Assignment Requirements
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ACCOUNTING CYCLE PROBLEM
Laura Young opened Magic Carpet Cleaners Inc. on January 1, 2012. During January the following transactions were completed.
Jan. 1 Issued 12,000 shares of common stock for $18,000 cash.
1 Purchased used truck for $12,000, paying $4,000 cash and the balance on account.
3 Purchased cleaning supplies for $940 on account.
5 Paid $7,200 cash on 1-year insurance policy effective January 1.
12 Billed customers $4,100 for cleaning services.
18 Paid $600 cash on amount owed on truck and $300 on amount owed on cleaning supplies.
20 Paid $2,600 cash for employee salaries.
21 Collected $2,300 cash from customers billed on January 12.
25 Billed customers $2,850 for cleaning services.
31 Paid $450 for gas and oil used in the truck during month.
31 Declared and paid $600 cash dividend.
The chart of accounts for Magic Carpet Cleaners contains the following accounts: Cash, Accounts Receivable, Cleaning Supplies, Prepaid Insurance, Equipment, Accumulated Depreciation—Equipment, Accounts Payable, Salaries Payable, Common Stock, Retained Earnings, Dividends, Income Summary, Service Revenue, Gas & Oil Expense, Cleaning Supplies Expense, Depreciation Expense, Insurance Expense, Salaries Expense.
Instructions
(a) Journalize the January transactions.
(b) Post to the ledger accounts. (Use T accounts.)
(c) Prepare a trial balance at January 31.
(d) Journalize the following adjustments.
(1) Services provided but unbilled and uncollected at January 31 were $2,340.
(2) Depreciation on the truck for the month was $320.
(3) One-twelfth of the insurance expired.
(4) An inventory count shows $210 of cleaning supplies on hand at January 31.
(5) Accrued but unpaid employee salaries were $760.
(e) Post adjusting entries to the T accounts.
(f) Prepare an adjusted trial balance.
(g) Prepare the income statement and a retained earnings statement for January and a
classified statement of financial position (balance sheet) at January 31.
(h) Journalize and post closing entries.
(i) Prepare a post-closing trial balance at January 31.
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(a)
General Journal J1
| Date | Account Titles and Explanation | Debit | Credit | ||
| July 1 | |||||
| 1 | |||||
| 3 | |||||
| 5 | |||||
| 12 | |||||
| 18 | |||||
| 20 | |||||
| 21 | |||||
| 25 | |||||
| 31 | |||||
| 31 | |||||
(a), (e) & (h)
Cash No. 101
Accounts Receivable No. 112
Cleaning Supplies No. 128
Prepaid Insurance No. 130
Equipment No. 157
Accumulated Depreciation—Equipment No. 158
Accounts Payable No. 201
Salaries Payable No. 212
Common Stock No. 311
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Retained Earnings No. 320
Dividends No. 332
Income Summary No. 350
Service Revenue No. 400
Gas & Oil Expense No. 633
Cleaning Supplies Expense No. 634
Depreciation Expense No. 711
Insurance Expense No. 722
Salaries Expense No. 726
(C) YAN’S CLEANING SERVICE INC.
Trial Balance
July 31, 2011
| Debit | Credit |
(d)
General Journal J2
| Date | Account Titles and Explanation | Debit | Credit | ||
| July 31 | |||||
| 31 | |||||
| 31 | |||||
| 31 | |||||
| 31 | |||||
(f) YAN’S CLEANING SERVICE INC.
Adjusted Trial Balance
July 31, 2011
| Debit | Credit |
(g) YAN’S CLEANING SERVICE INC.
Income Statement
For the Month Ended July 31, 2011
YAN’S CLEANING SERVICE INC.
Retained Earnings Statement
For the Month Ended July 31, 2011
YAN’S CLEANING SERVICE INC.
Statement of Financial Position
July 31, 2011
(h)
General Journal J3
| Date | Account Titles and Explanation | Debit | Credit | |||||
| July 31 | ||||||||
| 31 | ||||||||
| 31 | ||||||||
| 31 | ||||||||
(i) YAN’S CLEANING SERVICE INC.
Post-Closing Trial Balance
July 31, 2011
| Debit | Credit |
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