Question

Prepare a multi-step income statement, a statement of retained earnings, and a classified balance sheet at the end of each day (November 15th, 16th, 17th) using accrual accounting. Treat each day as a separate accounting period-as if each day is a year. Make sure to report current and non-current in regard to assets and liabilities when developing these statements. On Friday Greta took $1,000 out of her personal savings to fund the venture.

Opportunity Knocks - Saturday, November 9th Greta and her family visit the local farmers' market on their weekly shopping trip. Deborah, a local craft producer and friend of the family, is selling her holiday wreaths at the market. Greta tells Deborah how much she likes her wreaths. Deborah knows that Greta is a budding entrepreneur and asks if she will try selling the wreaths at the Festivus Extravaganza the following weekend, November 15th, 16th and 17th. Deborah says that she will be out of town most of that weekend and wants Greta to sell the product to keep building awareness of the wreaths. She also says that she has a booth reservation and Greta would have to pay the Festivus Extravaganza manager a $480 booth fee on November 15th along with a refundable $140 clean up fee. Deborah gives Greta the following additional information: Wreaths have been selling for a market price of $35 each. Greta can buy wreaths from her for $23 each Wreath inventory in Deborah's storage unit is enough to cover the needs of the Festivus Extravaganza weekend. Greta can keep any of the net income from the festival Deborah will return on the 12 pon of Sunday, November 17th and expects to be paid then for inventory acquired from the storage unit and not returned to her. Greta agrees to Deborah's offer and decides to sell wreaths at the festival. Greta asks her brother, Paul to help in the booth and Paul agrees. Friday, November 15th Early in the morning, Greta sets up the stand and pays the festival manager, Kavinda, $620 in cash. Prior to coming to the booth, Greta took $1,000 out her of personal savings to fund the venture. She also acquired 120 wreaths from Deborah's storage unit. At 2:30 in the afternoon, Rudolf Deer comes to the booth and prepays $630 to buy 18 wreaths that Greta will have ready for him to pick up on Sunday morning. Walk-up sales are good and 81 wreaths are sold in this manner by end of the day. Greta and Paul agree that $150 a day is fair and that he will be paid at the end of the festival

Answer 1

1.

Income Statement
	Nov 15	Nov 16	Nov 17
Sales	$ 2,835	$ 7,000	$ 6,055
Cost of Goods Sold	1,863	4,600	3,979
Gross Profit	972	2,400	2,076
Operating Expenses
Booth Fee Expense	480	-
Salaries Expense	150	150	350
Inventory Loss	-	437	-
Total Operating Expenses	630	587	350
Net Income	$ 342	$ 1,813	$ 1,726

2.

Statement of Retained Earnings
	Nov 15	Nov 16	Nov 17
Beginning balance	$ 0	$ 342	$ 2,155
Net Income	342	1,813	1,726
Ending balance	$ 342	$ 2,155	$ 3,881

3.

Balance Sheet
	Nov 15	Nov 16	Nov 17
Assets
Cash	$ 3,845	$ 9,620	$ 4,881
Accounts Receivable	0	1,225	0
Inventory	897	1,150	0
Clean Up Fee Deposit	140	140	0
Total Assets	$ 4,882	$ 12,135	$ 4,881
Liabilities and Equity
Accounts Payable	2,760	8,050	0
Salaries Payable	150	300	0
Unearned Revenue	630	630	0
Greta, Capital	1,000	1,000	1,000
Retained Earnings	342	2,155	3,881
Total Liabilities and Equity	$ 4,882	$ 12,135	$ 4,881