COMPREHENSIVE ACCOUNTING CASE

Basic Accounting
BUS 1102
Comprehensive Problem
 New Era Cleaning Service, Inc. opened for business on
July 1, 2010. During the month of July, the following transactions occurred:

July 1 Issued $18,000 of common stock for $18,000 cash.

July 1 Purchased a truck for $11,000. Paid $4,000 in cash and borrowed the rest (long term) from the bank.

July 3 Purchased cleaning supplies for $900 on account.

July 5 Paid $1,800 on a one-year insurance policy, effective July 1.

July 12 Billed customers $4,800 for cleaning services.

July 18 Paid $1,500 of the amount owed on the truck.

July 18 Paid $500 of the amount owed on cleaning supplies.

July 20 Paid $1,700 for employee salaries.

July 21 Collected $1,200 from customers billed on July 12.

July 25 Billed customers $1,900 for cleaning services.

July 31 Paid gas and oil for the month on the truck, $500.

July 31 Paid an $800 dividend.

Instructions:

Unit 2 Post July transactions to the general journal and general ledger 'T' accounts

Unit 3 Prepare an unadjusted trial balance

Unit 3 Post the following adjustments

(a) Earned but unbilled fees at July 31 were $1,400
(b) Depreciation for the month was $200
(c) One-twelfth of the insurance expired
(d) An inventory count showed $300 of cleaning supplies remaining on July 31.
(e) Accrued but unpaid employee salaries were $500.

Unit 3 Prepare an adjusted trial balance

Unit 4 Post closing entries

Unit 4 Prepare a classified balance sheet and an income statement as of July 31.
General Journal Date Accounts and Description

#1 7/1/2010 Cash
Capital Stock
Issued Stock for cash

#2 7/2/2010 Equipment
Cash
Bank Loan
Purchased a track by paying 4$4000 cash, and borrowing $7000 from Bank

#3 7/3/2010 Cleaning Supplies

Accounts Payable
Purchased cleaning supplies on account

#4 7/5/2010 Prepaid Insurance

Cash
Paid one year insurance in advance

#5 7/12/2010 Accounts Receivable

Service Revenue
Billed customers for cleaning service

#6 7/18/2010 Bank Loan

Cash
Paid some amount owed on the truck from July 2

#7 7/18/2010 Accounts Payable

Cash
Paid some amount owed on the cleaning supplies from July 3

#8 7/20/2010 Salary Expenses

Cash
Paid salary to employees

#9 7/21/2010 Cash
Accounts Receivable
Collected cash from customer billed for cleaning Service on July 12

#10 7/25/2010 Accounts Receivable

Service Revenue
Billed customers for cleaning service

#11 7/31/2010 Gash and Oil Expenses

 Cash
Paid gas and oil owed on the truck for a month

#12 7/31/2010 Dividends

Cash
Paid dividends to Stakeholders

Adjusting entries:

(a) Accounts Receivable

Service Revenue
To record account receivable for July 31

(b) Depreciation Expense

Accumulated depreciation
To record annual depreciation expense on the truck

(c ) Insurance Expenses
Prepaid Insurance
To adjust prepaid insurance ($1800/12 = $150)

(d) Supply Expenses

Cleaning Supply
Adjusting entry to record the cleaning supplies used ($900-$300=$600)

(e) Salary Expenses

Salaries Payable
To record accrued salary
Debit Credit

18000
18000

11000
4000
7000

900
900

1800
1800

4800
4800

1500
1500

500
500

1700
1700

1200
1200

1900
1900

500
 500

800
800

1400
1400

200
200

150
150

600
600

500
500
 Cash Accounts Receivable Prepaid Insurance
Debit Credit Debit Credit Debit Credit
18000 4800 1800
4000 1200 150
1800 1900 1650
1500 5500
500 1400
1700 6900
1200
500
800
8400

Equipment: Truck Accum. Depreciation Accounts Payable

Debit Credit Debit Credit Debit Credit
11000 200 500
900
400

Revenue Gas & Oil Expense

Salaries Payable Debit Credit Debit Credit
Debit Credit 4800 500
500 1900
6700
1400
8100

Insurance Expense Supplies Expense Depreciation Expense

Debit Credit Debit Credit Debit Credit
150 600 200
 Common Stock Dividend Retained Earnings
Debit Credit Debit Credit Debit Credit
18000 800
 Supplies
Debit Credit
900
600
300

Bank Loan
Debit Credit
7000
1500
5500

Salaries Expense
Debit Credit
1700
500
2200

Income Summary
Debit Credit
 Happy Workers Cleaning Service

Unadjusted Adjusted
Account Beginnng Balance Trial Balance Adjusting Entries Trial Balance
Debit Credit Debit Credit Debit Credit Debit Credit

Cash 0 8,400 8,400

Accounts Receivable 0 5,500 1,400 6,900
Cleaning Supplies 0 900 600 300
Prepaid Insurance 0 1,800 150 1,650
Equipment 0 11,000 11,000
Accumulated Deprec. 0 200 200

Accounts Payable 0 400 400

Salaries Payable 0 500 500
Bank Loan 0 5,500 5,500

Common Stock 0 18,000 18,000

Retained Earnings 0
Dividends 0 800 800

Service Revenue 0 6,700 1,400 8,100

Gas & Oil Expense 0 500 500
Cleaning Supplies Exp 0 600 600
Depreciation Expense 0 200 200
Insurance Expense 0 150 150
Salaries Expense 0 1,700 500 2,200
30,600 30,600 2,850 2,850 32,700 32,700
New Era Cleaning Service
Income Statement for period of July 1 through July 31, 2010

Revenue

Less: Expenses
Salaries
Cleaning Supplies
Gas & Oil
Depreciation
Insurance
Total Expenses

Net Income
 New Era Cleaning Service
Balance Sheet as of July 31, 2010

Assets
Current Assets
Cash
Accounts Receivable
Cleaning Supplies
Pre-paid Insurance
Total Current Assets

Long Term Assets

Truck-Equipment
less: Accumulated Depreciation
Total Long Term Assets

Total Assets

Liabilities
Current Liabilities
Accounts Payable
Salaries Payable
Total Current Liabilities

Long Term Liabilities

Bank Loan
Total Long Term Liabilities

Total Liabilities

Owners' Equity
Common Stock
Retained Earnings
Beginning Retained Earnings
Net Income
less: Dividends
Ending Retained Earnings

Total Owners' Equity

Total Liabilities and Owners' Equity