Question

Transactions to journalize: Karen Noonan opened Clean Sweep Inc. on February 1, 2019. During February, the following transactions were completed. Feb. 1 Issued 5,000 shares of Clean Sweep common stock for $13,000. Each share has a $1.50 par. 1 Borrowed $8,000 on a 2-year, 6% note payable. 1 Paid $9,020 to purchase used floor and window cleaning equipment from a company going out of business ($4,820 was for the floor equipment and $4,200 for the window equipment). 1 Paid $220 for February Internet and phone services. 1 Issued a 500,000 8% 5 year bond. Interest is payable July 1 and January 1 3 Purchased cleaning supplies for $980 on account. 4 Hired 4 employees. Each will be paid $480 per 5-day work week (Monday–Friday). Employees will begin working Monday, February 9. 5 Obtained insurance coverage for $9,840 per year. Coverage runs from February 1, 2019, through January 31, 2020. Karen paid $2,460 cash for the first quarter of coverage. 5 Discussions with the insurance agent indicated that providing outside window cleaning services would cost too much to insure. Karen sold the window cleaning equipment for $3,950 cash. 16 Billed customers $3,900 for cleaning services performed through February 13, 2019. 17 Received $540 from a customer for 4 weeks of cleaning services to begin February 21, 2019. (By paying in advance, this customer received 10% off the normal weekly fee of $150.) 18 Paid $300 on amount owed on cleaning supplies. 20 Paid $3 per share to buy 300 shares of Clean Sweep common stock from a shareholder who disagreed with management goals. The shares will be held as treasury shares. 23 Billed customers $4,300 for cleaning services performed through February 20. 24 Paid cash for employees’ wages for 2 weeks (February 9–13 and 16–20). 25 Collected $2,500 cash from customers billed on February 16. 27 Paid $220 for Internet and phone services for March. 28 Declared and paid a cash dividend of $0.20 per share. 28 Bought a $1,000 bond that pays 8% interest 28 Bought 5 shares of Jackson $5 par value common stock for $8 per share Adjusting entries 1. Services performed for customers through February 27, 2019, but unbilled and uncollected were $3,800. 2. Received notice that a customer who was billed $200 for services performed February 10 has filed for bankruptcy. Clean Sweep does not expect to collect any portion of this outstanding receivable. 3. Clean Sweep uses the allowance method to estimate bad debts. Clean Sweep estimates that 3% of its month-end receivables will not be collected. 4. Record 1 month of depreciation for the floor equipment. Use the straight-line method, an estimated life of 4 years, and $500 salvage value. 5. Record 1 month of insurance expense. 6. An inventory count shows $400 of supplies on hand at February 28. 7. One week of services were performed for the customer who paid in advance on February 17. 8. Accrue for wages owed through February 28, 2019. 9. Accrue for interest expense for 1 month. on the loan. 10. Accrued for interest on the bond.

Create t accounts

Create a trial balance

Enter adjusting journal entries

Update the t accounts

Create an adjusted trial balance

Create financial statements.

Create closing entries

Create post closing trial balance

Answer 1

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Event	Account	Debit	Credit
Feb 1	Cash	$       13,000
Feb 1	Common Stock		$         7,500
Feb 1	Paid in Capital in excess of par-Common		$         5,500
Feb 1	Cash	$         8,000			a
Feb 1	Note Payable		$         8,000
Feb 1	Equipment	$         9,020			a
Feb 1	Cash		$         9,020
Feb 1	Utility Expense	$            220
Feb 1	Cash		$            220
Feb 3	Cash	$    500,000
Feb 3	Bond Payable		$    500,000
Feb 3	Cleaning supplies	$            980
Feb 3	Accounts Payable		$            980
Feb 5	Prepaid Insurance	$         2,460
Feb 5	Cash		$         2,460
Feb 5	Cash	$         3,950
Feb 5	Loss on Sale of Equipment	$            250
Feb 5	Equipment		$         4,200
Feb 16	Accounts Receivable	$         3,900			a
Feb 16	Service Revenue		$         3,900
Feb 17	Cash	$            540			a
Feb 17	Unearned Service Revenue		$            540
Feb 18	Accounts Payable	$            300			a
Feb 18	Cash		$            300
Feb 20	Treasury Stock	$            900
Feb 20	Cash		$            900
Feb 23	Accounts Receivable	$         4,300
Feb 23	Service Revenue		$         4,300
Feb 24	Salaries and Wages Expense	$         3,840		4*480*2
Feb 24	Cash		$         3,840
Feb 25	Cash	$         2,500
Feb 25	Accounts Receivable		$         2,500
Feb 25	Prepaid Expense	$            220
Feb 25	Cash		$            220
Feb 28	Dividend	$            940		(5000-300)*0.20
Feb 28	Cash		$            940
Feb 28	Investment in Debt	$         1,000
Feb 28	Cash		$         1,000
Feb 28	Investment in Shares	$              40
Feb 28	Cash		$              40
Adjusting:
Feb 28	Accounts Receivable	$         3,800
Feb 28	Service Revenue		$         3,800
Feb 28	Allowance for Doubtful Accounts	$            200
Feb 28	Accounts Receivable		$            200
Feb 28	Bad Debt Expense	$            479
Feb 28	Allowance for Doubtful Accounts		$            479
	Working:
	Credit Sale	$       12,000
	Less: Collection	$       -2,500
	Less: Write Off	$           -200
	Ending Balance before Adjustment	$         9,300
	Estimated 3%	$            279
	Less: Already Written Off	$            200
	Bad Debt to be recorded 273+200	$            479
Feb 28	Depreciation Expense	$              90		(4820-500)/4*1/12
Feb 28	Accumulated Depreciation		$              90
Feb 28	Insurance Expense	$            820		2460/3
Feb 28	Prepaid Insurance		$            820
Feb 28	Cleaning supplies Expenses	$            580		980-400
Feb 28	Cleaning supplies		$            580
Feb 28	Unearned Service Revenue	$            135		540/4
Feb 28	Service Revenue		$            135
Feb 28	Salaries and Wages Expense	$         1,920		4*480
Feb 28	Salaries and Wages Payable		$         1,920
Feb 28	Interest Expense	$              40		8000*6%*1/12
Feb 28	Interest Payable		$              40
Feb 28	Interest Expense	$         3,333		500000*8%*1/12
Feb 28	Interest Payable		$         3,333
Feb 28	Income Tax Expenses	$            472
Feb 28	Income Tax Payable		$            472
Closing Entries:
Dec 31	Service Revenue	$       12,135
	Income Summary		$       12,135
	(to close revenue accounts)
Dec 31	Income Summary	$       11,430
	Cleaning supplies Expenses		$            580
	Depreciation Expense		$              90
	Utility Expense		$            220
	Salaries and Wages Expense		$         5,760
	Insurance Expense		$            820
	Bad Dept Expense		$            337
	Loss on Sale of Equipment		$            250
	Interest Expenses		$         3,373
	(to close expense accounts)
Dec 31	Income Summary	$            705
	Retained Earning		$            705
	(to close income summary accounts)
Dec 31	Retained Earning	$            940
	Dividends		$            940
	(to close dividends accounts)

Income Statement
Service Revenue		$       12,135
Less: Expenses
Cleaning supplies Expenses	$          580
Depreciation Expense	$            90
Utility Expense	$          220
Salaries and Wages Expense	$       5,760
Insurance Expense	$          820
Bad Dept Expense	$          337
Total Operating Expenses		$         7,807
Net Operating Income		$         4,328
Less: Loss on Sale of Equipment		$            250
Less: Interest Expenses		$         3,373
Income before tax		$            705
Net Income		$            705
Statement of Retained Earning
Beginning Balance		$               -
Add: Net Income		$            705
Less: Dividends		$            940
Ending Balance		$           -235
Balance Sheets
Assets
Current Assets:
Cash		$    509,050
Accounts Receivable	$       9,300
Less: Accounts Receivable	$        -137	$         9,163
Prepaid Insurance		$         1,640
Prepaid Expense		$            220
Cleaning Supplies		$            400
Total Current Assets		$    520,473
Equipment	$       4,820
Accumulated Depreciation	$           -90	$         4,730
Investment iN Share		$              40
Investment in Debt		$         1,000
Total Assets		$    526,243
Liabilities and Equity
Current Liabilities:
Accounts Payable	$          680
Salaries and Wages Payable	$       1,920
Unearned Service Revenue	$          405
Interest Payable	$       3,373
Total Current Liabilities		$         6,378
Note Payable		$         8,000
Bond Payable		$    500,000
Total Liabilities		$    514,378
Equity
Common Stock		$         7,500
Paid in Capital in excess of par-Common		$         5,500
Treasury Stock		$           -900
Retained Earning		$           -235
Total Equity		$       11,865
Total Liabilities and equity		$    526,243

	Normal		Post Closing
	Debit	Credit	Debit	Credit
Cash	$ 509,050		$509,050	$          -
Accounts Receivable	$      9,300		$    9,300	$          -
Allowance for Doubtful Accounts		$       137	$           -	$       137
Cleaning Supplies	$         400		$        400	$          -
Prepaid Insurance	$      1,640		$    1,640	$          -
Prepaid Expense	$         220		$        220	$          -
Investment in Debt	$      1,000		$    1,000	$          -
Investment in Shares	$           40		$          40	$          -
Equipment	$      4,820		$    4,820	$          -
Accumulated Depreciation		$         90	$           -	$         90
Accounts Payable		$       680	$           -	$       680
Note Payable		$    8,000	$           -	$    8,000
Interest Payable		$    3,373	$           -	$    3,373
Unearned Service revenue		$       405	$           -	$       405
Salaries and Wages Payable		$    1,920	$           -	$    1,920
Bond Payable		$500,000	$           -	$500,000
Common Stock		$    7,500	$           -	$    7,500
Paid in Capital in excess of par-Common		$    5,500	$           -	$    5,500
Treasury Stock	$         900		$        900	$          -
Retained Earning			$        235	$          -
Dividend	$         940
Service Revenue		$ 12,135
Cleaning Supplies Expenses	$         580
Depreciation Expense	$           90
Utility Expense	$         220
Loss on Sale of Equipment	$         250
Salaries and Wages Expense	$      5,760
Bad Debt Expense	$         337
Insurance Expense	$         820
Interest Expense	$      3,373
Total	$ 539,740	$539,740	$527,605	$527,605