts......(9000) $54000
Credit Allowance for 9,000
The companys accounting records revealed the following information for the year ended December 31,2011:
sales (on all accounts)......480,000
Debit A/R for 480,000
Cash collections from customers......435,000
Credit A/R for 435,000
Accounts written off.............10,500
Debit Allowance for 10,500
Credit A/R for 10,500
Bad Debts expense (accrued 12/31/11)........16,500
Credit Allowance for 16,500
After the amounts are put into the T accounts, you should see that you have a debit balance of 97,500 in Accounts Receivable and a credit balance of 15,000 in Allowance for Doubtful Accounts. That leaves a net realizable value of 82,500 (97,500 - 15,000)
Balance sheet presentation would just be:
Accounts Receivable. . . . . . . . . . . . . . .97,500
Less:
. .Allowance for Doubtful Accounts. . . . . 15,000
. . .Net Realizable Value. . . . . . . . . . . . .82,500
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