Accounting Problem Solving

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.

)

	Student Name	Student No.

	Student Name	Student No.

Grade / 10

 

(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

 

 

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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