QUESTION 2

1. PROBLEM ONE: [ 50 points]

   Listed below are the transactions of Clean-as-Clean Cleaners (CCC) Corp. for the month of March 2020, its first month of operations after being formed by Ashtyn.

   Mar. 1	Ashtyn invested $100,000 cash in CCC Inc. in exchange for common stock.
   2 2	Purchases dry cleaning equipment on account from Heavy Equipment Co. for $22,000. Paid $1,200 for one year dry cleaning equipment insurance. The amount was recorded as Insurance Expense (debit) and Cash (credit)
   3	Pays rent for office space, $2,000 for the month.
   4	Employs a receptionist, Jose, to work at the front desk for a monthly salary of $1,500 to be paid at the end of each month.
   5	Purchases dry cleaning supplies for cash, $3,000.
   9	Receives cash of $3,500 from patients for dry cleaning clothes picked up.
   10	Pays miscellaneous business expenses, $500.
   15 16	Bills various on account type customers $8,000 for dry cleaning services performed since March 1. Received $2,000 worth of cleaning supplies to be paid for on April 2.
   18	Pays Heavy Equipment Co. on account, $15,000.
   20	Receives $6,500 from customers on account.
   30	Bills on account customers $9,800 for last 15 days cleaning.
   30	Pays the following expenses in cash: salaries $1,500; miscellaneous office expenses $100.
   30 30	CCC declared and paid a $500 cash dividend to its shareholders. Purchased Michelle Wie's property for $78,000. CCC Company paid $25,000 in cash and issued a note for the difference to be paid in one year with no interest. The price consists of land $10,000 and a building worth $68,000. (Make one compound entry.)

   Requirements:

   1. Record the transactions above in CCCs Ledger, balance the accounts, and prepare a trial balance.
   2. And then prepare adjusting journal entries to take the following into account:
   • The equipment depreciates $2,000 per month.
   • Dry cleaning supplies used during March amounted to $4,000.
   • Expired insurance.
   • Interest on the note
   3. Answer the following questions:
   1. How much is net income for March 2020?
   2. What is the balance of retained earnings?
   3. How much are total assets?
   4. How much are total liabilities?
   5. How much is total equity?
   6. Write out the accounting equation and enter the appropriate totals in the equation. Totals only do not list accounts.
   7. Which accounts will be closed? List them.

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50 points

QUESTION 3

1. PROBLEM TWO: Financial Statements

   At the end of 2019, Wyatt Companys accountant presented you with the following account balances just prior to the preparation of the financial statements.

   Rent revenue $30,000

   Interest expense 15,000

   Gain on sale of Land 10,000

   Salaries and wages expense (selling) 104,000

   Supplies (selling) 18,000

   Salaries and wages expense (administrative) $134,000

   Other administrative expenses 51,000

   Cost of goods sold 480,000

   Net sales 980,000

   Depreciation on plant assets (70% selling, 30% administrative) 70,000

   Cash dividends declared 20,000

   Wyatt Corp. has 100,000 shares of common stock outstanding. In 2019.

   Additional transactions that occurred in 2019 and not included in the balances above are as follows.

   1. In 2019, Wyatt Corp. sold equipment for $40,000. The machine had originally cost $80,000 and had accumulated depreciation of $30,000. The gain or loss is considered non-recurring.
   2. The company discontinued operations of one of its subsidiaries during the current year at a loss of $60,000 before taxes. Assume that this transaction meets the criteria for discontinued operations. The loss from operations of the discontinued subsidiary was $20,000 before taxes; the loss from disposal of the subsidiary was $40,000 before taxes.

   Requirements:

   1. Analyze the above information and prepare a multiple-step income statement for the year 2019. Include a presentation for earnings per share as it should be shown on the face of the income statement. [30 points]

   (Assume a total effective tax rate of 40% on all items.)

   2. Prepare a Statement of retained earnings for Wyatt Company. [20 points]