Cissi Jean Oliver opened Cleaning Angels, Inc. on April 1, 2017. During April, t
ID: 2588358 • Letter: C
Question
Cissi Jean Oliver opened Cleaning Angels, Inc. on April 1, 2017. During April, the following transactions were completed: Apr 3 Issued 5,000 shares of Cleaning Angels common stock for $13,000. Each share has a $1.50 par. 3 Borrowed $8,000 on a 2-year, 6% note payable. 3 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). 3 Paid $220 for October Internet and phone service. 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 on Monday, April 10. 5 Obtained insurance coverage for $9,840 per year. Coverage runs from October 1, 2017, through September 30, 2018. Cissi Jean 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. Cissi Jean sold the window cleaning equipment for $3,950 cash. 17 Billed customers $3,900 for cleaning services performed through April 14, 2017. 17 Received $540 from a customer for 4 weeks of cleaning services to begin on April 20, 2017. (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 Cleaning Angels, Inc common stock from a shareholder who disagreed with management goals. The shares will be held as treasury stock. 24 Billed customers $4,300 for cleaning services performed through April 21. 24 Paid cash for employees’ wages for 2 weeks (April 10-14 and 17-21). 25 Collected $2,500 cash from customers billed on April 17. 27 Paid $220 for Internet and phone services for May. 27 Declared and paid a cash dividend of $0.20 per share. 28 Received notice that a customer who was billed $200 for services performed October 10 has filed for bankruptcy. Cleaning Angels, Inc does not expect to collect any portion of this outstanding receivable. (Cleaning Angels will follow the GAAP Guidelines for uncollectible accounts.) Adjusting Data: A. Services performed for customers through April 28, 2017, but unbilled and uncollected were $3,800. 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 4 years, and $500 salvage value. D. Record 1 month of insurance expense. E. An inventory count shows $400 of supplies on hand at April 30. F. One week of services were performed for the customer who paid in advance on April 17. G. Accrue for wages owed through April 28, 2017. H. Accrue for interest expense for 1 month. I. Cissi Jean estimates a 20% income tax rate. (Hint: Prepare an income statement up to “income before taxes” to help with the income tax calculation.) Instructions: Journalize the April transactions. Post to ledger accounts. Prepare a Trial Balance as of April 30, 2017. Journalize the adjustments. (Round all amounts to whole dollars.) Post adjusting entries to the ledger accounts. Prepare an adjusted trial balance. Journalize the closing entries.
Explanation / Answer
Journal entries in the books of Cleaning Angels, Inc for the month of April 2017
3-Apr
Cash Account
13000
To Common Stock
7500
To Additional paid in Capital
5500
(To record issue of 5,000 shares, $1.5 par value)
3-Apr
Cash Account
8000
To Note Payable
8000
(To record money borrowed against 6% 2 year Note payable)
3-Apr
Floor Equipment
4820
Window Equipment
4200
To Cash Account
9020
(To record purchase of floor and window equipment)
3-Apr
Telephone and Internet expenses
220
To Cash account
220
(To record payment for telephone and internet service for october)
3-Apr
Cleaning supplies
980
To Accounts Payable
980
(To record purchse of cleaning supplies on account)
5-Apr
Prepaid Insurance
2640
To Cash account
2640
(To record payment of first quarter coverage of Insurance)
5-Apr
Cash acccount
3950
Loss on sale of equipment
250
To Window Equipment
4200
(To record sale of Window equipment)
17-Apr
Accounts receivable
3900
To Cleaning services revenue
3900
(To record income for services provided thru Apr 14)
17-Apr
Cash account
540
To Unearned revenue
540
(To record payment received in advance for services beginning from Apr 20)
18-Apr
Accounts Payable
300
To Cash account
300
(To record payment made to vendors of cleaning supplies)
20-Apr
Treasury Stock
900
To Cash account
900
(To record purchase of 300 shares @$3 per share)
24-Apr
Accounts receivable
4300
To Cleaning income
4300
(To record income for services provided thru Apr 21)
24-Apr
Wages account
3840
To Cash account
3840
(To record bi-weekly wages paid for the two weeks ending Apr 21)
25-Apr
Cash account
2500
To Account receivable
2500
(To record amount collected from customers)
27-Apr
Prepaid expenses
220
To Cash account
220
(To record payment for telephone and internet service for May)
27-Apr
Dividend
940
To Cash account
940
(To record payment of $.20 dividend per share for 4,700 shares)
27-Apr
Bad and doubtful debts
200
To Accounts receivable
200
(To write off balance from bankrupt customer)
30-Apr
Unbilled revenue
3800
To Cleaning services revenue
3800
(To record unbilled and uncollected revenue)
30-Apr
Bad and doubtful debts
165
To Provision for bad and doubtful debts
165
(To record provision @3% of A/R as uncollectible)
30-Apr
Depreciaiton account
90.00
To Accumulated depreciation
90.00
(To record depreciation on Floor equipment)
=(4,820-500)/4/12
30-Apr
Cleaning supplies expense
580
To Cleaning supplies
580
(To adjust month end inventory of cleaning supplies)
30-Apr
Insurance expense
880
To Prepaid Insurance
880
(To record one month insurance expense)
30-Apr
Unearned revenue account
135
Discount acccount
15
To Cleaning services revenue
150
(To record revenue earned for 1 week services provided)
30-Apr
Wages account
1920
To Wages payable
1920
(To record wages payable for a week)
30-Apr
Interest account
40
To Interest payable
40
(To record interest payable for a month)
=8000*6%/12
Balance
Adjustments
Adjusted balance
Trial Balance
Debit
credit
Debit
credit
Debit
credit
Cash account
9910
9910
Accounts Receivable
5500
5500
Provision for Doubtful debts
165
165
Prepaid Insurance
2640
880
1760
Prepaid Expenses
220
220
Cleaning Supplies
980
580
400
Unbilled revenue
3800
3800
Floor Equipment
4820
4820
Window Equipment
0
Accumulated Depreciation
90
90
Accounts Payable
680
680
Wages Payable
1920
1920
Interest Payable
40
40
Unearned Revenue
540
135
405
Note Payable
8000
8000
Common Stock
7500
7500
Additional Paid in Capital
5500
5500
Treasury Stock
900
900
Dividend
940
940
Retained Earnings
Cleaning Services Revenue
8200
3950
12150
Discount allowed
15
15
Cleaning supplies expenses
580
580
Wages
3840
1920
5760
Insurance expense
880
880
Telephone and Internet expense
220
220
Bad and doubtful debts
200
165
365
Loss on sale of Equipment
250
250
Interest expense
40
40
Depreciation
90
90
30420
30420
7625
7625
36450
36450
Closing Entries
30-Apr
Cleaning Services Revenue
12150
By profit and Loss account
12150
(To Close revenue account)
30-Apr
Profit and Loss Account
8200
By Discount allowed
15
By Cleaning supplies expenses
580
By Wages
5760
By Insurance expense
880
By Telephone and Internet expense
220
By Bad and doubtful debts
365
By Loss on sale of Equipment
250
By Interest expense
40
By Depreciation
90
(To close expenses account)
30-Apr
Profit and Loss Account
3950
To Retained Earnings
3950
(To close income for the period)
30-Apr
Retained Earnings
940
To Dividend
940
(To close dividend)
3-Apr
Cash Account
13000
To Common Stock
7500
To Additional paid in Capital
5500
(To record issue of 5,000 shares, $1.5 par value)
3-Apr
Cash Account
8000
To Note Payable
8000
(To record money borrowed against 6% 2 year Note payable)
3-Apr
Floor Equipment
4820
Window Equipment
4200
To Cash Account
9020
(To record purchase of floor and window equipment)
3-Apr
Telephone and Internet expenses
220
To Cash account
220
(To record payment for telephone and internet service for october)
3-Apr
Cleaning supplies
980
To Accounts Payable
980
(To record purchse of cleaning supplies on account)
5-Apr
Prepaid Insurance
2640
To Cash account
2640
(To record payment of first quarter coverage of Insurance)
5-Apr
Cash acccount
3950
Loss on sale of equipment
250
To Window Equipment
4200
(To record sale of Window equipment)
17-Apr
Accounts receivable
3900
To Cleaning services revenue
3900
(To record income for services provided thru Apr 14)
17-Apr
Cash account
540
To Unearned revenue
540
(To record payment received in advance for services beginning from Apr 20)
18-Apr
Accounts Payable
300
To Cash account
300
(To record payment made to vendors of cleaning supplies)
20-Apr
Treasury Stock
900
To Cash account
900
(To record purchase of 300 shares @$3 per share)
24-Apr
Accounts receivable
4300
To Cleaning income
4300
(To record income for services provided thru Apr 21)
24-Apr
Wages account
3840
To Cash account
3840
(To record bi-weekly wages paid for the two weeks ending Apr 21)
25-Apr
Cash account
2500
To Account receivable
2500
(To record amount collected from customers)
27-Apr
Prepaid expenses
220
To Cash account
220
(To record payment for telephone and internet service for May)
27-Apr
Dividend
940
To Cash account
940
(To record payment of $.20 dividend per share for 4,700 shares)
27-Apr
Bad and doubtful debts
200
To Accounts receivable
200
(To write off balance from bankrupt customer)
30-Apr
Unbilled revenue
3800
To Cleaning services revenue
3800
(To record unbilled and uncollected revenue)
30-Apr
Bad and doubtful debts
165
To Provision for bad and doubtful debts
165
(To record provision @3% of A/R as uncollectible)
30-Apr
Depreciaiton account
90.00
To Accumulated depreciation
90.00
(To record depreciation on Floor equipment)
=(4,820-500)/4/12
30-Apr
Cleaning supplies expense
580
To Cleaning supplies
580
(To adjust month end inventory of cleaning supplies)
30-Apr
Insurance expense
880
To Prepaid Insurance
880
(To record one month insurance expense)
30-Apr
Unearned revenue account
135
Discount acccount
15
To Cleaning services revenue
150
(To record revenue earned for 1 week services provided)
30-Apr
Wages account
1920
To Wages payable
1920
(To record wages payable for a week)
30-Apr
Interest account
40
To Interest payable
40
(To record interest payable for a month)
=8000*6%/12
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