Acc280 Financial Accounting: Continuing Cookie Chronicle 5 (CCC5)_sole proprietorship
Acc280 Financial Accounting Continuing Cookie Chronicle 5 (CCC5) - proprietorship accounts 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 advice on how to account for these mixers. Each appliance has a serial number and can be easily identified. In the end, Natalie decides to use the perpetual inventory system to track her inventory. The following transactions happen during the month of January. Date Transaction Jan 4 Bought five deluxe mixers on account from Kzinski Supply Co. for $2,875, FOB shipping point, terms n/30. 6 Paid $100 freight on the January 4 purchase. 7 Returned one of the mixers to Kzinski because it was damaged during shipping. Kzinski issues Cookie Creations credit for the cost of mixer plus $20 for the cost of freight that was paid on January 6 for one mixer 8 Collected $375 of the accounts receivable from December 2009. 12 Three deluxe mixers are sold on account for $3,450, FOB destination, terns n/30. (Cost of goods sold is $595 per mixer.) 14 Paid the $75 of delivery charges for the three mixers that were sold on January 12. 14 Bought four deluxe mixers on account from Kzinski Supply Co. for $2,300, FOB ship ping point, terms n/30. 17 Natalie is concerned that there is not enough cash available to pay for all of the mixers purchased. She invests an additional $1,000 cash in Cookie Creations. 18 Paid $80 freight on the January 14 purchase 20 Sold two deluxe mixers for $2,300 cash. (Cost of goods sold is $595 per mixer.) 28 Natalie issued a check to her assistant for all the help the assistant has given her during the month. Her assistant worked 20 hours in January and is also paid the $56 owed at December 31, 2009. (Natalie’s assistant earns $8 an hour.) 28 Collected the amounts due from customers for the January 12 transaction. 30 Paid a $145 cellphone bill ($75 for the December 2009 account payable and $70 for the month of January). (Recall that the cellphone is used only for business purposes.) 31 Paid Kzinski all amounts due. 31 Natalie withdrew $750 cash for personal use. As of January 31, the following adjusting entry data is available. 1. A count of baking supplies reveals that none were used in January. 2. Another month’s worth of depreciation needs to be recorded on the baking equipment bought in November. (Recall that the baking equipment has a useful life of 5 years or 60 months and no salvage value.) 3. An additional month’s worth of interest on her grandmother’s loan needs to be accrued. (The interest rate is 6%.) 4. During the month, $110 of insurance has expired. 5. An analysis of the unearned revenue account reveals that Natalie has not had time to teach any of these lessons this month because she has been so busy selling mixers. As a result, there is no change to the unearned revenue account. Natalie hopes to complete the remaining lessons in February. 6. An inventory count of mixers at the end of January reveals that Natalie has three mixers remaining. Instructions Using the information from previous chapters and the new information above, do the following. (a) Prepare and post the January 2010 transactions. (b) Prepare a trial balance. (c) Prepare and post the adjusting journal entries required. (d) Prepare an adjusted trial balance. (e) Prepare a multiple-step income statement for the month ended January 31, 2010.
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