Lee Chang opened Lee's Window Washing on July 1, 2014. In July, the following transactions were completed:

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

1 Purchased a used truck for $25,000, paying $5,000 cash and signing a note payable for the balance.

3 Purchased supplies for $2,100 on account.

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

12 Billed customers $4,500 for cleaning services.

18 Paid $1,400 of amount owed on supplies.

20 Paid $2,000 for employee salaries.

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

25 Billed customers $9,000 for cleaning services.

31 Paid $550 for fuel for the month on the truck.

31 Withdrew $1,600 cash for personal use.

Instructions

(a) Journalize and post the July transactions.

(b) Prepare a trial balance at July 31.

(c) Journalize and post the following adjustments:

1. Earned but unbilled fees at July 31 were $1,500.

2. The truck has an estimated useful life of four years.

3. One-twelfth of the insurance expired.

4. An inventory count shows $700 of supplies on hand at July 31.

5. Accrued but unpaid employee salaries were $800.

6. The note payable has a 5.5% annual interest rate.

(d) Prepare an adjusted trial balance.

(e) Prepare the income statement and statement of owner's equity for July, and a classified balance sheet at July 31,

2014. Of the note payable, $5,000 must be paid by July 1, 2015.

(f) Journalize and post the closing entries.

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

Taking It Further

Do companies need to make adjusting and closing entries at the end of every month?