of December 2009, the following transactions occur.
Dec. 1 Natalie hires an assistant at an hourly wage of $8 to help with cookie making
and some administrative duties.
5 Natalie teaches the class that was booked on November 25. The balance outstanding
8 Cookie Creations receives a check for the amount due from the neighborhood
school for the class given on November 30.
9 Cookie Creations receives $750 in advance from the local school board for five
classes that the company will give during December and January.
15 Pays the cell phone invoice outstanding at November 30.
16 Issues a check to Natalie’s brother for the amount owed for the design of the
19 Receives a deposit of $60 on a cookie class scheduled for early January.
23 Additional revenue earned during the month for cookie-making classes amounts
to $4,000. (Natalie has not had time to account for each class individually.)
$3,000 in cash has been collected and $1,000 is still outstanding. (This is in addition
to the December 5 and December 9 transactions.)
23 Additional supplies purchased during the month for sugar, flour, and chocolate
chips amount to $1,250 cash.
23 Issues a check to Natalie’s assistant for $800. Her assistant worked approximately
100 hours from the time in which she was hired until December 23.
28 Pays a dividend of $500 to the common shareholder (Natalie).
As of December 31, Cookie Creations’ year-end, the following adjusting entry data are
1. A count reveals that $50 of brochures and posters remain at the end of December.
2. Depreciation is recorded on the baking equipment purchased in November. The baking
equipment has a useful life of 5 years. Assume that 2 months’ worth of depreciation
3. Amortization (which is similar to depreciation) is recorded on the website. (Credit
the Website account directly for the amount of the amortization.) The website is
amortized over a useful life of 2 years and was available for use on December 1.
4. Interest on the note payable is accrued. (Assume that 1.5 months of interest accrued
during November and December.) Round to nearest dollar.
5. One month’s worth of insurance has expired.
6. Natalie is unexpectedly telephoned on December 28 to give a cookie class at the neighborhood
community center on December 31. In early January Cookie Creations sends
an invoice for $450 to the community center.
7. A count reveals that $1,025 of baking supplies were used.
8. A cell phone invoice is received for $75. The invoice is for services provided during
the month of December and is due on January 15.
9. Because the cookie-making class occurred unexpectedly on December 28 and is for
such a large group of children, Natalie’s assistant helps out. Her assistant worked
7 hours at a rate of $8 per hour.
10. An analysis of the unearned revenue account reveals that two of the five classes paid
for by the local school board on December 9 still have not been taught by the end
of December. The $60 deposit received on December 19 for another class also remains
Using the information that you have gathered and the general ledger accounts that you
have prepared through Chapter 3, plus the new information above, do the following.
(a) Journalize the above transactions.
(b) Post the December transactions. (Use the general ledger accounts prepared in
(c) Prepare a trial balance at December 31, 2009. (c) Totals $8,160
(d) Prepare and post adjusting journal entries for the month of December.
(e) Prepare an adjusted trial balance as of December 31, 2009.
(f) Prepare an income statement and a retained earnings statement for the 2-month
period ending December 31, 2009, and a classified balance sheet as of December 31,
(g) Prepare and post closing entries as of December 31, 2009.
(h) Prepare a post-closing trial balance.
2 chapter 4 Accrual Accounting Concepts
(e) Totals $8,804
(f) Net income $3,211
(h) Totals $6,065
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