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AuntConnieCookiesimulation - an Account payable balance of...

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Initially the company purchased oven and kitchen equipment for $20,000. This is listed under the assets category of the November balance sheet. The money in cash account was decreased by $20,000 as a result of he purchase. In addition, in November office equipment was purchased on account from Trevor Depot for $15000. The equipment listed under assets on the balance sheet increased by $15,000 bringing the equipment assets to $35,000. The company will owe $15,000 as shown under accounts payable until the equipment is paid for. A Cash payment of 15,000 was spent to obtain baking ingredients needed to fulfill orders. This transaction increases the company’s property and is shown as an asset to the company. However, the cash account is reduced by that same amount. Later in November, the company issued a check for $3,000 towards its debt to Trevor Depot for previously purchased office equipment. This transaction decreased the company’s cash by $3000 and reduced the company’s debt as reflected in Accounts payable by $3000 leaving a cash balance of $42,000 and
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Unformatted text preview: an Account payable balance of $12000. The company owed this debt at that point in time. The owners of the office premises requested the company pat rent in advance. A check was issued for 6000. This amount was deducted from the cash account leaving a balance of $36,000 in cash as reflected on the balance sheet and is recorded as prepaid rent increasing the company’s assets, bringing the assets to $92,000 The company is interested in expanding and will be seeking a bank loan. Although you have firm orders of $100,000 worth of cookies, this transaction cannot be reflected on your balance sheet unless the customers have paid for the product in advance. Even then, the revenue must be allocated to the fiscal periods in which the cookies are actually delivered. The company is in a strong position even though you have been in the business for 2 months. In comparing December statements, owners equity and assets have increased by 9% leaving a net income of $10,375....
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