Question

Cissi Jean Oliver opened Cleaning Angels, Inc. on March 31, 2019. During April, the following transactions were completed:

Apr 1	Issued 5,000 shares of Cleaning Angels common stock for $13,000. Each share has a $1.00 par.
1	Borrowed $8,000 on a 2-year, 9% 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 April Internet and phone service.
1	Purchased cleaning supplies for $980 on account.
2	Hired 4 employees. Each will be paid $480 per 5-day work week (Monday-Friday). Employees will begin working on Monday, April 08.
2	Obtained insurance coverage for $9,840 per year. Coverage runs from April 1, 2019, through March 31, 2020. Cissi Jean paid $2,460 cash for the first quarter of coverage.
2	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 $4,000 cash.
15	Billed customers $3,900 for cleaning services performed through April 12, 2019.
15	Received $600 from a customer for 4 weeks of cleaning services to begin on April 22, 2019.
18	Paid $300 on amount owed on cleaning supplies.
19	Paid $3.25 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.
22	Billed customers $4,300 for cleaning services performed through April 19.
26	Paid cash for employees’ wages for 2 weeks (April 8-12 and 15-19).
26	Collected $2,500 cash from customers billed on April 15.
29	Paid $220 for Internet and phone services for May.
29	Declared and paid a cash dividend of $0.10 per share.
30	Received notice that a customer who was billed $200 for services performed April 8 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 30, 2019, 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 $500 of supplies on hand at April 30.
F. One week of services were performed for the customer who paid in advance on April 15.
G. Accrue for wages owed through April 30, 2019.
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:

1. Journalize the April transactions.
2. Post to ledger accounts.
3. Prepare a Trial Balance as of April 30, 2019.
4. Journalize the adjustments. (Round all amounts to whole dollars.)
5. Post adjusting entries to the ledger accounts.
6. Prepare an adjusted trial balance.
7. Journalize the closing entries.

Answer 1

1. In the books of Cleaning Angels Inc.:

Date	General Journal	Debit	Credit
April, 2019		$	$
1	Cash	13,000
	Common Stock		5,000
	Paid-in Capital in Excess of Par Value		8,000
1	Cash	8,000
	Notes Payable		8,000
1	Floor Equipment	4,820
	Window Equipment	4,200
	Cash		9,020
1	Telephone and Internet Expense	220
	Cash		220
1	Supplies	980
	Accounts Payable		980
2	No journal entry required	0	0
2	Prepaid Insurance	2,460
	Cash		2,460
2	Cash	4,000
	Loss on Sale of Equipment	200
	Window Equipment		4,200
15	Accounts Receivable	3,900
	Service Revenue		3,900
15	Cash	600
	Unearned Revenue		600
18	Accounts Payable	300
	Cash		300
19	Treasury Stock	975
	Cash		975
22	Accounts Receivable	4,300
	Service Revenue		4,300
26	Wages Expense	3,840
	Cash		3,840
26	Cash	2,500
	Accounts Receivable		2,500
29	Prepaid Internet and Telephone Expense	220
	Cash		220
29	Dividends	470
	Cash		470
30	Bad Debt Expense	200
	Accounts Receivable		200
Adjusting Entries
April 30, 2019
A.	Accounts Receivable	3,800
	Service Revenue		3,800
B.	Bad Debt Expense	279
	Allowance for Doubtful Accounts		279
C.	Depreciation Expense	90
	Accumulated Depreciation: Floor Equipment		90
D.	Insurance Expense	820
	Prepaid Insurance		820
E.	Supplies Expense	480
	Supplies		480
F	Unearned Revenue	150
	Service Revenue		150
G.	Wages Expense	2,688
	Wages Payable		2,688
H.	Interest Expense	60
	Interest Payable		60
I.	Income Tax Expense	655
	Income Taxes Payable		655

2.

Cleaning Angels Inc. Adjusted Trial Balance April 30, 2019
Account Titles	Debit	Credit
Cash	10,595
Accounts Receivable	9,300
Allowance for Doubtful Accounts		279
Supplies	500
Prepaid Insurance	1,640
Prepaid Telephone and Internet	220
Floor Equipment	4,820
Accumulated Depreciation: Floor Equipment		90
Accounts Payable		680
Wages Payable		2,688
Income Taxes Payable		655
Interest Payable		60
Unearned Revenue		450
Notes Payable		8,000
Common Stock		5,000
Paid-in Capital in Excess of Par Value		8,000
Dividends	470
Treasury Stock	975
Service Revenue		12,150
Loss on Sale of Equipment	200
Wages Expense	6,528
Supplies Expense	480
Insurance Expense	820
Internet and Telephone Expense	220
Bad Debt Expense	479
Depreciation Expense	90
Interest Expense	60
Income Tax Expense	655
Totals	$ 38,052	$ 38,052