Question

Stacy and her family visit the local weekend farmers' market on their weekly shopping trip. Deborah, a local candy-producer and friend of Stacy's family, sells her candy at a booth at the market during December and February, to meet demand for the holidays and Valentine's Day. Deborah no longer wants to work weekends but wants to continue to maintain interest in her product among farmers' market customers. Deborah knows that Stacy is a budding entrepreneur and asks if she would like to take over the retail sales at the booth in December and February. Deborah gives Stacy the following information: Boxed Specialty Chocolates sells at a market price of $14.00 cach. Deborah can prove that her chocolate has Fair Trade Certification Stacy can buy boxed chocolate from Deborah for $8.00 each. Stacy will be responsible for paying the booth fees for her booth. The booth fee is $400 per month Stacy can keep any of the net income from market sales. Deborah will take returns of all unsold boxes at the end of each month. Deborah expects to be paid for inventory that Stacy acquired but did not return by January 10 for December and by March 10 for February Stacy agrees to Deborah's offer and decides to sell boxed Specialty Chocolates at the farmers' market during December, 2018, February 2019 and December 2019. Stacy asks her brother, Paul, to help in her booth and she would pay him $250 for December and $200 for February. Paul agrees. December 2018 Stacy establishes her business as a corporation with a calendar year end and takes $1,200 out of her personal savings to buy common stock in the corporation. Stacy acquires 300 boxes from Deborah's storage unit. Stacy pays the market manager the booth fee for December and sets up the booth. Stacy sells 270 boxes of chocolates to market-goers. One customer, Mr. Johnson, pays for 20 boxes that he intends to pick up at the booth the first weekend in February Stacy pays Paul for his December work. The market manager tells Stacy that booth space for February is going quickly, so Stacy pays the manager $400 to secure booth space for February. Stacy returns all remaining boxes to Deborah.

Answer 1

1. Journal entries:

Date	Account Titles	Debit	Credit
		$	$
Dec 2018	Cash	1,200
	Common Stock		1,200
Dec 2018	Inventory	2,400
	Accounts Payable		2,400
Dec 2018	Booth Fee Expense	400
	Cash		400
Dec 2018	Cash	3,780
	Sales Revenue		3,780
Dec 2018	Cost of Goods Sold	2,160
	Inventory		2,160
Dec 2018	Cash	280
	Unearned Revenue		280
Dec 2018	Salaries Expense	250
	Cash		250
Dec 2018	Prepaid Expenses	400
	Cash		400
Dec 2018	Accounts Payable ( 30 boxes @ $ 8)	240
	Inventory		240
Jan 2019	Accounts Payable ( 290 boxes @ $ 8 )	2,320
	Cash		2,320
Feb 2019	Inventory	2,240
	Accounts Payable		2,240
Feb 2019	Booth Fee Expense	400
	Prepaid Expenses		400
Feb 2019	Unearned Revenue	280
	Sales Revenue		280
Feb 2019	Cost of Goods Sold	160
	Inventory		160
Feb 2019	Accounts Receivable	210
	Sales Revenue		210
Feb 2019	Cost of Goods Sold	120
	Inventory		120
Feb 2019	Cash	2,940
	Sales Revenue		2,940
Feb 2019	Cost of Goods Sold	1,680
	Inventory		1,680
Feb 2019	Salaries Expense	200
	Cash		200
Feb 2019	Accounts Payable	280
	Inventory		280
Mar 2019	Cash	210
	Accounts Receivable		210
Mar 2019	Accounts Payable	1,960
	Cash		1,960

Contd.

Dec 2019	Inventory	3,200
	Accounts Payable		3,200
Dec 2019	Booth Fee Expense	400
	Cash		400
Dec 2019	Donation Expense	120
	Inventory		120
Dec 2019	Cash	4,550
	Sales Revenue		4,550
Dec 2019	Salaries Expense	330
	Cash		330
Dec 2019	Accounts Payable	480
	Inventory		480
Dec 2019	Dividends	2,500
	Cash		2,500