The (a)
1. mixers should be classified as inventory as Natalie will attempt to resale them. 2. A perpetual inventory system will provide better control over inventory because you are dealing with high-value items you should use this system. 3. You still need to count inventory to ensure that your records are accurate. I suggest you should count inventory monthly.
(b) Date
GENERAL JOURNAL Account Titles and Explanation
Debit
Credit
Jan. 4 2,625
6
Merchandise Inventory........................ 2,625 Accounts Payable................................
Merchandise Inventory................................. Cash........................................................... Accounts Payable [($2,625 5) + $20]........ Merchandise Inventory............................ Cash................................................................ Accounts Receivable............................... Accounts Receivable.................................... Sales .......................................................... 100 100 545 545 375 375 3,150
7
8
12 3,150 12
Cost of Goods Sold [($2,625 + $100) 5 X 3]................................ Merchandise Inventory............................
1,635
1,635
(b) (Continued)
Jan.14
Freight-Out.................................... Cash...............................................
75 75 2,100 2,100
1,000
14Merchandise Inventory...................... Accounts Payable.........................
17 Cash.......................................................
Common Stock............................. 1,000
18 Merchandise Inventory........................ 80
Cash...............................................
20 2,100 20 Cost of Goods Sold [($2,625 + $100) 5 X 2]....................... Merchandise Inventory.................... Cash....................................................... Sales ................................................. 2,100
80
1,090
1,090 28 Wages Expense.................................... Wages Payable..................................... Cash.................................................. 160 56 216
28Cash ...........................................3,150 Accounts Receivable.................... 3,150
30 Accounts Payable................................. Telephone Expense.............................. Cash................................................... Accounts Payable ($2,625 $545 + $2,100).................... Cash................................................... 75 70 145
31
4,180
4,180 31 Dividends............................................... Cash................................................... 750 750
(b) and (d) Cash Ref. J1 100 1,030 J1 375 1,405 J1 75 1,330 J1 1,000 2,330
J1 80 2,250
Date Jan. 1 6 8 14 17
18
Explanation
Debit
Credit
Balance
Balance
1,130
20 28 28 30 31 31
J1 J1 J1 J1 J1 J1
2,100 3,150
4,350 216 4,134 7,284 145 7,139 4,180 2,959 750 2,209
Accounts Receivable
Date Jan. 1 8
12
Explanation
Ref. J1
Debit 375 500
Credit
Balance 875
Balance
J1
3,150
3,650
28
J1
3,150
500
Date Jan. 4 2,625 6 7 12 14 18 2,725 20 1,635
Merchandise Inventory Explanation Ref. Debit J1 2,625
Credit
Balance
J1 100 2,725 J1 545 2,180 J1 1,635 545 2,100 J1 J1 2,645 80 1,090
(b) and (d) (Continued) Date Jan. 1
Explanation
Baking Supplies Ref. Debit Prepaid Insurance Ref. Debit
J2
Credit
Balance 350
Balance
Date Jan. 1
Explanation
Credit
Balance
Balance
1,210
110 1,100
31 Adjusting entry
Date
Explanation
Baking Equipment Ref. Debit
Credit
Balance
Jan. 1
Balance
1,300
Date Jan. 1
Accumulated DepreciationBaking Equipment Explanation Ref. Debit Credit Balance
J2 22
Balance 43
65
31 Adjusting entry
Date
Explanation
Accounts Payable Ref. Debit J1 2,625 2,700 J1 545 2,155 J1 2,100 4,255 J1 75 4,180 J1 4,180 0
Credit
Balance 75
Jan. 1 Balance 4 7 14 30 31
(b) and (d) (Continued) Date Wages Payable Ref. Debit Credit Balance
Explanation
Jan.
1 Balance 56 28 J1
56 0
Date Jan.
Explanation
Unearned Revenue Ref. Debit
Credit
Balance
1 Balance 300
Date
Explanation
Interest Payable Ref. Debit
Credit
Balance
Jan.
1 Balance
31
Adjusting entry
J2
15
10
25
Date
Explanation
Notes Payable Ref. Debit
Credit
Balan ce
Jan.
1 Balance 2,000
Date
Jan.
Explanation
1 Balance 900
Common Stock Ref. Debit
J1
Credit
Balance
17
1,000 1,900
Date
Jan.
Explanation
1 Balance 1,476
Retained Earnings Ref. Debit
Credit
Balance
Date
Jan. 31
Explanation
Dividends Ref. Debit
J1 750
Credit
Balance
750
(b) and (d) (Continued) Sales Ref. J1
J1 2,100
Date Jan. 12 3,150
20
Explanation
Debit
Credit 3,150
5,250
Balance
Date
Jan. 12 20
Explanation
Cost of Goods Sold Ref. Debit
J1 1,635 J1 1,090
Credit
1,635 2,725
Balance
Date
Jan. 28
Explanation
Wages Expense Ref.
J1 160
Debit
160
Credit
Balance
Date
Explanatio n
J1
Telephone Expense Ref. Debit
Credit
Balance
Jan. 30
70
70
Date
Depreciation Expense Explana Ref. Debit tion
Credit
Balance
Jan. 31 Adjusting entry
J2
22 22
Date
Explanation
Insurance Expense Ref. Debit
Credit
Balance
Jan. J2
(b) and (d) (Continued)
31 Adjusting entry 110 110
Date
Jan. 14
Explanation
J1
Freight Out Ref. Debit
75 75
Credit
Balance
Date
Explanation
Interest Expense Ref. Debit
J2 10
Credit
Balance
10
Jan. 31 Adjusting entry
(c) Cookie Creations Trial Balance January 31, 2008 Debit Credit
Cash .................................................................................... $ 2,209
Accounts Receivable..................................................
Merchandise Inventory...............................................................
500
1,635
Baking Insurance....................................................... Supplies..........................................................
350
Prepaid Baking Equipment...................................................... Accumulated DepreciationBaking Equipment..... 43 Unearned Revenue..................................................... ................................................................................ 300 Interest Payable.......................................................... .................................................................................. 15 Notes Payable............................................................. ............................................................................. 2,000 Common Stock............................................................ ............................................................................. 1,900 Retained Earnings...................................................... ............................................................................. 1,476 Dividends..................................................................... Sales............................................................................. ............................................................................. 5,250 Cost of Goods Sold.................................................... Wages Expense........................................................... Telephone Expense.................................................... Freight Out .................................................................. ...................................................................................... $10,984
1,210 1,300 $
750
2,725 160 70 75 $10,984
(d) Date
GENERAL JOURNAL Account Titles and Explanation Debit 22 22
J2
Credit
Jan. 31 Depreciation Expense............................. Accumulated Depreciation Baking Equipment.............................. ($1,300 60 months) 31 Interest Expense...................................... Interest Payable.................................. ($2,000 X 6% X 1/12)
10 10
31 Insurance Expense.................................. Prepaid Insurance...............................
110 110
(e) Cookie Creations Adjusted Trial Balance January 31, 2008
Debit Credit Cash............................................................................. $ 2,209
Accounts Receivable.................................................................. 500
Merchandise Inventory.............................................. Baking Supplies......................................................... Prepaid Insurance...................................................... Baking Equipment...................................................... Accumulated DepreciationBaking Equipment.... 65 Unearned Revenue..................................................... ............................................................................... 300 Interest Payable.......................................................... ................................................................................. 25 Notes Payable............................................................. ............................................................................ 2,000 Common Stock........................................................... ............................................................................ 1,900 Retained Earnings...................................................... ............................................................................ 1,476 Dividends.................................................................... Sales............................................................................ ............................................................................ 5,250 Cost of Goods Sold.................................................... Wages Expense.......................................................... Telephone Expense...................................................
1,635 350 1,100 1,300 $
750
2,725 160 70
Depreciation Expense................................................ Insurance Expense.................................................... Freight-Out.................................................................. Interest Expense........................................................ ......................................................................... ______ $11,016
22 110 75 10 $11,016
(f) Cookie Creations Income Statement Month ended January 31, 2008
Sales.................................................................................... $5,250 Cost of goods sold............................................................ 2,725 Gross profit........................................................................ 2,525
Operating expenses Wages expense..................................................
Insurance expense....................................................... Freight-out.....................................................................
$160
110 75
Telephone expense...........................................
Depreciation expense.................................................. Total operating expenses........................................ 437 Income from operations.................................................... 2,088 Other expenses Interest expense............................................................ 10 Net income......................................................................... $2,078
70
22