Final answer:
To prepare a balance sheet for Holmes Cleaning Service, we must account for services on account, cash collected, salaries paid, and estimated uncollectible accounts. A simplified balance sheet would show assets including cash of $99,500 and accounts receivable of $168,100, minus liabilities leading to equity.
Step-by-step explanation:
Preparing a Balance Sheet for Holmes Cleaning Service:
When preparing a balance sheet for Holmes Cleaning Service, we need to consider all the transactions that took place during the first year of operation. Here is a breakdown of the balance sheet components based on the given events:
- There were cleaning services provided on account, which means that this amount will be recorded under Accounts Receivable initially, amounting to $170,000.
- The company collected cash from accounts receivable, which is $127,500. This reduces the Accounts Receivable amount and increases Cash.
- The paid salaries of $28,000 for the year will be recorded as an expense, reducing the Cash balance and impacting the equity.
- An adjustment was made for uncollectible accounts expense of $1,900, which affects the Accounts Receivable and the equity since it is an expense predicted based on revenues.
The balance sheet as of December 31, 2018, would likely look something like the following:
- Assets:
- Cash: $127,500 - $28,000 = $99,500
- Accounts Receivable: $170,000 - $1,900 (uncollectible accounts expense) = $168,100
- Liabilities: (Not detailed in the information provided, so we assume no liabilities for the simplicity of this exercise)
- Equity: (Calculated as the difference between assets and liabilities)
Note: Since the question does not mention the initial equity, the issuance of shares, or any retained earnings previously, we cannot accurately calculate the total equity. However, it would primarily be the net assets after deducting liabilities, if any.