Question

Sylvia Sweet opened Sweet Angels, Inc. on June 1, 2020. During June, the following transactions were completed:

June 1	Issued 5,000 shares of Cleaning Angels common stock for $13,000. Each share has a $1.00 par.
2	Borrowed $7,500 on a 2-year, 8% note payable.
2	Paid $9,000 to purchase used floor and window cleaning equipment from a company going out of business ($4,820 was for the floor equipment and $4,180 for the window equipment).
2	Paid $250 for June for Internet and phone service.
3	Purchased cleaning supplies for $980 on account.
4	Hired 4 employees. Each will be paid $450 per 5-day work week (Monday-Friday). Employees will begin working on Monday, June 8th.
4	Discussions with the insurance agent indicated that providing outside window cleaning services would cost too much to insure. Sylvia sold the window cleaning equipment for $4,000 cash.
4	Obtained insurance coverage for $9,840 per year. Coverage runs from June 4, 2020, through June 04, 2021. Sylvia paid $2,460 cash for the first quarter of coverage.
8	Paid $2.80 per share to buy 300 shares of Cleaning Angels, Inc common stock from a shareholder who disagreed with management goals. The shares will be held as treasury stock.
12	Paid $300 on amount owed on cleaning supplies.
15	Paid for employees’ wages for the week of June 8-12.
15	Billed customers $3,600 for cleaning services performed through June 12, 2020.
17	Received $600 from a customer for 4 weeks of cleaning services to begin on June 22, 2020.
22	Billed customers $4,300 for cleaning services performed through June 19.
22	Paid employees’ wages for the week of June 15-19
23	Collected $2,400 cash from customers billed on June 15.
25	Paid $250 for Internet and phone services for July.
29	Declared and paid a cash dividend of $0.08 per share.
29	Collected $3,100 from customers billed on June 15 & 22.
29	Billed customers $3,900 for cleaning services performed through June 26th
29	Paid employees’ wages for the week of June 22-26
30	Received notice that a customer who was billed $150 for services performed June 10th has filed for bankruptcy. Sweet Angels, Inc does not expect to collect any portion of this outstanding receivable. (Sweet Angels will follow the GAAP Guidelines for uncollectible accounts.)

Adjustment Data:

A. Services performed for customers through June 30, 2020, but unbilled and uncollected were $1,500.

B. Cleaning Angels used the allowance method to estimate bad debts. Cleaning Angels estimates that 3% of its month-end receivables will not be collected.

C. Record 1 month of depreciation for the floor equipment. Use the straight-line method, an estimated life of 5 years, and $400 salvage value.

D. Record 1 month of insurance expense.

E. An inventory count shows $350 of supplies on hand at June 30th.

F. Record services performed for the customer who paid in advance on June 17th.

G, Accrue for wages owed through June 30, 2020.

H. Accrue for interest expense for one month.

I. Sylvia estimates a 20% income tax rate. (Hint: Prepare an income statement up to “income before taxes” to help with the income tax calculation.)

Instructions:

1. Journalize the June transactions.
2. Post to ledger accounts.
3. Prepare a Trial Balance as of June 30, 2020.
4. Journalize the adjusting entries. (Round all amounts to whole dollars.)
5. Post the adjusting entries to the ledger accounts.
6. Prepare an Adjusted Trial Balance as of June 30, 2020.
7. Journalize the closing entries.
8. Post the Closing Entries to the ledger accounts.
9. Prepare a Post-Closing Trial Balance on June 30, 2020

Answer 1

1.

Date	Account Titles	Debit	Credit
June		$	$
1	Cash	13,000
	Common Stock		5,000
	Paid-in Capital in Excess of Par: Common Stock		8,000
2	Cash	7,500
	Notes Payable		7,500
2	Floor Equipment	4,820
	Window Equipment	4,180
	Cash		9,000
2	Internet Expense	250
	Cash		250
3	Cleaning Supplies	980
	Accounts Payable		980
4.	No journal entry required	0	0
4	Cash	4,000
	Loss on sale of equipment	180
	Window Equipment		4,180
4	Prepaid Insurance	2,460
	Cash		2,460
8	Treasury Stock	840
	Cash		840
12	Accounts Payable	300
	Cash		300
15	Wages Expense	1,800
	Cash		1,800
15	Accounts Receivable	3,600
	Service Revenue		3,600
17	Cash	600
	Unearned Revenue		600
22	Accounts Receivable	4,300
	Service Revenue		4,300
22	Wages Expense	1,800
	Cash		1,800
23	Cash	2,400
	Accounts Receivable		2,400
25	Prepaid Internet Expense	250
	Cash		250
29	Dividends	376
	Cash		376
29	Cash	3,100
	Accounts Receivable		3,100
29	Accounts Receivable	3,900
	Service Revenue		3,900
29	Wages Expense	1,800
	Cash		1,800
30	Bad Debt Expense	150
	Accounts Receivable		150

3.

Sweet Angels Inc. Trial Balance June 30, 2020
Account Titles	Debit	Credit
	$	$
Cash	11,724
Accounts Receivable	6,150
Cleaning Supplies	980
Prepaid Insurance	2,460
Prepaid Internet Expense	250
Floor Equipment	4,820
Accumulated Depreciation		0
Accounts Payable		680
Wages Payable		0
Income Taxes Payable		0
Interest Payable		0
Unearned Revenue		600
Notes Payable		7,500
Common Stock		5,000
Paid-in Capital in Excess of Par: Common Stock		8,000
Treasury Stock	840
Retained Earnings		0
Service Revenue		11,800
Dividends	376
Service Revenue
Wages Expense	5,400
Internet Expense	250
Insurance Expense	0
Bad Debt Expense	150
Depreciation Expense	0
Supplies Expense	0
Interest Expense	0
Loss on Sale of Equipment	180
Income Tax Expense	0
Totals	$ 33,580	$33,580

4.

Date	Account Titles	Debit	Credit
June 30		$	$
A.	Accounts Receivable	1,500
	Service Revenue		1,500
B.	Bad Debt Expense	230
	Allowance for Doubtful Accounts		230
C.	Depreciation Expense	74
	Accumulated Depreciation		74
D.	Insurance Expense	820
	Prepaid Insurance		820
E.	Supplies Expense	630
	Cleaning Supplies		630
F.	Unearned Revenue	600
	Service Revenue		600
G.	Wages Expense	720
	Wages Payable		720
H.	Interest Expense	50
	Interest Payable		50
I.	Income Tax Expense	1,079
	Income Taxes Payable		1,079

5.

Sweet Angels Inc. Adjusted Trial Balance June 30, 2020
Account Titles	Debit	Credit
	$	$
Cash	11,724
Accounts Receivable	7,650
Allowance for Doubtful Accounts		230
Cleaning Supplies	350
Prepaid Insurance	1,640
Prepaid Internet Expense	250
Floor Equipment	4,820
Accumulated Depreciation		74
Accounts Payable		680
Wages Payable		720
Income Taxes Payable		1,079
Interest Payable		50
Unearned Revenue		0
Notes Payable		7,500
Common Stock		5,000
Paid-in Capital in Excess of Par: Common Stock		8,000
Treasury Stock	840
Retained Earnings		0
Dividends	376
Service Revenue		13,900
Wages Expense	6,120
Internet Expense	250
Insurance Expense	820
Bad Debt Expense	380
Depreciation Expense	74
Supplies Expense	630
Interest Expense	50
Loss on Sale of Equipment	180
Income Tax Expense	1,079
Totals	$ 37,233	$ 37,233