: On October 1, 2015, Santana Rey launched a computer services company called Bu
ID: 2460332 • Letter: #
Question
: 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
S. Rey, Capital
301
Accounts Receivable
106
S. Rey, Withdrawals
302
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
Please complete the following:
Prepare journal entries to record each of the following transactions for Business Solutions.
Oct.
1
S. Rey invested $45,000 cash, a $20,000 computer system, and $8,000 of office equipment in the company.
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 suppies on credit from Harris Office Products.
4
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
S. Rey withdrew $3,600 cash from the company for personal use.
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
S. Rey withdrew $2,000 cash from the company for personal use.
Open ledger accounts (in balance column format) and post the journal entries from part 1 to them.
Prepare a trial balance as of the end of November.
Account
No.
Account
No.
Cash
101
S. Rey, Capital
301
Accounts Receivable
106
S. Rey, Withdrawals
302
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
Explanation / Answer
1-Oct Cash Dr 45000 Computer equipment Dr 20000 Office equipment Dr 8000 S Rey capital Cr 73000 2-Oct Prepaid Rent Dr 3300 Cash Cr 3300 3-Oct Computer supplies Dr 1420 Accounts payable Cr 1420 4-Oct Prepaid Insurance Dr 2220 Cash Cr 2220 6-Oct Accounts receivable Dr 4800 Computer service revenue Cr 4800 8-Oct Accounts payable Dr 1420 Cash Cr 1420 10-Oct No entry 12-Oct Accounts receivable Dr 1400 Computer service revenue Cr 1400 15-Oct Cash Dr 4800 Accounts receivable Cr 4800 17-Oct Repair expense - Computer Dr 805 Cash Cr 805 20-Oct Advertising expense Dr 1728 Cash Cr 1728 22-Oct Cash Dr 1400 Accounts receivable Cr 1400 28-Oct Accounts receivable Dr 5208 Computer service revenue Cr 5208 31-Oct Wages expense Dr 875 Cash Cr 875 31-Oct S Rey withdrawals Dr 3600 Cash Cr 3600 1-Nov Mileage expense Dr 320 Cash Cr 320 2-Nov Cash Dr 4633 Accounts receivable Cr 4633 5-Nov Computer supplies Dr 1125 Cash Cr 1125 8-Nov Accounts receivable Dr 5668 Computer service revenue Cr 5668 13-Nov No entry 18-Nov Cash Dr 2208 Accounts receivable Cr 2208 22-Nov Miscellaneous expenses Dr 250 Cash Cr 250 24-Nov Accounts receivable Dr 3950 Computer service revenue Cr 3950 25-Nov No entry 28-Nov Mileage expense Dr 384 Cash Cr 384 30-Nov Wages expense Dr 1750 Cash Cr 1750 30-Nov S Rey withdrawals Dr 2000 Cash Cr 2000 Cash 1-Oct To S Rey capital 301 45000 2-Oct By prepaid rent 131 3300 15-Oct To Accounts receivable 106 4800 4-Oct By prepaid insurance 128 2220 22-Oct To Accounts receivable 106 1400 8-Oct By accounts payable 201 1420 2-Nov To Accounts receivable 106 4633 17-Oct By repair expense - computer 684 805 20-Oct By Advertising expense 655 1728 18-Nov To Accounts receivable 106 2208 31-Oct By wages expense 623 875 31-Oct By S Reys withdrawal 302 3600 1-Nov By mileage expense 676 320 5-Nov By computer supplies 126 1125 22-Nov By Miscellaneous expenses 677 250 28-Nov By mileage expense 676 384 30-Nov By wages expense 623 1750 30-Nov By S Reys withdrawal 302 2000 30-Nov By balance c/d 38264 58041 58041 S Rey Capital 30-Nov To balance c/d 73000 1-Oct By Cash 101 45000 By Computer equipment 167 20000 By Office equipment 163 8000 73000 73000 Accounts receivable 6-Oct To computer service revenue 403 4800 15-Oct By Cash 101 4800 12-Oct To computer service revenue 403 1400 22-Oct By Cash 101 1400 28-Oct To computer service revenue 403 5208 2-Nov By Cash 101 4633 8-Nov To computer service revenue 403 5668 18-Nov By Cash 101 2208 24-Nov To computer service revenue 403 3950 30-Nov By balance c/d 7985 21026 21026 S Rey Withdrawals 31-Oct To Cash 101 3600 30-Nov By Balance c/d 5600 30-Nov To Cash 101 2000 5600 5600 Computer supplies 3-Oct To Accounts payable 201 1420 30-Nov By Balance c/d 2545 5-Nov To Cash 101 1125 2545 2545 Computer service revenue 30-Nov To Balance c/d 21026 6-Oct By Accounts receivable 106 4800 12-Oct By Accounts receivable 106 1400 28-Oct By Accounts receivable 106 5208 8-Nov By Accounts receivable 106 5668 24-Nov By Accounts receivable 106 3950 21026 21026 Prepaid Insurance 4-Oct To Cash 101 2220 30-Nov By balance c/d 2220 2220 2220 Prepaid Rent 2-Oct To Cash 101 3300 30-Nov By balance c/d 3300 3300 3300 Office equipment 1-Oct To S Rey capital 301 8000 30-Nov By balance c/d 8000 8000 8000 Computer equipment 1-Oct To S Rey capital 301 20000 30-Nov By balance c/d 20000 20000 20000 Accounts payable 8-Oct To Cash 101 1420 3-Oct By Computer supplies 126 1420 1420 1420 Wages Expense 31-Oct To Cash 101 875 30-Nov By Balance c/d 2625 30-Nov To Cash 101 1750 2625 2625 Mileage Expense 1-Nov To Cash 101 320 30-Nov By Balance c/d 704 28-Nov To Cash 101 384 704 704 Miscellaneous Expense 22-Nov To Cash 101 250 30-Nov By Balance c/d 250 250 250 Repair Expense - Computer 17-Oct To Cash 101 805 30-Nov By Balance c/d 805 805 805 Advertising Expense 20-Oct To Cash 101 1728 30-Nov By Balance c/d 1728 1728 1728 Trial Balance Dr Cr Cash 38264 Accounts receivable 7985 Computer supplies 2545 Prepaid Insurance 2220 Prepaid Rent 3300 Office equipment 8000 Computer equipment 20000 Accounts payable 0 S Ray Capital 73000 S Rey Withdrawal 5600 Computer service revenue 21026 Wages expense 2625 Advertising expense 1728 Mileage expense 704 Miscellaneous expense 250 Repair expense - Computer 805 Total 94026 94026
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