Reference no: EM131832794

Question: Karen Noonan opened Clean Sweep Inc. on February 1, 2017. During February, the following transactions were completed. Feb. 1 Issued 5,000 shares of Clean Sweep common stock for $13,000. Each share has a $1.50 par.

1 Borrowed $8,000 on a 2-year, 6% 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 February Internet and phone services. 3 Purchased cleaning supplies for $980 on account.

4 Hired 4 employees. Each will be paid $480 per 5-day work week (Monday- Friday). Employees will begin working Monday, February 9.

5 Obtained insurance coverage for $9,840 per year. Coverage runs from February 1, 2017, through January 31, 2018. Karen paid $2,460 cash for the first quarter of coverage.

5 Discussions with the insurance agent indicated that providing outside window cleaning services would cost too much to insure. Karen sold the window cleaning equipment for $3,950 cash.

16 Billed customers $3,900 for cleaning services performed through February 13, 2017.

17 Received $540 from a customer for 4 weeks of cleaning services to begin February 21, 2017. (By paying in advance, this customer received 10% off the normal weekly fee of $150.) 18 Paid $300 on amount owed on cleaning supplies. 20 Paid $3 per share to buy 300 shares of Clean Sweep common stock from a shareholder who disagreed with management goals. The shares will be held as treasury shares.

23 Billed customers $4,300 for cleaning services performed through February 20

24 Paid cash for employees' wages for 2 weeks (February 9-13 and 16-20).

25 Collected $2,500 cash from customers billed on February 16. 27 Paid $220 for Internet and phone services for March.

28 Declared and paid a cash dividend of $0.20 per share.

Instructions: (a) Journalize the February transactions. (You do not need to include an explanation for each journal entry.)

(b) Post to the ledger accounts (Use T-accounts.)

(c) Prepare a trial balance at February 28, 2017.

(d) Journalize the following adjustments. (Round all amounts to whole dollars.)

(1) Services performed for customers through February 27, 2017, but unbilled and uncollected were $3,800.

(2) Received notice that a customer who was billed $200 for services performed February 10 has filed for bankruptcy. Clean Sweep does not expect to collect any portion of this outstanding receivable.

(3) Clean Sweep uses the allowance method to estimate bad debts. Clean Sweep estimates that 3% of its month-end receivables will not be collected.

(4) Record 1 month of depreciation for the floor equipment. Use the straight-line method, an estimated life of 4 years, and $500 salvage value.

(5) Record 1 month of insurance expense.

(6) An inventory count shows $400 of supplies on hand at February 28.

(7) One week of services were performed for the customer who paid in advance on February 17.

(8) Accrue for wages owed through February 28, 2017.

(9) Accrue for interest expense for 1 month.

(10) Karen estimates a 20% income tax rate. (Hint: Prepare an income statement up to "income before taxes" to help with the income tax calculation.)