Question
Comprehensive Accounting Cycle Review 11-2 (Part Level Submission)
Karen Noonan opened Skysong, Inc. on February 1, 2017. During February, the following transactions were completed.
Declared and paid a cash dividend of $0.30 per share.
Journalize the following adjustments. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Record journal entries in the order presented in the problem. Round answers to 0 decimal places, e.g. 1,525.)
Karen estimates a 20% income tax rate. (Hint: Prepare an income statement up to “income before taxes” to help with the income tax calculation.)
Feb. 1 Issued 4,600 shares of Clean Sweep common stock for $13,520. Each share has a $1.50 par. 1 Borrowed $8,000 on a 2-year, 6% note payable. 1 Paid $9,380 to purchase used floor and window cleaning equipment from a company going out of business ($3,680 was for the floor equipment and $5,700 for the window equipment). 1 Paid $230 for February Internet and phone services. 3 Purchased cleaning supplies for $1,020 on account. 4 Hired 4 employees. Each will be paid $500 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 $4,110 cash. 16 Billed customers $4,060 for cleaning services performed through February 13, 2017. 17 Received $504 from a customer for 4 weeks of cleaning services to begin February 21, 2017. 18 Paid $310 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 $4,470 for cleaning services performed through February 20. 24 Paid cash for employees’ wages for 2 weeks (February 9–13 and 16–20). 25 Collected $2,600 cash from customers billed on February 16. 27 Paid $230 for Internet and phone services for March. 28
Declared and paid a cash dividend of $0.30 per share.
Journalize the following adjustments. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Record journal entries in the order presented in the problem. Round answers to 0 decimal places, e.g. 1,525.)
(1) Services performed for customers through February 27, 2017, but unbilled and uncollected were $3,950. (2) Received notice that a customer who was billed $280 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 $800 salvage value. (5) Record 1 month of insurance expense. (6) An inventory count shows $420 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.)
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Explanation / Answer
Date Account title & explanation Debit Credit Amount in $ Amount in $ Bad-debts 273 Allowance for doubtful debts 273 You can now calcuate the revised portion of income tax expense without having to debit the bad debts expense.
