Cate's Cleaning

Cate loves the look and smell of a clean house. Having been complimented so frequently by visitors on the appearance of her home, she was finally convinced to make a business of it when a friend gave her $2,000 in July to clean his business for the next two months (August and September). The only stipulation was that Cate had to obtain liability insurance for any injury she might incur on his premises. Cate arranged the insurance to begin on August 1, the premium for the two months was $300 which was due on July 31, which Cate paid with cash. Before the end of July she also obtained a one-time cleaning job from another friend who was out of the country and wanted her house cleaned before she returned on August 1. She agreed to pay Cate $250 upon her return. To finish up the house cleaning assignment, Cate had been able to arrange the rental of equipment and a supply of cleaning products from a business acquaintance. They agreed to a fee of $50 for the one time rental/supply usage, with payment to be made in August. Cate completed the house cleaning in July and sent the government a check for $80 for estimated taxes related to the house cleaning assignment.

The following transactions/events occurred duringAugust:

A friend convinced Cate that it might be wise to protect herself and incorporate her business. She did so by transferring the existing business (including all assets and liabilities and equity) into the corporation as well as investing an additional $1,000 in the corporation and taking back common stock representing 100% ownership. [The corporation records the assets, liabilities and equity of the previous business at their existing values. i.e. it is as if Cate had always been incorporated, at least from an accounting perspective.)

Cate decided she would need her own equipment and supplies and so acquired the necessary equipment from a local cleaning supply company. She paid $300 for the equipment. The store owner assured Cate that although the equipment was used - it was good for 6 more months of use. Cate acquired $100 worth of cleaning supplies as well, also paying cash.

Cate cleaned her friend's business as required and collected the money from the other friend for whom she had cleaned the house in July. She paid the rental fee for the July equipment rental as well.

Cate did various cleaning jobs throughout the month, for which she received cash payments of $1,700. She also cleaned an entire student dorm for which she was to be paid $1,000 in September.

Cate's business friend was so impressed with her work; he committed to two more months and again paid $2,000 in advance. Cate extended her insurance coverage for 2 more months by paying an additional $300.

Cate had obtained a Speedway gas credit card for the business and during the month $200 had been charged for gas. The balance was due in September.

Cate ran out of supplies by the end of the month.

Cate's boyfriend is an accountant; he estimated her corporation's taxes for the month of August were $1,000. Tax payments are due on October 15 and will be paid at that time.