Question

Lisa Frees and Amelia Ellinger have been operating a catering business for several years. In March, the partners plan to expand by opening a retail sales shop. They have decided to form the business as a corporation called Traveling Gourmet, Inc. The following transactions occurred in March: a. Received $103,000 cash from each of the two shareholders to form the corporation, in addition to $4,300 in accounts receivable, $9,900 in equipment, a van (equipment) appraised at a fair value of $17,600, and $2,350 in supplies. Gave the two owners each 960 shares of common stock with a par value of $1 per share. b. Purchased a vacant store for sale in a good location for $590,000, making a $118,000 cash down payment and signing a 10-year mortgage note from a local bank for the rest. c. Borrowed $73,000 from the local bank on a 10 percent, one-year note. d. Purchased food and paper supplies costing $14,800 in March; paid cash. e. Catered four parties in March for $6,500; $2,060 was billed and the rest was received in cash. f. Sold food at the retail store for $18,050 cash; the food and paper supplies used cost $11,290. (Hint: Record two the revenue effect separate from the expense effect.) g. Received a $650 telephone bill for March to be paid in April. h. Paid $593 in gas for the van in March. i. Paid $10,880 in wages to employees who worked in March. i. Paid a $530 dividend from the corporation to each owner. k. Purchased $73,000 of equipment (refrigerated display cases, cabinets, tables, and chairs) and renovated and decorated the new store for $31,500 (added to the cost of the building); paid cash. Required: 1. Prepare an unadjusted classified income statement in good form for the month of March. TRAVELING GOURMET, INC. Income Statement (unadjusted) Revenues: Total revenues Expenses: Total costs and expenses

Answer 1

TRAVELING GOURMET, INC. Income Statement Cunadjusted) particulars Note REVENUES catering food at retail stoles 000 8560 18050 Total gevenues o po 26610 w you on Ex PENSE S DOO interest 608 al 3 290 food & paper Supplies 26090 650. Telephone bille Gas for van 593 10880 wages to employees 38821 Total cost &e expenses

Note: amount borrowed from local Bank- $73000 rate of interest - 104. interest expense for month of march noward to caps $73000 X 104.x), = 608 beto Note 2 catered four parties in march for $6.500, $2060 Total revenue from catering = 6500+ 2060 loi = $8560 60 Note 3 food &e paper supplics cost e 3 h food &e paper seeppling pait in cash - food & peper supplics p d used for = Sale of food at retail stores $14800 $ 1129 ba $26090