Question

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. 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. Instructions (a) Journalize the February transactions. (You do not need to include an explanation for each journal entry.) (b) Post to the ledger accounts (Use T-accounts.) (c) Prepare a trial balance at February 28, 2019. Totals $30,420 (d) Journalize the following adjustments. (Round all amounts to whole dollars.) 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. 10.Karen estimates a 20% income tax rate. (Hint: Prepare an income statement up to income before income taxes to help with the income tax calculation.) (e) Post adjusting entries to the T-accounts. (f) Prepare an adjusted trial balance. (g) Prepare a multiple-step income statement, a retained earnings statement, and a properly classified balance sheet as of February 28, 2019. Net income $3,117 Tot. assets $26,101 (h) Journalize closing entries.

Answer 1

Journal Entries for the transactions in February
Date	Account Title	Debit($)	Credit($)
Feb-01	Cash A/c	13000
	To Common Stock A/c		7500
	To Paid in capital - in excess of par		5500
	(To record issuance of common stock in excess of par)
Feb-01	Cash A/c	8000
	To 6% Note Payable		8000
	(To record purchase of notes payable)
Feb-01	Equipment A/c	9020
	To Cash A/c		9020
	(To record purchase of equipment)
Feb-01	Telephone & Network Expenses	220
	To Cash A/c		220
	(To record payment of Internet & phone services)
Feb-03	Cleaning supplies A/c	980
	To Accounts Payable		980
Feb-05	Insurance expense A/c	820
	Prepaid insurance A/c	1640
	To Cash A/c		2460
Feb-16	Cash A/c	3950
	Loss on sale of equipment A/c	250
	To Equipment A/c		4200
	Accounts receivable A/c	3900
	To Service Income A/c		3900

Date	Account Title	Debit($)	Credit($)		Trial Balance
Feb-17	Cash A/c	540			Particulars	Debit
	To service Income A/c		540		Service income
					Cleaning supplies	400
Feb-18	Accounts payable A/c	300			Common Stock
	To Cash A/c		300		Paid in capital in excess of par
					Retained Earnings
					6% Notes Payable
Feb-20	Treasury Stock A/c	900			Interest Payable
	To cash A/c		900		Accounts Payable
					Wages payable
Feb-23	Accounts receivable A/c	4300			Allowance for Bad & doubtful debts
	To Service income A/c		4300		Cash	10090
					Accounts Receivable	9215
Feb-24	Wages A/c	3840			Prepaid Expenses	220
	To cash A/c		3840		Prepaid Insurance	1640
					Equipment	4730
Feb-25	Cash A/c	2500			Treasury Stock	900
	To Accounts Receivable A/c		2500		Insurance	820
					Depreciation	90
Feb-27	prepaid expense A/c	220			Telephone & Network expenses	220
	To Cash A/c		220		Dividend	940
					Bad debts	90
Feb-28	Dividend A/c	940			Interest Expense	40
	To Cash A/c		940		Wages Expense	5760
					Loss on sale of Equipment	250
Feb-28	Unearned revenue A/c	3800			Un earned revenue	3800
	To Service income A/c		3800		Cleaning supplies	980
					Total	40185
Feb-28	Allowance for Bad debts A/c	285
	To Accounts Receivable		285
Feb-28	Bad debt A/c	200
	To Allowance for bad debts		200		Income statement
					Income
Feb-28	Depreciation expense A/c	90			Service income	12540
	To Equipment A/c		90		Closing stock	400
					Expenses
Feb-28	Wages A/c	1920			Cleaning supplies	980
	To Wages Payable A/c		1920		Bad debts	90
	Accrual of wages of last week of february				Interest Expense	40
					Wages Expense	5760
Feb-28	Interest Expense A/c	40			Loss on sale of Equipment	250
	To Interest payable A/c		40		Insurance	820
					Depreciation	90
					Telephone & Network expenses	220
					Profit before Tax	4690
					Less: Tax@20%	938
					Profit after tax	3752