Question

Comprehensive Accounting Cycle Review Journalize transactions and prepare financial statements. ACR13 Karen Noonan opened Clean Sweep Inc. on February 1, 2020. 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. I Borrowed $8,000 on a 2-year, 6% note payable. 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) Paid $220 for February Internet and phone services. Purchased cleaning supplies for $980 on account Hired 4 employees. Each will be paid $480 per 5-day work week (Monday-Friday). Employees will begin working Monday. February 9 1 1 3 4 Expand Your Critical Thinking 13-33 Feb. 5 Obtained insurance coverage for S9,840 per year. Coverage runs from February 1, 2020, through January 31, 2021. Karen paid $2,460 cash for the first quarter of coverage. 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. 5 6 Billed customers $3,900 for cleaning services performed through February 13, 2020 17 Received $540 from a customer for 4 weeks of cleaning services to begin February 21, 2020. (By paying in advance, this customer received 10% off the normal weekly fee of $150.) Paid $300 on amount owed on cleaning supplies. 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. Billed customers $4,300 for cleaning services performed through February 20 Paid cash for employees' wages for 2 weeks (February 9-13 and 16-20). Collected $2,500 cash from customers billed on February 16. Paid $220 for Internet and phone services for March. 18 20 23 24 25 27

Answer 1

a.	JOURNAL ENTRIES
Date	Account Title	Debit	Credit
1-Feb	Cash	13000
	Common stock		13000
	Cash	8000
	2-Year 6% Note payable		8000
	Floor Cleaning equipment	4820
	Window Cleaning equipment	4200
	Cash		9020
	Utility expense	220
	cash		220
3	Cleaning supplies	980
	Accounts payable		980
4	No Entry
5	Insurance expense	2460
	Cash		2460
	Cash	3950
	Loss on sale	250
	Window Cleaning equipment		4200
16	Accounts receivable	3900
	Service Revenue		3900
17	Cash	540
	Discount (to be amortised)	60
	Unearned Service revenue		600
18	Accounts payable	300
	Cash		300
20	Treasury stock	900
	Cash		900
23	Accounts receivable	4300
	Service Revenue		4300
24	Wages expense	3840
	Cash		3840
	(4 emp.* $ 480/wk.*2 wks.)
25	Cash	2500
	Accounts receivable		2500
27	Prepaid expense	220
	Cash		220
		54440	54440

	LEDGER ACCOUNTS			Net Ledger balances
Date	Account Title	Debit	Credit	Debit	Credit
1-Feb	2-Year 6% Note payable		8000		8000
3	Accounts payable		980
18	Accounts payable	300			680
16	Accounts receivable	3900
23	Accounts receivable	4300
25	Accounts receivable		2500	5700
1-Feb	Cash	13000
1-Feb	Cash	8000
1-Feb	Cash		9020
1-Feb	cash		220
5	Cash		2460
5	Cash	3950
17	Cash	540
18	Cash		300
20	Cash		900
24	Cash		3840
25	Cash	2500
27	Cash		220	11030
3	Cleaning supplies	980		980
1-Feb	Common stock		13000		13000
17-Jan	Discount on adv. Service revenue	60		60
1-Feb	Floor Cleaning equipment	4820		4820
5	Insurance expense	2460		2460
5	Loss on sale	250		250
27	Prepaid expense	220		220
16	Service Revenue		3900
23	Service Revenue		4300		8200
20	Treasury stock	900		900
17	Unearned Service revenue		600		600
1-Feb	Utility expense	220		220
24	Wages expense	3840		3840
1-Feb	Window Cleaning equipment	4200
5	Window Cleaning equipment		4200	0
		54440	54440	30480	30480

Unadjusted Trial Balance
As at Feb.28, 2020
Account Titles	Debit	Credit
Cash	11030
Accounts receivable	5700
Cleaning supplies	980
Prepaid expense	220
Floor Cleaning equipment	4820
Accounts payable		680
Unearned Service revenue		600
Discount on adv. Service revenue(to be amortised)	60
2-Year 6% Note payable		8000
Common stock		13000
Treasury stock	900
Service Revenue		8200
Insurance expense	2460
Loss on sale	250
Utility expense	220
Wages expense	3840
Total	30480	30480

	d.Adjustment Entries
1	Accounts receivable	3800
	Service Revenue		3800
2	Allowance for doubtful accounts	200
	Accounts receivable		200
3	Bad debt expense	479
	Allowance for doubtful accounts		479
	(5700+3800-200)*3%=279
	(200+279=479)
4	Depreciation expense	90
	Acc. Depn. -Floor cleaning Eqpt.		90
	(4820-500)/4/12
5	Prepaid Insurance	1640
	Insurance expense		1640
	2460-(2460/3)
6	Cleaning supplies expense	580
	Cleaning supplies		580
	(980-400)
7	Unearned Service revenue	150
	Discount on adv. Service revenue amortised		15
	Service revenue		135
8	Wage expense	1920
	Wage payable		1920
	(4*480)
9	Interest expense	40
	Interest payable		40
	8000*6%/12 mths.
10	Income tax expense	779
	Income tax payable		779
	(as per Income statement)

Trial Balance	Unadjusted		Adj. Entries		Adjusted T/B		Post-Closing
As at Feb.28, 2020
Account Titles	Debit	Credit	Debit	Credit	Debit	Credit	Debit	Credit
Cash	11030				11030		11030
Accounts receivable	5700		3600		9300		9300
Allowance for doubtful a/cs.				279		279		279
Cleaning supplies	980		-580		400		400
Prepaid expense	220				220		220
Prepaid Insurance			1640		1640		1640
Floor Cleaning equipment	4820				4820		4820
Acc. Depn. -Floor cleaning Eqpt.				90		90		90
Accounts payable		680				680		680
Wage payable				1920		1920		1920
Unearned Service revenue		600		-150		450		450
Discount on adv. Service revenue(to be amortised)	60		-15		45		45
Interest payable				40		40		40
Income tax payable				779		779		779
2-Year 6% Note payable		8000				8000		8000
Common stock		13000				13000		13000
Treasury stock	900				900		900
Retained Earnings								3117
Service Revenue		8200		3935		12135
Insurance expense	2460		-1640		820
Loss on sale	250				250
Utility expense	220				220
Wages expense	3840		1920		5760
Bad debt expense			479		479
Depreciation expense			90		90
Cleaning supplies expense			580		580
Interest expense			40		40
Income tax expense			779		779
Total	30480	30480	6893	6893	37373	37373	28355	28355

Multi-Step Income statement
Service Revenue		12135
Less: Operating expenses:
Insurance expense	820
Loss on sale of cleaning eqpt.	250
Utility expense	220
Wages expense	5760
Bad debt expense	479
Depreciation expense	90
Cleaning supplies expense	580	8199
Operating income		3936
Less: Non-opg. Expense
Less:Interest expense		40
Income before tax		3896
Less:Income tax expense		779
Net Income		3117

Classified Balance Sheet
As at Feb.28, 2020
Assets
Current assets:
Cash	11030
Accounts receivable	9300
Allowance for doubtful a/cs.	-279
Cleaning supplies	400
Prepaid expense	220
Prepaid Insurance	1640
Total Current assets		22311
Fixed assets:
Floor Cleaning equipment	4820
Acc. Depn. -Floor cleaning Eqpt.	-90
Net fixed assets		4730
Total assets		27041
Liabilities & Equity
Current Liabilities:
Accounts payable	680
Wage payable	1920
Unearned Service revenue	450
Discount on adv. Service revenue(to be amortised)	-45
Interest payable	40
Income tax payable	779
Total Current Liabilities		3824
Long-term liabilities
2-Year 6% Note payable		8000
Total Liabilities		11824
Equity:
Common stock	13000
Treasury stock	-900
Retained Earnings(net Income)	3117
Total equity		15217
Total Liabilities & Equity		27041

Closing Entries
Income summary	9018
Insurance expense		820
Loss on sale of cleaning eqpt.		250
Utility expense		220
Wages expense		5760
Bad debt expense		479
Depreciation expense		90
Cleaning supplies expense		580
Interest expense		40
Income tax expense		779
Service Revenue	12135
Income summary		12135
Income summary	3117
Retained earnings		3117