Question Question 3 (60 marks)
Betty Higgins started Betty's Cleaning Service on July 1. The following transactions
occurred during Year 1:
• July 1-Invested $20,000 cash in the business.
• July 1-Purchased a used truck for $25,000, paying $5,000 cash and
borrowing $20,000by signing a note payable due in June, Year 2.
• July 1-Paid $2,800 for a 1-year insurance policy starting July 1.
• July 5-Billed customers $3,300 for cleaning services.
July 12-Purchased supplies on account for $2,100.
July 18-Paid employees' salaries of $3,000.
July 25-Billed customers $8,900 for cleaning services.
• July 28-Collected $3,300 cash from the July 5 billing.
• July 31-Paid $550 for truck repairs.
• July 31-Withdrew $2,600 cash for personal use.
.
.
Use the following chart of account numbers:
Cash #1100
Accounts Receivable #1200
Supplies #1300
Prepaid Insurance # 1400
Vehicles #1500
Accumulated Depreciation, Vehicles #1600
Accounts Payable #2100
Salaries Payable # 2200
Interest Payable # 2300
Note Payable #2400
Betty Higgins, Capital #3100
Betty Higgins, Withdrawals #3200
Income Summary # 3300
Service Revenue # 4100
Depreciation Expense # 5100
Repairs Expense # 5200
Insurance Expense # 5300/nInterest Expense # 5400
Salaries Expense # 5500
Supplies Expense # 5600
Legal Fees Expense #5300
Required
a. Journalize the July transactions and post them to the ledger accounts.
Date
Year 1
July 1
1
1
5
12
Account Title
Cash
Betty Higgins, Capital
Vehicles
Cash
Notes Payable
Prepaid Insurance
Cash
Accounts Receivable
Service Revenue
Supplies
Accounts Payable
PR
1100
3100
1500
1100
2400
1400
1100
1200
4100
1300
2100
Debit
20,000
25,000
2,800
3,300
Credit
2,100
20000
5,000
20000
2,800
3,300
2,100/n18
25
28
31
31
Leger Accounts:
Account: Cash
Date
Jul. 1
Jul. 1
Jul. 1
Jul. 18
Jul. 28
Salaries Expense
Cash
Item
Accounts Receivable
Service Revenue
Cash
Accounts Receivable
Repairs Expense
Cash
Debit
$20,000
5500
1100
3,300
1200
4100
1100
1200
Betty Higgins, Withdrawals 3200
Cash
1100
5200
1100
Credit
$5,000
2,800
3,000
3,000
8,900
3,300
550
2,600
3,000
8,900
3,300
550
2,600
Account No. 1100
Balance
$20,000 Dr
15,000 D
12,200 Dr
9,200 Dr
12,500 Dr/nJul. 31
Jul. 31
Account: Accounts Receivable
Date
Jul. 5
Jul. 25
Jul. 28
Item
Account: Supplies
Date
Item
Jul. 12
Account: Prepaid Insurance
Date
Item
Jul. 1
Accounts: Vehicles
Date
Jul. 1
Item
Account: Notes Payable
Date
Item
Debit
Debit
Debit
Debit
$3,300
8,900
$2,100
Debit
$2,800
$25,000
Credit
Credit
Credit
Credit
TRU Open Learning
550
$2,600
Account No. 1200
$3,300
Balance
Credit
Account No. 1300
Balance
11,950 Dr
$9,350 Dr
$3,300 Dr
12,200 Dr
$8,900 Dr
Account No. 1400
Balance
$2,100 Dr
Balance
Balance
Account No. 1500
$2,800 Dr
$25,000 Dr
Account No. 2400/nJul. 1
Account: Accounts Payable
Item
Date
Jul. 12
Account: Betty Higgins, Capital
Date
Jul. 1
Date
Jul. 31
Account: Betty Higgings, Withdrawals
Item
Debit
Account: Service Revenues
Date
Jul. 5
Jul. 25
Item
Date
Account: Repair Expense
Jul. 31
Item
Debit
Item
Debit
Debit
Debit
$2,600
$550
Credit
Credit
Credit
Credit
Credit
$20,000
Account No. 2100
$2,100
$20,000
Balance
Account No. 3100
Balance
$3,300
$8,900
$20,000 Cr
Balance
Account No. 3200
$2,100 Cr
Balance
$20,000 Cr
Account No. 4100
Balance
$2,600 Dr
$3,300 C
$12,200 Cr
Account No. 5200
$550Dr/nAccount: Salaries Expense
Item
Date
Jul. 18
Assignment 2: Measuring Business Income and Completing the Accounting Cycle (10%)
Account
Cash
b. Prepare a trial balance for July 31, Year 1.
Betty's Cleaning Service
Unadjusted Trial Balance
July 1, Year 1
Debit
Accounts Receivable
Debit
Supplies
Prepaid Insurance
Vehicles
Accounts Payable
Notes Payable
Betty Higgins, Capital
Betty Higgins, Withdrawals
Service Revenue
Repairs Expense
Salaries Expense
Total
$3,000
$9,350
8,900
2,100
2,800
25,000
2600
550
Credit
3000
$54,300
Credit
$2,100
20,000
20,000
12,200
$54,300
c. Journalize and post the following July adjustments:
Account No. 5500
Balance
$3,000Dr/nDate
Year 1
July 31
31
31
31
31
31
The truck has an estimated life of 5 years and no residual value.
Insurance for 1 month has expired.
• Supplies on hand on July 31 are $700.
• Employees have earned $800, and it will be paid in August.
The note payable has an annual rate of 5.5%.
PR
On July 31, Betty provided $1,500 worth of services that had not yet been
recorded.
.
Account
Accounts Receivable
Service Revenue
Vehicles
Depreciation Expense
Accumulated Depreciation, 1600
Insurance Expense
Prepaid Insurance
Supplies Expense
Supplies
Salaries Payable
Salaries Expense
1200
Interest Expense
4100
5100
5300
1400
5600
1300
2200
5500
5400
Debit
1,500
417
233
1,400
800
Credit
1500
417
233
1,400
800/nAssignment 2: Measuring Business Income and Completing the Accounting Cycle (10%)
Interest Payable
d. Prepare an adjusted trial balance.
Account
Debit
Cash
Accounts Receivable
Supplies
Prepaid Insurance
Vehicles
Accumulated
depreciation, vehicles
Accounts payable
Salaries payable
Notes Payable
Interest Payable
Betty Higgins, Capital
Betty Higgins,
Withdrawals
Service Revenue
Depreciation Expense
Repairs Expense
Insurance Expense
Salaries Expense
Supplies Expense
Account
2300
$9,350
$11,200
2,100
2,567
25,000
2,600
417
550
233
3,000
2,000
$59,017
Credit
88
$417
3,308
3,000
20,000
275
19,817
12,200
$59,017
e. Prepare (i) an income statement, (ii) a statement of owner's equity, and (iii) a
classified balance sheet for the month of July.
Amount/nACCT 1211: Accounting 1
Service Revenue
Depreciation Expense
Insurance Expense
Salaries Expense
Supplies Expense
Interest Expense
Net Income
5,225
Statement of Owner's Equity
Account
Betty Higgins,
Capital
Betty Higgins,
Withdrawals
Net income
13,700
ASSET'S
Current Assets
Beginning Balance
20000
.
Total Owner's
Equity
Classified balance sheet for Betty's Cleaning Service as of July 31, Year 1:
20000
• Cash: $14,850
• Accounts Receivable: $7,100
• Supplies: $700
• Prepaid Insurance: $2,200
Total Current Assets: $24,850
Non-Current Assets
Vehicles: $25,000
Less: Accumulated Depreciation: $1,000
Ending Balance
Net Non-Current Assets: $24,000
25225
2,600
27825
