Lee Chang opened Lee's Window Washing on July 1, 2014. In July, the following transactions were completed: July 1 Lee
Lee Chang opened Lee's Window Washing on July 1, 2014. In July, the following transactions were completed:
July 1 Lee invested $20,000 cash in the business.
1 Purchased a used truck for $25,000, paying $5,000 cash and signing a note payable for the balance.
3 Purchased supplies for $2,100 on account.
5 Paid $1,800 on a one-year insurance policy, effective July 1.
12 Billed customers $4,500 for cleaning services.
18 Paid $1,400 of amount owed on supplies.
20 Paid $2,000 for employee salaries.
21 Collected $3,400 from customers billed on July 12.
25 Billed customers $9,000 for cleaning services.
31 Paid $550 for fuel for the month on the truck.
31 Withdrew $1,600 cash for personal use.
(a) Journalize and post the July transactions.
(b) Prepare a trial balance at July 31.
(c) Journalize and post the following adjustments:
1. Earned but unbilled fees at July 31 were $1,500.
2. The truck has an estimated useful life of four years.
3. One-twelfth of the insurance expired.
4. An inventory count shows $700 of supplies on hand at July 31.
5. Accrued but unpaid employee salaries were $800.
6. The note payable has a 5.5% annual interest rate.
(d) Prepare an adjusted trial balance.
(e) Prepare the income statement and statement of owner's equity for July, and a classified balance sheet at July 31,
2014. Of the note payable, $5,000 must be paid by July 1, 2015.
(f) Journalize and post the closing entries.
(g) Prepare a post-closing trial balance at July 31.
Taking It Further
Do companies need to make adjusting and closing entries at the end of every month?