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

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

Solutions

Expert Solution

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

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