SERIAL PROBLEM – Aurora Systems
This comprehensive problem starts in this chapter and continues in Chapters 4, 5, and 6.
On October 1, 2011, Aurora Wilson organized a computer service company called Aurora
Systems. Aurora is organized as a sole proprietorship and will provide consulting services, computer
system installations, and custom program development. Wilson has adopted the calendar year
for reporting, and expects to prepare the company’s first set of financial statements as of
December 31, 2011. The initial chart of accounts for the accounting system includes these items:
Account NumberAccount NameAccount NumberAccount Name
101Cash301Aurora Wilson, Capital
106Accounts Receivable302Aurora Wilson, Withdrawals
126Computer Supplies403Computer Services Revenue
128Prepaid Insurance623Wages Expense
131Prepaid Rent655Advertising Expense
163Office Equipment676Mileage Expense
167Computer Equipment684Repairs Expense, Computer
201Accounts Payable699Charitable Donations Expense
Part A
Required
1. Set up balance column accounts based on the chart of accounts provided.
2. Prepare journal entries to record each of the following October transactions.
3. Post the October entries.
4. Prepare a trial balance at October 31, 2011.
5. Prepare an income statement and a statement of changes in equity for the month ended
October 31, 2011, as well as a balance sheet at October 31, 2011.
Oct. 1Aurora Wilson invested $26,500 cash, a $9,000 computer system, and
$5,000 of office equipment in the business.
2Paid six months of rent in advance; $8,250.
3Purchased computer supplies on credit for $1,475 from Triple-One Supplies.
5Paid $8,136 cash for one year’s premium on a property and liability insurance
policy.
6Billed Norton Electric $1,300 for installing a new computer system.
8Paid for the computer supplies purchased from Triple-One Supplies.
10Hired Donald Gee as a part-time assistant for $325 per day, as needed.
12Billed Norton Electric another $975 for computer services rendered.
15Received $1,000 from Norton Electric on its account.
17Paid $875 to repair equipment damaged when moving into the
new office.
20Paid $2,075 for an advertisement in the local newspaper.
22Received the balance owing from Norton Electric on its account.
28Billed Whistler Resort $7,346 for services.
31Paid Donald Gee for nine days’ work.
31Aurora Wilson withdrew $1,500 cash from the business for personal use.
Part B
Required
6. Prepare journal entries to record each of the following November transactions.
7. Post the November entries.
8. Prepare a trial balance at November 30, 2011.
9. Prepare an income statement and a statement of changes in equity for the two months ended
November 30, 2011, as well as a balance sheet at Novembe 30, 2011.
Nov. 1Reimbursed Aurora Wilson’s business automobile expense for 1,950
kilometres at $1.75 per kilometre.
2Received $8,240 cash from Langara Lodge for computer services rendered.
5Purchased $450 of computer supplies for cash from Triple-One Supplies.
8Billed Dinwoody Entertainment $3,230 for computer services rendered.
13Notified by Kinsetta Groceries that Aurora’s bid of $4,950 for an
upcoming project was accepted.
18Received $4,000 from Whistler Resort against the bill dated October 28.
22Donated $400 to the Hope Mission in the company’s name.
24Completed work for Kinsetta Groceries and sent a bill for the agreed amount.
25Sent another bill to Whistler Resort for the past due amount of $3,346.
28Reimbursed Aurora Wilson’s business automobile expense for 870
kilometres at $1.75 per kilometre.
30Paid Donald Gee for 17 days’ work.
30Aurora Wilson withdrew $1,800 cash from the business for personal use.