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Continuing Cookie Chronicle_CCC5

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Question;Continuing Cookie Chronicle1;Continuing Cookie Chronicle;(Note:This is a continuation of the;Cookie Chronicle from Chapters 1 through 4.);CCC5Because Natalie has had such a;successful first few months, she is considering other opportunities to develop;her business. One opportunity is to become the exclusive distributor of a line;of fine European mixers. The current cost of a mixer is approximately$550, and Natalie would sell each one for $1,100.;Natalie comes to you for advice on how to account for these mixers. Each;appliance has a serial number and can be easily identified.;Natalie asks you the following questions.;1. ?Would;you consider these mixers to be inventory? Or, should they be classified as;supplies or equipment??;2. ?I?ve;learned a little about keeping track of inventory using both the perpetual and;the periodic systems of accounting for inventory. Which system do you think is;better? Which one would you recommend for the type of inventory that I want to;sell??;3. ?How;often do I need to count inventory if I maintain it using the perpetual system?;Do I need to count inventory at all??;In the end, Natalie;decides to use the perpetual method of accounting for inventory, and the;following transactions happen during the month of January.;Jan. 4 She buys five deluxe mixers on account from;Kzinski Supply Co. for $2,750, terms n/30.;6 She pays $100 freight on the January 4;purchase.;7 Natalie returns one of the mixers to Kzinski;because it was damaged during shipping. Kzinski issues Cookie Creations credit;for the cost of the mixer plus $20 for the cost of freight that was paid on;January 6 for one mixer.;8 She collects the amount due from the;neighborhood community center that was accrued at the end of December 2014.;12 She;sells three deluxe mixers on account for $3,300, FOB destination, terms n/30.;The mixers cost $570 each (including freight).;13 Natalie;pays her cell phone bill previously accrued in the December adjusting journal;entries.;14 She pays;$75 of delivery charges for the three mixers that were sold on January 12.;14 She buys;four deluxe mixers on account from Kzinski Supply Co. for $2,200, terms n/30.;17 Natalie;is concerned that there is not enough cash available to pay for all of the;mixers purchased. She issues additional common stock for $1,000.;18 She pays;$80 freight on the January 14 purchase.;20 She;sells two deluxe mixers for $2,200 cash.;28 Natalie;issues a check to her assistant. Her assistant worked 20 hours in January and;is also paid for amounts owing at December 31, 2014. Recall that Natalie?s;assistant earns $8 an hour.;28 Natalie;collects amounts due from customers in the January 12 transaction.;31 She pays;Kzinski all amounts due.;31 Cash;dividends of $750 are paid.;As of January 31, the following adjusting entry data;are available.;1. A count;of brochures and posters reveals that none were used in January.;2. A count;of baking supplies reveals that none were used in January.;3. 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 or60;months.);4. One;month?s worth of amortization (write-off) needs to be recorded on the website.;(Recall that the website has a useful life of 2 years or 24 months.);5. An additional;month?s worth of interest on her grandmother?s loan needs to be accrued. (The;interest rate is 9%.);6. One;month?s worth of insurance has expired.;7. Natalie;receives her cell phone bill, $75. The bill is for services provided in January;and is due February 15. (Recall that the cell phone is used only for business;purposes.);8. 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 book the outstanding lessons in February.;9. An;inventory count of mixers at the end of January reveals that Natalie has three;mixers remaining.;Instructions;Using the information that you have gathered and;the general ledger accounts that you have prepared through Chapter 4, plus the;new information above, do the following.;(a) Answer;Natalie?s questions.;(b) Prepare;and post the January 2015 transactions.;(c) Prepare;a trial balance.;(d) Prepare;and post the adjusting journal entries required.;(e) Prepare;an adjusted trial balance.;(f) Prepare;a multiple-step income statement and retained earnings statement for the month;ended January 31, 2015.;(g) Prepare;a classified balance sheet as of January 31, 2015.;(c) Totals 12,434;(f) Net income 2,180;(g) Total assets 8,414

 

Paper#38292 | Written in 18-Jul-2015

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