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After the success of the company’s first two months, Santana Rey continues to operate Business Solutions. The November 30, 2020, unadjusted trial balance of Business Solutions (reflecting its transactions for October and November of 2020) follows.

No. Account Title Debit Credit
101 Cash $ 38,464
106 Accounts receivable 13,418
126 Computer supplies 2,545
128 Prepaid insurance 1,980
131 Prepaid rent 3,020
163 Office equipment 8,500
164 Accumulated depreciation—Office equipment $ 0
167 Computer equipment 22,400
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 6,000
403 Computer services revenue 34,004
612 Depreciation expense—Office equipment 0
613 Depreciation expense—Computer equipment 0
623 Wages expense 2,350
637 Insurance expense 0
640 Rent expense 0
652 Computer supplies expense 0
655 Advertising expense 1,708
676 Mileage expense 684
677 Miscellaneous expenses 180
684 Repairs expense—Computer 755
Totals $ 102,004 $ 102,004

Business Solutions had the following transactions and events in December 2020.

Dec. 2 Paid $1,010 cash to Hillside Mall for Business Solutions’s share of mall advertising costs.
3 Paid $450 cash for minor repairs to the company’s computer.
4 Received $4,250 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 $100 per day.
14 Notified by Alex’s Engineering Co. that Business Solutions’s bid of $7,700 on a proposed project has been accepted. Alex’s paid a $1,700 cash advance to Business Solutions.
15 Purchased $2,000 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 $5,725 cash.
22–26 Took the week off for the holidays.
28 Received $3,100 cash from Gomez Co. on its receivable.
29 Reimbursed S. Rey for business automobile mileage (600 miles at $0.23 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.

  1. The December 31 inventory count of computer supplies shows $640 still available.
  2. Three months have expired since the 12-month insurance premium was paid in advance.
  3. As of December 31, Lyn Addie has not been paid for four days of work at $100 per day.
  4. The computer system, acquired on October 1, is expected to have a four-year life with no salvage value.
  5. The office equipment, acquired on October 1, is expected to have a five-year life with no salvage value.
  6. Three of the four months’ prepaid rent have expired.

Required:
1. Prepare journal entries to record each of the December transactions and events for Business Solutions.
2-a. Prepare adjusting entries to reflect a through f.
2-b. Post the journal entries to record each of the December transactions from Requirement 1 and adjusting entries from Requirement 2A. After completing Requirement 7, post the closing entries to the general ledger accounts.
3. Prepare an adjusted trial balance as of December 31, 2020.
4. Prepare an income statement for the three months ended December 31, 2020.
5. Prepare a statement of retained earnings for the three months ended December 31, 2020.
6. Prepare a balance sheet as of December 31, 2020.
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, 2020.

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