Final Revision – Test 2
Problem 1:
Here are selected 2022 transactions of Akron Corporation.
Jan 1 Retired a piece of machinery that was purchased on January 1, 2012. The machine
cost $62,000 and had a useful life of 10 years with no salvage value.
June 30 Sold a computer that was purchased on January 1, 2020. The computer cost $36,000
and had a useful life of 3 years with no salvage value. The computer was sold for $5,000 cash.
Dec 31 Sold a delivery truck for $9,000 cash. The truck cost $25,000 when it was purchased
on January 1, 2019, and was depreciated based on a 5-year useful life with a $4,000 salvage value.
Instructions
Journalize all entries required on the above dates. Akron Corporation uses straight-line
depreciation.
Problem 2:
Karen Noonan opened Clean Sweep Inc. on February 1, 2020. During February, the following
transactions were completed.
Feb 1 Issued 5,000 shares of Clean Sweep common stock for $13,000. Each share has a
$1.50 par value.
Feb 2 Borrowed $8,000 on a 2-year, 6% note payable
Feb 3 Paid $9,020 to purchase used floor and window cleaning equipment from a
company going out of business ($4,820 was for the floor equipment and $4,200 for the window
equipment)
Feb 4 Paid $220 for February Internet and phone services
Feb 5 Purchased cleaning supplies for $980 on account.
Feb 6 Hired 4 employees. Each will be paid $480 per 5-day work week. Employees will
begin working on Monday, February 9.
Feb 7 Obtained insurance coverage for $9,840 per year. Coverage runs from February 1,
2020, through January 31, 2021. Karen paid $2,460 cash for the first quarter of coverage.
Feb 16 Billed customers $3,900 for cleaning services performed through February 13, 2022.
Feb 24 Paid cash for employee wages for 2 weeks (February 9-13 and 16-20).
Feb 25 Collected $2,500 cash from customers billed on February 16.
Feb 27 Declared and paid cash dividend of $0.2 per share.
Instructions
(a) Journalize the transactions.
(b) Journalize the following adjustments:
1. Clean Sweep uses the allowance method to estimate bad debts. Clean Sweep estimates
that 3% of its month-ended receivables will not be collected.
2. Depreciation for the floor equipment using the straight-line method, an estimated life of
4 years, and $500 salvage value.
3. Karen estimates a 20% income tax rate.
(c) Prepare a classified balance sheet as of February 28, 2022 (extra)
