Sparkling Clean Dry Cleaners Inc. began operations on January 1, 2011. In its first year, the following transactions occurred:
1. Issued common shares for $150,000 cash.
2. Purchased dry cleaning equipment for $75,000 cash.
3. Purchased cleaning supplies, on account, for $9,600.
4. Used $8,400 of the supplies in cleaning operations.
5. Collected $124,000 from customers for dry cleaning.
6. Borrowed $15,000 from the bank on July 1, 2011, at an interest rate of 8% per year.
7. Paid wages of $49,000 to employees. In addition to this, $1,000 of wages were owed to employees at the end of the year.
8. Amortized the equipment by $3,000 for the year.
9. Paid $22,000 for utilities (telephone, electricity, and water).
10. Paid interest on the bank loan described in transaction 6.
Required:
a. Prepare journal entries to record each of the above transactions.
b. Create T accounts and post the journal entries to the T accounts.
c. Prepare a December 31, 2011, trial balance.