P4.5A

(LO 1, 2) AP Lee Chang opened Lee's Window Washing on July 1, 2021. In July, the following transactions were completed:

July 1	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.
1	Paid $2,800 on a one-year insurance policy, effective July 1.
5	Billed customers $3,300 for cleaning services.
12	Purchased supplies for $2,100 on account.
18	Paid $3,000 for employee salaries.
25	Billed customers $8,900 for cleaning services.
28	Collected $3,300 from customers billed on July 5.
31	Paid $550 for repairs on the truck.
31	Withdrew $2,600 cash for personal use.

Instructions

a.

Journalize and post the July transactions to the general ledger.

b.

Prepare a trial balance at July 31.

c.

Journalize and post the following July 31 adjustments:

• 1.Services of $1,500 were provided but remained unbilled and uncollected at July 31.
• 2.The truck has an estimated useful life of five 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, 2021. Of the note payable, $5,000 must be paid by June 30, 2022.

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?