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SP 3

Journal entries
Dec. 2

Advertising Expense .................................. 655


Cash .....................................................101

1,025
1,025

Paid share of mall advertising costs.

Repairs ExpenseComputer ..................... 684


Cash .....................................................101

500
500

Repaired the computer.

Cash ............................................................. 101


Accounts Receivable ..........................106

3,950
3,950

Collected accounts receivable.

10

Wages Expense .......................................... 623


Cash .....................................................101

750
750

Paid employee for part-time work.

14

Cash ............................................................. 101


Unearned Computer Services Revenue ...236

1,500
1,500

Received advance on work to be performed.

15

Computer Supplies .................................... 126


Accounts Payable ...............................201

1,100
1,100

Purchased supplies on credit.

16

No entry recorded in the journal.

20

Cash ............................................................. 101


Computer Services Revenue .............403

5,625
5,625

Collected cash revenue from customer.

28

Cash ............................................................. 101


Accounts Receivable ..........................106

3,000
3,000

Collected accounts receivable.

29

Mileage Expense ........................................ 676


Cash .....................................................101

192
192

Reimbursed Lopez for mileage.

31

Dividends .................................................... 319


Cash .....................................................101
Paid cash for dividends.

1,500
1,500

Serial Problem SP 3 (Continued)


Part 2
Adjusting entries
Dec. 31 Computer Supplies Expense .........................652
Computer Supplies .................................126

3,065
3,065

Adjustment for supplies used (supplies


balance less cost of supplies available).

31 Insurance Expense .........................................637


Prepaid Insurance ...................................128

555
555

Adjustment for expired insurance (1/4


of original prepaid amount).

31 Wages Expense ..............................................623


Wages Payable ........................................210

500
500

Adjustment for accrued wages.

31 Depreciation ExpenseComputer Equip .......613


Accumulated Depreciation
Computer Equipment ...........................168

1,250
1,250

Adjustment for computer equipment depreciation:


Cost ......................................................... $20,000
Predicted life ........................................... 4 years
Annual depreciation (cost/life) ..............
$5,000
Expense for three months .....................
$1,250

31 Depreciation ExpenseOffice Equip ............612


Accumulated Depreciation
Office Equipment ..................................164

400
400

Adjustment for office equipment depreciation:


Cost ..........................................................
$8,000
Predicted life ............................................ 5 years
Annual depreciation (cost/life) ...............
$1,600
Expense for three months ......................
$400

31 Rent Expense ..................................................640


Prepaid Rent ............................................131
Adjustment for expired rent (3/4 of
original prepaid amount).

2,475
2,475

Serial Problem SP 3 (Continued)


Part 3
SUCCESS SYSTEMS
Adjusted Trial Balance
December 31, 2009
Debit
Cash ........................................................................... $ 58,160
Accounts receivable .................................................
5,668
Computer supplies ...................................................
580
Prepaid insurance .....................................................
1,665
Prepaid rent ...............................................................
825
Office equipment ......................................................
8,000
Accumulated depreciationOffice equipment .......
Computer equipment ................................................
20,000
Accumulated depreciationComputer equipment
Accounts payable .....................................................
Wages payable ..........................................................
Unearned computer services revenue ...................
Common stock ...........................................................
Retained earnings......................................................
Dividends ....................................................................
7,100
Computer services revenue .....................................
Depreciation expenseOffice equipment .............
400
Depreciation expenseComputer equipment ........
1,250
Wages expense .........................................................
3,875
Insurance expense ...................................................
555
Rent expense ............................................................
2,475
Computer supplies expense ....................................
3,065
Advertising expense..................................................
2,965
Mileage expense .......................................................
896
Miscellaneous expenses ..........................................
250
Repairs expenseComputer ...................................
1,305
Totals .......................................................................... $119,034

Credit

400
1,250
1,100
500
1,500
83,000
0
31,284

_______
$119,034

Serial Problem SP 3 (Continued)


Part 4
SUCCESS SYSTEMS
Income Statement
For Three Months Ended December 31, 2009
Revenue
Computer services revenue.......................................
Expenses
Depreciation expenseOffice equipment ...............
Depreciation expenseComputer equipment .........
Wages expense ...........................................................
Insurance expense .....................................................
Rent expense ..............................................................
Computer supplies expense ......................................
Advertising expense...................................................
Mileage expense .........................................................
Miscellaneous expenses ............................................
Repairs expenseComputer.....................................
Total expenses ............................................................
Net income ....................................................................

$31,284
$ 400
1,250
3,875
555
2,475
3,065
2,965
896
250
1,305
17,036
$14,248

SUCCESS SYSTEMS
Statement of Retained Earnings
For Three Months Ended December 31, 2009
Retained earnings, October 1, 2009 ............................
Plus: Net income ..........................................................
Less: Dividends ............................................................
Retained earnings, December 31, 2009 ......................

$
0
14,248
14,248
7,100
$ 7,148

Serial Problem SP 3 (Continued)


Part 4continued
SUCCESS SYSTEMS
Balance Sheet
December 31, 2009
Assets
Cash ................................................................................

$ 58,160

Accounts receivable .....................................................

5,668

Computer supplies ........................................................

580

Prepaid insurance .........................................................

1,665

Prepaid rent ...................................................................

825

Office equipment ........................................................... $ 8,000


Accumulated depreciationOffice equipment .............
(400)
Computer equipment .....................................................
Accumulated depreciationComputer equipment ......

7,600

20,000
(1,250)

18,750

Total assets .....................................................................

$ 93,248

Liabilities
Accounts payable...........................................................

1,100

Wages payable ...............................................................

500

Unearned computer services revenue .........................

1,500

Total liabilities ................................................................

3,100

Equity
Common stock ...............................................................

83,000

Retained earnings ..........................................................

7,148

Total liabilities and equity .............................................

$ 93,248

Serial Problem SP 3 (Continued)


Part 5
Closing entries
2009

Dec. 31 Computer Services Revenue .......................... 403


Income Summary ...................................... 901

31,284
31,284

To close the revenue account.

31 Income Summary .............................................


Depreciation ExpOffice Equipment.......
Depreciation ExpComputer Equipment ..
Wages Expense ........................................
Insurance Expense ..................................
Rent Expense ...........................................
Computer Supplies Expense ..................
Advertising Expense ...............................
Mileage Expense ......................................
Miscellaneous Expenses ........................
Repairs ExpenseComputer .................

901
612
613
623
637
640
652
655
676
677
684

17,036

Income Summary ............................................. 901


Retained Earnings .................................... 318

14,248

400
1,250
3,875
555
2,475
3,065
2,965
896
250
1,305

To close the expense accounts.

31

14,248

To close the Income Summary account.

31

Retained Earnings ............................................ 318


Dividends ................................................... 319

7,100

To close the dividends account.

Note: All accounts with numbers that start with the digits 1 or 2
(the permanent accounts) are unaffected by the closing process.

7,100

Serial Problem SP 3 (Concluded)


Part 6
SUCCESS SYSTEMS
Post-Closing Trial Balance
December 31, 2009
Debit

Credit

Cash ............................................................................... $ 58,160


Accounts receivable .....................................................

5,668

Computer supplies .......................................................

580

Prepaid insurance .........................................................

1,665

Prepaid rent ...................................................................

825

Office equipment...........................................................

8,000

Accumulated depreciationOffice equipment ..........


Computer equipment ....................................................

400

20,000

Accumulated depreciationComputer equipment ...

1,250

Accounts payable .........................................................

1,100

Wages payable ..............................................................

500

Unearned computer services revenue........................

1,500

Common stock ..............................................................

83,000

Retained earnings .........................................................

7,148

Totals ............................................................................. $ 94,898 $ 94,898

Serial Problem SP 3 (Continued)


[Note: The ledger includes all entries from the prior three months. The Working Papers
shorten the solution by showing the balances of the accounts as of November 30, 2009.]

General Ledger

Cash
Date
Oct.

Nov.

Dec.

Explanation
1
2
5
8
15
17
20
22
31
31
1
2
5
18
22
28
30
30
2
3
4
10
14
20
28
29
31

PR

Debit
55,000

4,800

1,400

4,633
2,208

3,950
1,500
5,625
3,000

Acct. No. 101


Credit
Balance
55,000
3,300
51,700
2,220
49,480
1,420
48,060
52,860
805
52,055
1,940
50,115
51,515
875
50,640
3,600
47,040
320
46,720
51,353
1,125
50,228
52,436
250
52,186
384
51,802
1,750
50,052
2,000
48,052
1,025
47,027
500
46,527
50,477
750
49,727
51,227
56,852
59,852
192
59,660
1,500
58,160

Serial Problem SP 3 (Continued)


Date
Oct.

Nov.

Dec.

Date
Oct.
Nov.
Dec.

Date
Oct.
Dec.

Date
Oct.
Dec.

Date
Oct.

Date
Dec.

6
12
15
22
28
8
18
24
4
28

Accounts Receivable
Explanation
PR
Debit
4,800
1,400

5,208
5,668
3,950

Computer Supplies
Explanation
PR
3
5
15
31
Prepaid Insurance
Explanation
PR
5
31
Prepaid Rent
Explanation
PR
2
31
Office Equipment
Explanation
PR
1

Acct. No. 106


Credit
Balance
4,800
6,200
4,800
1,400
1,400
0
5,208
10,876
2,208
8,668
12,618
3,950
8,668
3,000
5,668

Debit
1,420
1,125
1,100

Acct. No. 126


Credit
Balance
1,420
2,545
3,645
3,065
580

Debit
2,220

Acct. No. 128


Credit
Balance
2,220
555
1,665

Debit
3,300

Acct. No. 131


Credit
Balance
3,300
2,475
825

Debit
8,000

Acct. No. 163


Credit
Balance
8,000

Accumulated DepreciationOffice Equipment


Acct. No. 164
Explanation
PR
Debit
Credit
Balance
31
400
400

Serial Problem SP 3 (Continued)


Date
Oct.

Date
Dec.

Date
Oct.
Dec.

Date
Dec.

Date
Dec.

Date
Oct.

Date
Dec.

Date
Oct.
Nov.
Dec.

Computer Equipment
Explanation
PR
Debit
20,000

Acct. No. 167


Credit
Balance
20,000

Accumulated DepreciationComputer Equipment


Acct. No. 168
Explanation
PR
Debit
Credit
Balance
31
1,250
1,250
Accounts Payable
Explanation
PR
Debit
3
8
15

1,420

Explanation

Wages Payable
PR

Debit

31

Acct. No. 210


Credit
Balance
500
500

Unearned Computer Services Revenue


Explanation
PR
Debit

Acct. No. 236


Credit
Balance
1,500
1,500

Common Stock
Explanation
PR

Acct. No. 307


Credit
Balance
83,000
83,000

14

Debit

1
Retained Earnings
Explanation
PR
Debit
31
31

7,100

Explanation
31
30
31
31

Acct. No. 201


Credit
Balance
1,420
1,420
0
1,100
1,100

Closing

Dividends
PR

Debit
3,600
2,000
1,500

Acct. No. 318


Credit
Balance
14,248
14,248
7,148
Acct. No. 319
Credit
Balance
3,600
5,600
7,100
7,100
0

Serial Problem SP 3 (Continued)


Date
Oct.

Nov.

Dec.

Date
Dec.

Date
Dec.

Date
Oct.
Nov.
Dec.

Date
Dec.

Date
Dec.

Computer Services Revenue


Explanation
PR
Debit

Acct. No. 403


Credit
Balance
4,800
4,800
1,400
6,200
5,208
11,408
4,633
16,041
5,668
21,709
3,950
25,659
5,625
31,284
0

6
12
28
2
8
24
20
31

Closing

31
31

Depreciation ExpenseOffice Equipment


Acct. No. 612
Explanation
PR
Debit
Credit
Balance
400
400
Closing
400
0

31,284

Depreciation ExpenseComputer Equipment


Acct. No. 613
Explanation
PR
Debit
Credit
Balance
31
1,250
1,250
31
Closing
1,250
0
Wages Expense
Explanation
PR
31
30
10
31
31

Debit
875
1,750
750
500

Closing

Acct. No. 623


Credit
Balance
875
2,625
3,375
3,875
3,875
0

31
31

Insurance Expense
Explanation
PR
Debit
555
Closing

Acct. No. 637


Credit
Balance
555
555
0

Explanation
31
31

Closing

Rent Expense
PR

Debit
2,475

Acct. No. 640


Credit
Balance
2,475
2,475
0

Serial Problem SP 3 (Continued)


Date
Dec.

Date
Oct.
Dec.

Date
Nov.
Dec.

Date
Nov.
Dec.

Date
Oct.
Dec.

Date
Dec.

31
31

Computer Supplies Expense


Explanation
PR
Debit
3,065
Closing

Acct. No. 652


Credit
Balance
3,065
3,065
0

20
2
31

Advertising Expense
Explanation
PR
Debit
1,940
1,025
Closing

Acct. No. 655


Credit
Balance
1,940
2,965
2,965
0

Mileage Expense
Explanation
PR
1
28
29
31

Debit
320
384
192

Closing

Acct. No. 676


Credit
Balance
320
704
896
896
0

22
31

Miscellaneous Expense
Explanation
PR
Debit
250
Closing

Acct. No. 677


Credit
Balance
250
250
0

17
3
31

Repairs ExpenseComputer
Explanation
PR
Debit
805
500
Closing

Acct. No. 684


Credit
Balance
805
1,305
1,305
0

31
31
31

Income Summary
Explanation
PR
Debit
Closing
Closing
17,036
Closing
14,248

Acct. No. 901


Credit
Balance
31,284
31,284
14,248
0