Question

New Era Cleaning Service, Inc. opened for business on   
July 1, 2010. During the month of July, the following transactions occurred:  
      
July 1   Issued $18,000 of common stock for $18,000 cash.  
July 1   Purchased a truck for $11,000. Paid $4,000 in cash and borrowed the rest (long term) from the bank.  
July 3   Purchased cleaning supplies for $900 on account.  
July 5   Paid $1,800 on a one-year insurance policy, effective July 1.  
July 12   Billed customers $4,800 for cleaning services.  
July 18   Paid $1,500 of the amount owed on the truck.  
July 18   Paid $500 of the amount owed on cleaning supplies.  
July 20   Paid $1,700 for employee salaries.  
July 21   Collected $1,200 from customers billed on July 12.        
July 25   Billed customers $1,900 for cleaning services.         
July 31   Paid gas and oil for the month on the truck, $500.        
July 31   Paid a $800 dividend.   
Instructions:   

Post July transactions to the general journal and general ledger 'T' accounts   
      
   Prepare an unadjusted trial balance  
      
   Post the following adjustments   
   (a) Earned but unbilled fees at July 31 were $1,400  
   (b) Depreciation for the month was $200  
   (c) One-twelfth of the insurance expired  
   (d) An inventory count showed $300 of cleaning supplies remaining on July 31.  
   (e) Accrued but unpaid employee salaries were $500.  
      
   Prepare an adjusted trial balance  
      
   Post closing entries  
      
   Prepare a classified balance sheet and an income statement as of July 31.  

Answer 1

General Journal

July	Journal Entries	Dr. ($)	Cr. ($)
1	cash	18000
	To common stock		18000
	(being issuance of stock for cash)
1	truck	11000
	To cash		4000
	To bank loan		7000
	(being purchase of truck for cash and remaining from bank)
3	cleaning supplies	900
	To accounts payable		900
	(being purchase of supplies on account)
5	prepaid insurance	1800
	To cash		1800
	(being insurance premium paid in advance)
12	accounts receivable	4800
	To cleaning service		4800
	(being services performed on account)
18	bank loan	1500
	To cash		1500
	(being borrowings repaid)
18	accounts payable	500
	To cash		500
	(being accounts payable paid off)
20	salaries expenses	1700
	To cash		1700
	(being salaries paid)
21	cash	1200
	To accounts receivable		1200
	(being cash collected from customer)
25	accounts receivable	1900
	To cleaning service		1900
	(being services performed on account)
31	utilities expenses	500
	To cash		500
	(being oil and gas expenses paid)
31	dividend	800
	To cash		800
	(being dividends paid)

Adjusted Entries

Ref.No.	Adjusting Journal Entries	Dr. ($)	Cr. ($)
a	accounts receivable	1400
	To cleaning services		1400
b	depreciation expenses	200
	To accumulated depreciation		200
	(being depreciation expenses recorded)
c	insurance expenses	150
	To prepaid insurance		150
	(being insurance expenses expired)
d	cleaning supplies expenses	600
	To cleaning supplies		600
	(being supplies expensed)
e	salaries expenses	500
	To accrued salaries		500
	(being accrued salaries recorded)

Trial Balance

Unadjusted

Adjustments

Adjusted

Trial Balance	unadjusted	adjustments	adjusted
accounts	Dr. ($)	Cr. ($)	Dr. ($)	Cr. ($)	Dr. ($)	Cr. ($)
cash	8400				8400
accounts receivable	5500		1400		6900
cleaning supplies	900			600	300
prepaid insurance	1800			150	1650
truck	11000				11000
accumulated depreciation				200		200
common stock		18000				18000
dividend	800				800
accounts payable		400				400
accrued salaries				500		500
bank loan		5500				5500
cleaning services		6700		1400		8100
salaries expenses	1700		500		2200
utilities expenses	500				500
cleaning supplies expenses			600		600
depreciation expenses			200		200
insurance expenses			150		150
totals	30600	30600	2850	2850	32700	32700

Post Closing Entries

No.	Post Closing Journal Entries	Dr. ($)	Cr. ($)
1	cleaning services	8100
	To income summary		8100
	(being closing of revenue account)
2	income summary	3650
	To salaries expenses		2200
	To cleaning supplies expenses		600
	To utilities expenses		500
	To depreciation expenses		200
	To insurance expenses		150
	(being closing of expenses account)
3	income summary	4450
	To retained earnings		4450
	(closing of income summary to retained earnings account)
4	retained earnings	800
	To dividends		800
	(closing of dividend account to retained earnings)

Balance Sheet

As of July 31

Assets	Amount ($)	Amount ($)	Liabilities	Amount ($)	Amount ($)
cash	8400		accounts payable	400
accounts receivable	6900		accrued salaries	500
cleaning supplies	300		total current liabilities		900
prepaid insurance	1650		non current liabilities
total current assets		17250	bank loan		5500
non current assets			total liabilities		6400
truck	11000		stockholders equity
less depreciation	200	10800	common stock	18000
			retained earnings:
			add net income	4450
			less dividend	800
			total stockholders equity		21650
total assets		28050	total liabilities and stockholders equity		28050

Income Statement

Income Statement	Amount ($)	Amount ($)
cleaning services	8100
total revenue		8100
less operating expenses
salaries expenses	2200
cleaning supplies expenses	600
utilities expenses	500
depreciation expenses	200
insurance expenses	150
total operating expenses		3650
net income		4450