Harry Craig opened Craig Cleaners on March 1, 2015. During March, the following
ID: 2448267 • Letter: H
Question
Harry Craig opened Craig Cleaners on March 1, 2015. During March, the following transactions were completed.
Mar 1 Issued 10,000 shares of common stock for $20,000 cash.
1 Purchased used equipment for $9,000, paying $3,000 cash and the balance on account.
3 Purchased cleaning supplies on account for $3,000.
4 Paid $2,400 cash on a 6-month insurance policy effective March 1, 2015.
7 Paid $ 1,600 for monthly rent.
14 Billed customers $ 5,400 for cleaning services.
18 Paid $ 1,400 cash on account owed on equipment and $ 500 on account owed on cleaning supplies.
20 Paid $1,900 cash for employee salaries.
21 Collected $3,100 cash from customers billed on March 14.
22 Billed customers $ 5,800 for cleaning services.
23 Paid $400 for gas and oil used in truck during month (use Maintenance and Repairs Expense).
31 Declared and paid a $ 500 cash dividend.
The chart of accounts for Craig Cleaners contains the following accounts: Cash, Accounts Receivable, Supplies, Prepaid Insurance, Equipment, Accumulated Depreciation-Equipment, Accounts Payable, Salaries and Wages Payable, Common Stock, Retained Earnings, Dividends, Income Summary, Service Revenue, Maintenance and Repairs Expense, Depreciation Expense, Rent Expense, Supplies Expense, Insurance Expense, Salaries and Wages Expense.
Instructions:
Prepare the income statement and a retained earnings statement for March and a classified balance sheet at March 31.
Explanation / Answer
Craig Cleaners Income Statement and Retained Earnings Statement Expenses Income Purchases $ 3,000 Sales (5400 + 5800) $ 11,200 Insurance (2400 / 6) $ 400 Rent $ 1,600 Salaries and wages $ 1,900 Maintenance and Repairs $ 400 Depreciation (9000/5) x 1/12 $ 150 Operating Income $ 3,750 Total $ 11,200 Total $ 11,200 Dividend $ 500 Operating Income $ 3,750 Retained Earnings $ 3,250 Total $ 3,750 Total $ 3,750 Note: It is assumed that Equipment has a useful life of 5 years with zero salvage value. Depreciation per annum is $ 1800 ($9000/5) and depreciation for a month is $ 150 ($1800/12) Craig Cleaners Balance sheet as on March 31 Liabilities Assets Common Stcok $ 20,000 Equipment $ 9,000 Retained Earnings $ 3,250 Less: Depreciation $ -150 Current Liabilities: Net Book Value $ 8,850 Accounts Payable- Equipmentss(9000 -4400) 4600 Accounts Payable- Supplies (3000 -500) 2500 Current Assets Accounts Receivable (11200-3100) $ 8,100 Cash $ 11,400 prepaid Insurance $ 2,000 Total $ 30,350 Total $ 30,350 Craig Cleaners Cash Account Inflows Outflows Opening Cash $ - Cash paid for equipment $ 3,000 Issue of common stock $ 20,000 Payment for Insurance $ 2,400 Collection from Debtors $ 3,100 Payment for Rent $ 1,600 Payment for Equipment $ 1,400 Payment for cleaning supplies $ 500 Payment for Salaries $ 1,900 Payment for Gas and Oil $ 400 Payment of Dividend $ 500 Closing Cash $ 11,400 Total $ 23,100 Total $ 23,100
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