Cleaning Co. began business on March 1, 2011. The company provides specialized cleaning services to corporate clients. Listed below are the transactions entered into by Cleaning Co. during its first month of operations:
1. Borrowed $200,000 and signed a 10-year note at the bank.
2. Issued 1,000 shares for $100,000 in cash.
3. Signed a 1-year lease for space in a strip mall on March 1and paid the first month's rent of $1,000 in cash.
4. Acquired cleaning equipment at a cost of $100,000. The company paid $25,000 in cash and will pay the remainder during the next year. The equipment is expected to last ten years.
5. Provided services to 25 clients who were charged fees of $200 each for the month. 20 clients paid the monthly fees. 5 clients were provided services but have not paid yet.
6. Paid employees' wages of $4,000.
7. Purchased a computer for $1,000 on credit.
8. Received a power bill for $200 which has not yet been paid.
9. Received a phone bill for $100 which was paid.
10. Contracted a company to print flyers and distribute them for a fixed fee of $500. The flyers have been printed and distributed but an invoice has not yet been received from the company.
11. Paid dividends of $1,000 to shareholders.
Cleaning Co. has a chart of accounts which includes the following accounts:
Cleaning service fees
a. Prepare the general journal for Cleaning Co. for the month of March 2011 and record all journal entries.
b. Post all journal entries to ledger accounts (hint - use T accounts).
c. Prepare a trial balance as at March 31, 2011.
d. Prepare a Balance Sheet, Income Statement and Statement of Retained Earnings for the month of March 2011.
e. What does the Income Statement tell you about Cleaning Co's first month of operations?