Jannero Pargo opened Pargo’s Cleaning Service on July 1, 2012. During July the following transactions were completed — invested 000 cash business

Jannero Pargo opened Pargo’s Cleaning Service on July 1, 2012. During July the following transactions were completed.

July 1 Pargo invested $20,000 cash in the business.

1 Purchased used truck for $9,000, paying $4,000 cash and the balance on account.

3 Purchased cleaning supplies for $2,100 on account.

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

12 Billed customers $4,500 for cleaning services.

18 Paid $1,500 cash on amount owed on truck and $1,400 on amount owed on cleaning supplies.

20 Paid $2,500 cash for employee salaries.

21 Collected $3,400 cash from customers billed on July 12.

25 Billed customers $6,000 for cleaning services.

31 Paid gasoline for month on truck $350.

31 Withdraw $5,600 cash for personal use.

The chart of accounts for Pargo’s Cleaning Service contains the following accounts: No. 101

Cash, No. 112 Accounts Receivable, No. 128 Supplies, No. 130 Prepaid Insurance, No. 157 Equipment, No. 158 Accumulated Depreciation—Equipment, No. 201 Accounts Payable, No. 212 Salaries and Wages Payable, No. 301 Owner’s Capital, No. 306 Owner’s Drawings, No. 350 Income Summary, No. 400 Service Revenue, No. 633 Gasoline Expense, No. 634 Supplies Expense, No. 711 Depreciation Expense, No. 722 Insurance Expense, and No. 726 Salaries and Wages Expense.

Instructions

(a) Journalize and post the July transactions. Use page J1 for the journal and the three-column form of account.

(b) Prepare a trial balance at July 31 on a worksheet.

(1) Services provided but unbilled and uncollected at July 31 were $2,700.

(2) Depreciation on equipment for the month was $500.

(3) One-twelfth of the insurance expired.

(4) An inventory count shows $600 of cleaning supplies on hand at July 31.

(5) Accrued but unpaid employee salaries were $1,000.

(d) Prepare the income statement and owner’s equity statement for July and a classified balance sheet at July 31.

(e) Journalize and post adjusting entries. Use page J2 for the journal.

(f) Journalize and post closing entries and complete the closing process. Use page J3 for the journal.

(g) Prepare a post-closing trial balance at July 31.

SOLUTION

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(a)

General Journal J1

Date	Account Titles and Explanation	Ref.	Debit	Credit
July 1	Cash	101	20,000
	Owner’s Capital	301		20,000
1	Equipment	157	9,000
	Cash	101		4,000
	Accounts Payable	201		5,000
3	Supplies	128	2,100
	Accounts Payable	201		2,100
5	Prepaid Insurance	130	1,800
	Cash	101		1,800
12	Accounts Receivable	112	4,500
	Service Revenue	400		4,500
18	Accounts Payable	201	2,900
	Cash	101		2,900
20	Salaries and Wages Expense	726	2,500
	Cash	101		2,500
21	Cash	101	3,400
	Accounts Receivable	112		3,400
25	Accounts Receivable	112	6,000
	Service Revenue	400		6,000
31	Gasoline Expense	633	350
	Cash	101		350
31	Owner’s Drawings	306	5,600
	Cash	101		5,600

(b) & (c)

(a), (e) & (f)

Cash No. 101

Date	Explanation	Ref.	Debit	Credit	Balance
July 1		J1	20,000		20,000
1		J1		4,000	16,000
5		J1		1,800	14,200
18		J1		2,900	11,300
20		J1		2,500	8,800
21		J1	3,400		12,200
31		J1		350	11,850
31		J1		5,600	6,250
Accounts Receivable	No. 112

Date	Explanation	Ref.	Debit	Credit	Balance
July 12		J1	4,500		4,500
21		J1		3,400	1,100
25		J1	6,000		7,100
31	Adjusting	J2	2,700		9,800
Supplies	No. 128

Date	Explanation	Ref.	Debit	Credit	Balance
July 3		J1	2,100		2,100
31	Adjusting	J2		1,500	600
Prepaid Insurance	No. 130

Date	Explanation	Ref.	Debit	Credit	Balance
July 5		J1	1,800		1,800
31	Adjusting	J2		150	1,650
Equipment	No. 157

Date	Explanation	Ref.	Debit	Credit	Balance
July 1		J1	9,000		9,000

PROBLEM 4-5B (Continued)

Accumulated Depreciation—Equipment No. 158

Date	Explanation	Ref.	Debit	Credit	Balance
July 31	Adjusting	J2		500	500
Accounts Payable	No. 201

Date	Explanation	Ref.	Debit	Credit	Balance
July 1		J1		5,000	5,000
3		J1		2,100	7,100
18		J1	2,900		4,200
Salaries and Wages Payable	No. 212

Date	Explanation	Ref.	Debit	Credit	Balance
July 31	Adjusting	J2		1,000	1,000
Owner’s Capital	No. 301

Date	Explanation	Ref.	Debit	Credit	Balance
July 1		J1		20,000	20,000
31	Closing	J3		7,200	27,200
31	Closing	J3	5,600		21,600
Owner’s Drawings	No. 306

Date	Explanation	Ref.	Debit	Credit	Balance
July 31		J1	5,600		5,600
31	Closing	J3		5,600	0
Income Summary	No. 350

Date	Explanation	Ref.	Debit	Credit	Balance
July 31	Closing	J3		13,200	13,200
31	Closing	J3	6,000		7,200
31	Closing	J3	7,200		0
Service Revenue	No. 400

Date	Explanation	Ref.	Debit	Credit	Balance
July 12		J1		4,500	4,500
25		J1		6,000	10,500
31	Adjusting	J2		2,700	13,200
31	Closing	J3	13,200		0
Gasoline Expense	No. 633

Date	Explanation	Ref.	Debit	Credit	Balance
July 31		J1	350		350
31	Closing	J3		350	0
Supplies Expense	No. 634

Date	Explanation	Ref.	Debit	Credit	Balance
July 31	Adjusting	J2	1,500		1,500
31	Closing	J3		1,500	0
Depreciation Expense	No. 711

Date	Explanation	Ref.	Debit	Credit	Balance
July 31	Adjusting	J2	500		500
31	Closing	J3		500	0
Insurance Expense	No. 722

Date	Explanation	Ref.	Debit	Credit	Balance
July 31	Adjusting	J2	150		150
31	Closing	J3		150	0
Salaries and Wages Expense	No. 726

Date	Explanation	Ref.	Debit	Credit	Balance
July 20		J1	2,500		2,500
31	Adjusting	J2	1,000		3,500
31	Closing	J3		3,500	0
(d)	PARGO’S CLEANING SERVICE
	Income Statement
	For the Month Ended July 31, 2012
	Revenues
		Service revenue			$13,200
	Expenses
		Salaries and wages expense		$3,500
		Supplies expense		1,500
		Depreciation expense		500
		Gasoline expense		350
		Insurance expense		150
		Total expenses			6,000
	Net income			$ 7,200
	PARGO’S CLEANING SERVICE
	Owner’s Equity Statement
	For the Month Ended July 31, 2012
	Owner’s Capital, July 1			$ 0
	Add: Investments		$20,000
		Net income		7,200	27,200
				27,200
	Less: Drawings			5,600
	Owner’s Capital, July 31			$21,600
	PARGO’S CLEANING SERVICE
	Balance Sheet
	July 31, 2012
	Assets
	Current assets
		Cash		$6,250
		Accounts receivable		9,800
		Supplies		600
		Prepaid insurance		1,650
		Total current assets			$18,300
	PARGO’S CLEANING SERVICE
	Balance Sheet (Continued)
	July 31, 2012
	Assets (Continued)
	Property, plant, and equipment
		Equipment		$9,000
		Less: Accumulated depreciation—
		equipment		500	8,500
		Total assets			$26,800
	Liabilities and Owner’s Equity
	Current liabilities
		Accounts payable		$4,200
		Salaries and wages payable		1,000
		Total current liabilities			$ 5,200
	Owner’s equity
		Owner’s capital			21,600
		Total liabilities and owner’s equity			$26,800
(e)
General Journal	J2

Date	Account Titles and Explanation	Ref.	Debit	Credit
July 31	Accounts Receivable	112	2,700
	Service Revenue	400		2,700
31	Depreciation Expense	711	500
	Accumulated Depreciation—
	Equipment	158		500
31	Insurance Expense	722	150
	Prepaid Insurance	130		150
31	Supplies Expense	634	1,500
	Supplies	128		1,500
31	Salaries and Wages Expense	726	1,000
	Salaries and Wages Payable	212		1,000
(f)	General Journal
	J3

Date	Account Titles and Explanation	Ref.	Debit	Credit
July 31	Service Revenue	400	13,200
	Income Summary	350		13,200
31	Income Summary	350	6,000
	Salaries and Wages Expense	726		3,500
	Depreciation Expense	711		500
	Insurance Expense	722		150
	Supplies Expense	634		1,500
	Gasoline Expense	633		350
31	Income Summary	350	7,200
	Owner’s Capital	301		7,200
31	Owner’s Capital	301	5,600
	Owner’s Drawings	306		5,600
(g)	PARGO’S CLEANING SERVICE
	Post-Closing Trial Balance
	July 31, 2012

	Debit		Credit
Cash		$ 6,250
Accounts Receivable		9,800
Supplies		600
Prepaid Insurance		1,650
Equipment		9,000
Accumulated Depreciation—Equipment			$ 500
Accounts Payable			4,200
Salaries and Wages Payable			1,000
Owner’s Capital			21,600
$27,300	$27,300