New Era Cleaning Service, Inc. opened for business on July 1, 2010. During the month of July, the following transactions occurred: July 1: Issued $18,000 of common stock for $18,000 cash.
July 1: Purchased a truck for $11,000. Paid $4,000 in cash and borrowed the remainder (long term) from the bank.
July 3: Purchased cleaning supplies for $900 on account.
July 5: Paid $1,800 on a one-year insurance policy, effective July 1.
July 12: Billed customers $4,800 for cleaning services.
July 18: Paid $1,500 of the amount owed on the truck.
July 18: Paid $500 of the amount owed on cleaning services.
July 20: Paid $1,700 for employee salaries.
July 21: Collected $1,200 from customers billed on July 12.
July 25: Billed customers $1,900 for cleaning services.
July 31: Paid gas and oil for the month on the truck, $500.
July 31: Paid a $800 dividend.
Please complete the following tasks: Post the July transactions to the general journal and the general ledger "T" account
repare an unadjusted trial balance; Post the following adjustments:
(a) Earned but unbilled fees at July 31 were $1,400
(b) Depreciation for the month was $200
(c ) One-twelfth of the insurance expired
(d) An inventory count showed $300 of cleaning supplies remaining on July 31

New Era Cleaning Service, Inc.

a) General Journal:

July 1:

Debit Cash Account $18,000

Credit Common Stock $18,000

To record the issue of common stock for cash.

July 1:

Debit Truck $11,000

Credit Cash $4,000

Credit Bank Loan $7,000

To record the purchase of a truck.

July 3:

Debit Supplies $900

Credit Accounts Payable $900

To record the purchase of cleaning supplies on account.

July 5:

Debit Prepaid Insurance $1,800

Credit Cash Account $1,800

To record the payment of insurance for a year.

July 12:

Debit Accounts Receivable $4,800

Credit Service Revenue $4,800

To record services rendered on account.

July 18:

Debit Bank Loan $1,500

Credit Cash Account $1,500

To record payment on bank loan.

July 18:

Debit Accounts Payable $500

Credit Cash Account $500

To record payment on account.

July 20:

Debit Salaries $1,700

Credit Cash Account $1,700

To record payment of salaries.

July 21:

Debit Cash Account $1,200

Credit Accounts Receivable $1,200

To record receipt of cash on account.

July 25:

Debit Accounts Receivable $1,900

Credit Service Revenue $1,900

To record services rendered on account.

July 31:

Debit Automobile Fuel $500

Credit Cash Account $500

To record payment for gas and oil for the month.

July 31:

Debit Dividends $800

Credit Cash Account $800

To record payment for dividends.

b) General Ledger "T-account":

                                               Cash Account

July 1 Common Stock          $18,000  July 1  Truck                        $4,000

July 21 Accounts Receivable   1,200  July 5 Insurance                    1,800

                                                            July 18 Bank Loan                  1,500

                                                            July 18 Accounts Payable        500

                                                            July 20 Salaries                      1,700

                                                            July 31 Automobile Fuel          500

                                                            July 31 Dividend                       800

                                                           July 31 Balance c/d               8,400

                                           19,200                                                  19,200

Balance b/d                         8,400

                                             Common Stock

                                                             July 1 Cash account          $18,000

                                                Bank Loan

July 18 Cash                           1,800     July 1  Truck                       $7,000

July 31 Balance c/d               5,200                                                            

                                              7,000                                                  7,000

                                                            Balance b/d                         5,200

                                               Truck

July 1  Cash                        $4,000    July 31 Balance c/d            $11,000

July 1 Bank loan                   7,000                                                            

                                            11,000                                                 19,200

 Balance b/d                       11,000

                                               Supplies

July 3 Cash                              900

                                               Accounts Payable

July 18 Cash                              500    July 3 Supplies                        900

July 31 Balance c/d                   400                                                            

                                                 900                                                     900

                                                                Balance b/d                         400

                                               Prepaid Insurance

July 5 Cash                             1,800

                                                Service Revenue

July 31 Balance c/d              6,700  July 12 Accounts Receivable  $4,800

                                                       July 25 Accounts Receivable  $1,900

                                             6,700                                                     6,700

                                                               Balance b/d                         6,700

                                              Accounts Receivable

July 12 Service Revenue     $4,800  July 21  Cash                         $1,200

July 25 Service Revenue      1,900   July 31 Balance c/d                5,500

                                              6,700                                                   6,700

      Balance b/d                    5,500

                                           Salaries

July 20 Cash                      $1,700

                                          Automobile Fuel

July 31 Cash                      $500

                                         Dividend

July 31 Cash                      $800

Trial Balance as of July 31:

Description                      Debit       Credit

Cash                              $8,400

Common Stock                               $18,000

Bank Loan                                          5,200

Truck                              11,000

Supplies                            900

Accounts Payable                                400

Prepaid Insurance         1,800

Service Revenue                              6,700

Accounts Receivable   5,500

Salaries                          1,700

Automobile Fuel             500

Dividends                        800

Total

c) Adjusting Journal Entries at July 31:

a) Debit Accounts Receivable $1,400

Credit Service Revenue $1,400

To record unbilled fees.

b) Debit Depreciation Expense $200

Credit Accumulated Depreciation $200

To record depreciation expense for the month.

c) Debit Insurance Expense $150

Credit Prepaid Insurance $150

To record a month's insurance expense.

d) Debit Supplies Expense $300

Credit Supplies $300

To record supplies expense.

Explanation:

Journal entries initially record transactions on a day-to-day basis.  From the journal, the transactions are posted to the ledger accounts (e.g. T-accounts) and a trial balance is extracted to check if the two sides are in agreement.  At the end of the accounting period, adjusting entries are recorded in the general journal to ensure that accounts are based on the accrual concept and not on cash basis.

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