TorontoCleanDry Inc. is a top dry cleaner in Toronto that offers services ranging from wash and...

  

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TorontoCleanDry Inc. is a top dry cleaner in Toronto that offers services ranging from wash and press to tailoring and alterations. The company is owned by three sisters - Mandy, Lauren and Jessica. Jessica decided to open a new business in Montreal with one of her friend Chloé. Montreal CleanDry Inc began operations on December 1, 2021. The company has a December 31 year-end and uses inventory perpetual method. You have been provided a listing of all transactions that occurred in the company's first month of operations. 1. December 1 - Issued common shares for $150,000 cash. 2. December 2 - Took out a $125,000 loan with Scotia Bank @ 6% interest payable every January 1 and the principal of the loan due December 1, 2026. 3. December 3 - Purchased inventory on account for $125,000 from ChemicalSafe. Company uses perpetual method. Supplier offered 2% discount in 10 days. 4. December 4 - Purchased a dry-cleaning equipment and a delivery Truck for $22,000 and $100,000 respectively. The company signed a note with the two suppliers. 5. December 5 - Purchased cleaning supplies on account for $9,600. 6. December 6 - Prepaid 1 year rent for the period from December 1 to November 30 for $12,000 cash. 7. December 10 - Montreal CleanDry Inc provides also commercial wash and fold for hotels. One of its customers made a deposit of $55,000 for future cleaning service. 8. December 11 - Performed dry cleaning services for WestmountHotel Inc for $124,000.One-quarter of this amount was paid in cash and the remainder was on account. 9. December 12 - Paid the balance due to its supplier ChemicalSafe (Ref. transaction#3). 10. December 13 - the company provides Laundry services for hotel continental for $25,000. The bill will be paid next January. 11. December 18 - Incurred wages for 2 employees (Irene and Cindy) who worked a total of 32 hours each at an hourly rate of $15.00; these wages will be paid on December 20. 12. On December 19 morning, Jessica (the owner) read in the newspaper that the hotel intercontinental is in financial distress. The hotel manager called her in the afternoon to ask for an extended payment. After meeting with Chloé, they decided to record a bad debt expense for $2 500. 13. December 20 - Paid wages of $9,000 to employees in addition to the amount owed to Irene and Cindy. 14. December 22 - Interviewed Kamala Trump, an experienced employee, to manage the store effective June 1, 2021; this position comes with a $50,000 annual salary 15. December 23 - Declared a dividend of $5,000. 16. December 24 - Rented the delivery truck to Duc's Dépanneur, a business next door, for the last week of the month for $2,500 cash. 17. December 25 - Paid the dividends previously declared on Dec 23. 18. December 31 - Depreciation on the delivery truck is calculated based on an estimated useful life of 5 years using the straight-line method. Residual value $20,000 19. December 31 - Accrued the interest on any debt financing taken in the month of December. 20. December 31 - Used $3,400 of the supplies in cleaning operations. 21. December 31 - Recorded the rent of December. 22. December 31- The company concluded that Hotel intercontinental with accounts totalling $2,500 would be unable to pay and wrote these receivables off. 23. At the end of 2021, Jessica and Chloé decided that it would use an estimate for bad debts of 1% of its credit sales. Credit sales equals $1 350,000 REQUIRED: 1) Prepare all necessary journal entries and adjusting entries for the month of December 2021 (26 marks) 2) Prepare the T account for the following accounts: Accounts receivable, Allowance for doubtful accounts and Bad debt expense. How accounts receivable would be presented the statement of financial position at December 31, 2021? (4 marks) TorontoCleanDry Inc. is a top dry cleaner in Toronto that offers services ranging from wash and press to tailoring and alterations. The company is owned by three sisters - Mandy, Lauren and Jessica. Jessica decided to open a new business in Montreal with one of her friend Chloé. Montreal CleanDry Inc began operations on December 1, 2021. The company has a December 31 year-end and uses inventory perpetual method. You have been provided a listing of all transactions that occurred in the company's first month of operations. 1. December 1 - Issued common shares for $150,000 cash. 2. December 2 - Took out a $125,000 loan with Scotia Bank @ 6% interest payable every January 1 and the principal of the loan due December 1, 2026. 3. December 3 - Purchased inventory on account for $125,000 from ChemicalSafe. Company uses perpetual method. Supplier offered 2% discount in 10 days. 4. December 4 - Purchased a dry-cleaning equipment and a delivery Truck for $22,000 and $100,000 respectively. The company signed a note with the two suppliers. 5. December 5 - Purchased cleaning supplies on account for $9,600. 6. December 6 - Prepaid 1 year rent for the period from December 1 to November 30 for $12,000 cash. 7. December 10 - Montreal CleanDry Inc provides also commercial wash and fold for hotels. One of its customers made a deposit of $55,000 for future cleaning service. 8. December 11 - Performed dry cleaning services for WestmountHotel Inc for $124,000.One-quarter of this amount was paid in cash and the remainder was on account. 9. December 12 - Paid the balance due to its supplier ChemicalSafe (Ref. transaction#3). 10. December 13 - the company provides Laundry services for hotel continental for $25,000. The bill will be paid next January. 11. December 18 - Incurred wages for 2 employees (Irene and Cindy) who worked a total of 32 hours each at an hourly rate of $15.00; these wages will be paid on December 20. 12. On December 19 morning, Jessica (the owner) read in the newspaper that the hotel intercontinental is in financial distress. The hotel manager called her in the afternoon to ask for an extended payment. After meeting with Chloé, they decided to record a bad debt expense for $2 500. 13. December 20 - Paid wages of $9,000 to employees in addition to the amount owed to Irene and Cindy. 14. December 22 - Interviewed Kamala Trump, an experienced employee, to manage the store effective June 1, 2021; this position comes with a $50,000 annual salary 15. December 23 - Declared a dividend of $5,000. 16. December 24 - Rented the delivery truck to Duc's Dépanneur, a business next door, for the last week of the month for $2,500 cash. 17. December 25 - Paid the dividends previously declared on Dec 23. 18. December 31 - Depreciation on the delivery truck is calculated based on an estimated useful life of 5 years using the straight-line method. Residual value $20,000 19. December 31 - Accrued the interest on any debt financing taken in the month of December. 20. December 31 - Used $3,400 of the supplies in cleaning operations. 21. December 31 - Recorded the rent of December. 22. December 31- The company concluded that Hotel intercontinental with accounts totalling $2,500 would be unable to pay and wrote these receivables off. 23. At the end of 2021, Jessica and Chloé decided that it would use an estimate for bad debts of 1% of its credit sales. Credit sales equals $1 350,000 REQUIRED: 1) Prepare all necessary journal entries and adjusting entries for the month of December 2021 (26 marks) 2) Prepare the T account for the following accounts: Accounts receivable, Allowance for doubtful accounts and Bad debt expense. How accounts receivable would be presented the statement of financial position at December 31, 2021? (4 marks)

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