Cookie Creations 5 Because Natalie has had such a successful first few months, she is considering…
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Question “Cookie Creations 5 Because Natalie has had such a successful first few months, she is considering…”
Cookie Creations 5 Because Natalie has had such a successful first few months, she is considering other opportunities to develop her business. One opportunity is the sale of fine European mixers. The owner of Kzinski Supply Co. has approached Natalie to become the exclusive distributor of these fine mixers in her state. The current cost of a mixer is approximately $575, and Natalie would sell each one for $1,150. Natalie comes to you for on advice how to account for these mixers. Each appliance has a serial number and can be easily identified. The trial balance for Continuing Cookie Chronicle as on December 31, 2011 is as follows: Continuing Cookie Chronicle Trial Balance December 31, 2011 Debit Credit Account Cash $1,180 Accounts Receivable 875 Supplies 350 Prepaid Insurance 1,210 Equipment 1,200 Accumulated Depreciation Equipment $40 Accounts Payable 75 Salaries and Wages Payable 56 Unearned Service Revenue 300 Interest Payable 15 Notes Payable 2,000 Owner’s Capital 2,329 $4,815 $4,815 In the end, Natalie decides to use the perpetual inventory system. The following transactions happen during the month of January Bought five deluxe mixers on account from Kzinski Supply Co. for $2,875, FOB shipping point, terms n/30 Ja n. 4 6 Paid $100 freight on the January 4 purchase. Returned one of the mixers to Kzinski because it was damaged during shipping. Kzinski issues Continuing Cookie Chronicle credit for the cost of mixer plus $20 for the cost of freight that was paid on nuary 6 for one mixer Ja 8 Collected $375 of the accounts receivable from December 2015. Three deluxe mixers are sold on account for $3,450, FOB destination, terms n/30. (Cost of goods sold is $595 per 12 mixer.) Paid the $75 of delivery charges for the three mixers that were sold on 14 Ja nuary 12 Bought four deluxe mixers on account from Kzinski Supply Co. for $2,300, FOB shipping point, terms n/30 14 Natalie is concerned that there is not enough cash available to pay for al of the mixers purchased. She invests an 17 additional $1,000 cash in Continuing Cookie Chronicle. 18 Paid $80 freight on the January 14 purchase. Sold two deluxe mixers for $2,300 cash. (Cost of goods sold is $595 per mixer.) 20 Natalie issued a check to her assistant for all the help the assistant has given her during the month 28 Her assistant worked 20 hours in nuary and is also paid the $56 owed at December 31, 2016. (Natalie’s assistant earns $8 an Ja hour 28 Collected the amounts due from customers for the January 12 transaction. Paid a $145 utility bill ($75 for the December 2016 accounts payable and $70 for the month of January) 30 31 Paid Kzinski all amounts due 31 Natalie withdrew $750 for personal use.
Answer
Date | Account Title & Explanations | Debit | ||
Jan. 4 | Inventory | $2,875 | ||
Accounts Payable | ||||
Jan. 6 | Freight-in | $100 | ||
Cash | ||||
Jan. 7 | Accounts Payable (($2,875/5)+$20) | $595 | ||
Inventory | ||||
Jan. 8 | Cash | $375 | ||
Accounts Receivable | ||||
Jan. 12 | Accounts Receivable | $3,450 | ||
Sales Revenue | ||||
(To record sales revenue) | ||||
Jan. 12 | Cost of goods sold (3 units * $595) | $1,785 | ||
Inventory | ||||
(To record cost of goods sold) | ||||
Jan. 14 | Freight-out | $75 | ||
Cash | ||||
(To record freight charges paid) | ||||
Jan. 14 | Inventory | $2,300 | ||
Accounts Payable | ||||
(To record purchases made) | ||||
Jan. 17 | Cash | $1,000 | ||
Owner’s Capital | ||||
Jan. 18 | Freight-in | $80 | ||
Cash | ||||
Jan. 20 | Cash | $2,300 | ||
Sales Revenue | ||||
(To record sales revenue) | ||||
Jan. 20 | Cost of goods sold (2 units * $595) | $1,190 | ||
Inventory | ||||
(To record cost of goods sold) | ||||
Jan. 28 | Salaries and Wages Expenses | $160 | ||
(20 hrs* $8) | ||||
Salaries and Wages Payable | $56 | |||
Cash | ||||
(To record salaries and wages paid) | ||||
Jan. 30 | Cash | $3,450 | ||
Accounts Receivable | ||||
(To record amount collected from customers) | ||||
Jan. 30 | Utilities Expenses | $70 | ||
AccountsPayable | $75 | |||
Cash | ||||
Jan. 31 | Accounts Payable | $4,580 | ||
($2,875-$595+$2,300) | ||||
Cash | ||||
(To record payments made to creditors) | ||||
Jan. 31 | Owner’s Drawings | $750 | ||
Cash | ||||
(To record amount withdrawn for personal use) | ||||
Cash | ||||
Date | Explanation Ref | Debit | Credit | Balance |
Balance | $1,180 | |||
Jan. 6 | J1 | $100 | $1,080 | |
Jan. 8 | J1 | $375 | $1,455 | |
Jan. 14 | J1 | $75 | $1,380 | |
Jan. 17 | J1 | $1,000 | $2,380 | |
Jan. 18 | J1 | $80 | $2,300 | |
Jan. 20 | J1 | $2,300 | $4,600 | |
Jan. 28 | J1 | $216 | $4,384 | |
Jan. 30 | J1 | $3,450 | $7,834 | |
Jan. 30 | J1 | $145 | $7,689 | |
Jan. 31 | J1 | $4,580 | $3,109 | |
Jan. 31 | J1 | $750 | $2,359 | |
Accounts Receivable | ||||
Date | Explanation Ref | Debit | Credit | Balance |
Balance | $875 | |||
Jan. 8 | J1 | $375 | $500 | |
Jan. 12 | J1 | $3,450 | $3,950 | |
Jan. 30 | J1 | $3,450 | $500 | |
Inventory | ||||
Date | Explanation Ref | Debit | Credit | Balance |
Balance | $0 | |||
Jan. 4 | J1 | $2,875 | $2,875 | |
Jan. 6 | J1 | $100 | $2,975 | |
Jan. 7 | J1 | $595 | $2,380 | |
Jan. 12 | J1 | $1,785 | $595 | |
Jan. 14 | J1 | $2,300 | $2,895 | |
Jan. 18 | J1 | $80 | $2,975 | |
Jan. 20 | J1 | $1,190 | $1,785 | |
Supplies | ||||
Date | Explanation Ref | Debit | Credit | Balance |
Jan. 1 | Balance | $350 | ||
Prepaid insurance | ||||
Date | Explanation Ref | Debit | Credit | Balance |
Jan. 1 | Balance | $1,210 |
Equipment | ||||
Date | Explanation Ref | Debit | Credit | Balance |
Jan. 1 | Balance | $1,200 | ||
Accumulated Depreciation – Equipment | ||||
Date | Explanation Ref | Debit | Credit | Balance |
Jan. 1 | Balance | $40 |
Accounts Payable | ||||
Date | Explanation Ref | Debit | Credit | Balance |
Jan. 1 | Balance | $75 | ||
Jan. 4 | $2,875 | $2,950 | ||
Jan. 7 | J1 | $595 | $2,355 | |
Jan. 14 | J1 | $2,300 | $4,655 | |
Jan. 30 | J1 | $75 | $4,580 | |
Jan. 31 | J1 | $4,580 | $0 | |
Salaries and Wages Payable | ||||
Date | Explanation Ref | Debit | Credit | Balance |
Jan. 1 | Balance | $56 | ||
Jan. 28 | J1 | $56 | $0 | |
Unearned Service Revenue | ||||
Date | Explanation Ref | Debit | Credit | Balance |
Jan. 1 | Balance | $300 | ||
Interest Payable | ||||
Date | Explanation Ref | Debit | Credit | Balance |
Jan. 1 | Balance | $15 |
Notes Payable | ||||
Date | Explanation Ref | Debit | Credit | Balance |
Jan. 1 | Balance | $2,000 | ||
Owner’s Capital | ||||
Date | Explanation Ref | Debit | Credit | Balance |
Jan. 1 | Balance | $2,329 | ||
Jan. 17 | J1 | $1,000 | $3,329 | |
Owner’s Drawings | ||||
Date | Explanation Ref | Debit | Credit | Balance |
Jan. 1 | Balance | $0 | ||
Jan. 31 | J1 | $750 | $750 | |
Sales Revenue | ||||
Date | Explanation Ref | Debit | Credit | Balance |
Jan. 12 | J1 | $3,450 | $3,450 | |
Jan. 20 | J1 | $2,300 | $5,750 | |
Cost of goods sold | ||||
Date | Explanation Ref | Debit | Credit | Balance |
Jan. 12 | J1 | $1,785 | $1,785 | |
Jan. 20 | J1 | $1,190 | $2,975 | |
Salaries and Wages Expense | ||||
Date | Explanation Ref | Debit | Credit | Balance |
Jan. 28 | J1 | $160 | $160 | |
Utilities Expense | ||||
Date | Explanation Ref | Debit | Credit | Balance |
Jan. 30 | Adjusting J1 | $70 | $70 |
Freight out | ||||
Date | Explanation Ref | Debit | Credit | Balance |
Jan. 14 | J1 | $75 | $75 |
Continuing Cookie Chronicle | ||||
Trial Balance | ||||
January 31, 2017 | ||||
Account | Debit | Credit | ||
Cash | $2,359 | |||
Accounts Receivable | $500 | |||
Inventory | $1,785 | |||
Supplies | $350 | |||
Prepaid insurance | $1,210 | |||
Equipment | $1,200 | |||
Accumulated Depreciation – Equipment | $40 | |||
Unearned Service Revenue | $300 | |||
Interest Payable | $15 | |||
Notes Payable | $2,000 | |||
Owner’s Capital | $3,329 | |||
Owner’s Drawings | $750 | |||
Sales Revenue | $5,750 | |||
Cost of goods sold | $2,975 | |||
Salaries and Wages Expense | $160 | |||
Utilities Expense | $70 | |||
Freight out | $75 | |||
Total | $11,434 | $11,434 |
Adjusting
Entries
No. | Date | Account Title & Explanations | Debit | Credit | ||
1 | Jan. 31 | No Entry | $0 | |||
No Entry | $0 | |||||
2 | Jan. 31 | Depreciation Expenses | $20 | |||
($1,200/60 months) | ||||||
Accumulated Depreciation-Equipment | $20 | |||||
3 | Jan. 31 | Interest Expenses | $10 | |||
($2,000*6%/12) | ||||||
Interest Payable | $10 | |||||
4 | Jan. 31 | Insurance Expense | $110 | |||
Prepaid Insurance | $110 | |||||
5 | Jan. 31 | No Entry | $0 | |||
No Entry | $0 | |||||
6 | Jan. 31 | No Entry | $0 | |||
No Entry | $0 |
Cash | ||||
Date | Explanation Ref | Debit | Credit | Balance |
Balance | $1,180 | |||
Jan. 6 | J1 | $100 | $1,080 | |
Jan. 8 | J1 | $375 | $1,455 | |
Jan. 14 | J1 | $75 | $1,380 | |
Jan. 17 | J1 | $1,000 | $2,380 | |
Jan. 18 | J1 | $80 | $2,300 | |
Jan. 20 | J1 | $2,300 | $4,600 | |
Jan. 28 | J1 | $216 | $4,384 | |
Jan. 30 | J1 | $3,450 | $7,834 | |
Jan. 30 | J1 | $145 | $7,689 | |
Jan. 31 | J1 | $4,580 | $3,109 | |
Jan. 31 | J1 | $750 | $2,359 | |
Accounts Receivable | ||||
Date | Explanation Ref | Debit | Credit | Balance |
Balance | $875 | |||
Jan. 8 | J1 | $375 | $500 | |
Jan. 12 | J1 | $3,450 | $3,950 | |
Jan. 30 | J1 | $3,450 | $500 | |
Inventory | ||||
Date | Explanation Ref | Debit | Credit | Balance |
Balance | $0 | |||
Jan. 4 | J1 | $2,875 | $2,875 | |
Jan. 6 | J1 | $100 | $2,975 | |
Jan. 7 | J1 | $595 | $2,380 | |
Jan. 12 | J1 | $1,785 | $595 | |
Jan. 14 | J1 | $2,300 | $2,895 | |
Jan. 18 | J1 | $80 | $2,975 | |
Jan. 20 | J1 | $1,190 | $1,785 | |
Supplies | ||||
Date | Explanation Ref | Debit | Credit | Balance |
Jan. 1 | Balance | $350 | ||
Prepaid insurance | ||||
Date | Explanation Ref | Debit | Credit | Balance |
Jan. 1 | Balance | $1,210 | ||
Jan. 31 | Adjusting J2 | $110 | $1,100 | |
Equipment | ||||
Date | Explanation Ref | Debit | Credit | Balance |
Jan. 1 | Balance | $1,200 | ||
Accumulated Depreciation – Equipment | ||||
Date | Explanation Ref | Debit | Credit | Balance |
Jan. 1 | Balance | $40 | ||
Jan. 31 | Adjusting J2 | $20 | $60 | |
Accounts Payable | ||||
Date | Explanation Ref | Debit | Credit | Balance |
Jan. 1 | Balance | $75 | ||
Jan. 4 | $2,875 | $2,950 | ||
Jan. 7 | J1 | $595 | $2,355 | |
Jan. 14 | J1 | $2,300 | $4,655 | |
Jan. 30 | J1 | $75 | $4,580 | |
Jan. 31 | J1 | $4,580 | $0 | |
Salaries and Wages Payable | ||||
Date | Explanation Ref | Debit | Credit | Balance |
Jan. 1 | Balance | $56 | ||
Jan. 28 | J1 | $56 | $0 | |
Unearned Service Revenue | ||||
Date | Explanation Ref | Debit | Credit | Balance |
Jan. 1 | Balance | $300 | ||
Interest Payable | ||||
Date | Explanation Ref | Debit | Credit | Balance |
Jan. 1 | Balance | $15 | ||
Jan. 31 | Adjusting J2 | $10 | $25 | |
Notes Payable | ||||
Date | Explanation Ref | Debit | Credit | Balance |
Jan. 1 | Balance | $2,000 | ||
Owner’s Capital | ||||
Date | Explanation Ref | Debit | Credit | Balance |
Jan. 1 | Balance | $2,329 | ||
Jan. 17 | J1 | $1,000 | $3,329 | |
Owner’s Drawings | ||||
Date | Explanation Ref | Debit | Credit | Balance |
Jan. 1 | Balance | $0 | ||
Jan. 31 | J1 | $750 | $750 | |
Sales Revenue | ||||
Date | Explanation Ref | Debit | Credit | Balance |
Jan. 12 | J1 | $3,450 | $3,450 | |
Jan. 20 | J1 | $2,300 | $5,750 | |
Cost of goods sold | ||||
Date | Explanation Ref | Debit | Credit | Balance |
Jan. 12 | J1 | $1,785 | $1,785 | |
Jan. 20 | J1 | $1,190 | $2,975 | |
Salaries and Wages Expense | ||||
Date | Explanation Ref | Debit | Credit | Balance |
Jan. 28 | J1 | $160 | $160 | |
Utilities Expense | ||||
Date | Explanation Ref | Debit | Credit | Balance |
Jan. 30 | Adjusting J1 | $70 | $70 | |
Depreciation Expense | ||||
Date | Explanation Ref | Debit | Credit | Balance |
Jan. 31 | Adjusting J2 | $20 | $20 | |
Insurance Expense | ||||
Date | Explanation Ref | Debit | Credit | Balance |
Jan. 31 | Adjusting J2 | $110 | $110 | |
Freight out | ||||
Date | Explanation Ref | Debit | Credit | Balance |
Jan. 14 | J1 | $75 | $75 | |
Interest Expense | ||||
Date | Explanation Ref | Debit | Credit | Balance |
Jan. 31 | Adjusting J2 | $10 | $10 |
Continuing Cookie Chronicle | ||||
Adjusted Trial Balance | ||||
January 31, 2017 | ||||
Account | Debit | Credit | ||
Cash | $2,359 | |||
Accounts Receivable | $500 | |||
Inventory | $1,785 | |||
Supplies | $350 | |||
Prepaid insurance | $1,100 | |||
Equipment | $1,200 | |||
Accumulated Depreciation – Equipment | $60 | |||
Unearned Service Revenue | $300 | |||
Interest Payable | $25 | |||
Notes Payable | $2,000 | |||
Owner’s Capital | $3,329 | |||
Owner’s Drawings | $750 | |||
Sales Revenue | $5,750 | |||
Cost of goods sold | $2,975 | |||
Salaries and Wages Expense | $160 | |||
Utilities Expense | $70 | |||
Depreciation Expense | $20 | |||
Insurance Expense | $110 | |||
Freight out | $75 | |||
Interest Expense | $10 | |||
Total | $11,464 | $11,464 |
Continuing Cookie Chronicle | ||||
Income Statement | ||||
January 31, 2017 | ||||
Account | Debit | Credit | ||
Sales Revenue | $5,750 | |||
Less: Cost of Goods Sold | ($2,975) | |||
Gross Margin | $2,775 | |||
Salaries and Wages Expense | $160 | |||
Utilities Expense | $70 | |||
Depreciation Expense | $20 | |||
Insurance Expense | $110 | |||
Freight out | $75 | |||
Total Operating Expenses | ($435) | |||
Operating income | $2,340 | |||
Interest Expense | ($10) | |||
Net Income | $2,330 |
Conclusion
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