Question

only question 11

Early in 2014, Libby and Bruce Wanamaker leave their jobs and start a new business: Taco Thursday, a food truck. The following transactions describe the starting and running of their business from March 1, 2014 to December 31, 2014. Bruce and Libby contribute $100,000 of their cash to start the business. They purchase a food truck for $30,000 cash. They start using the truck on April 1, 2014. On March 24, 2014 they paid S18,000 cash to purchase insurance for the business. The policy covers one year and it effective from April 1,2014 to March 31, 2015 When they open for business on April 1, they have just three items on their menu with the following selling prices: 1. 2. 3. 4. Carne Asada Taco Sweet Potato & Kale Taco Imported Cola (with real cane sugar) $4.00 $3.50 2.00 From April 1 until December 31, 2014, they sell 12,400 Came Asada Tacos; 8,100 Sweet Potato & Kale Tacos; and 5,700 bottles of Cola. The cost of the food (and related serving items, such as paper plates and napkins) was $67,250 For the year ended December 31, 2014, they purchase food and serving items for $71,000 on account. For the year ended December 31, 2014, they pay S68,750 of the purchases on account noted in (5) They hire an employee, Emma Jane, to work on the food truck. She eams $17,400 over the course of the year for her work. Most is paid in cash; however, they owe Emma Jane $1,200 in pay as of December 31,2014 5. 6. 7. 8. They incur other operating expenses during the year ended December 31, 2014 of $3,750. 9. On July 1,2014, Taco Thursday borrows $40,000 from a local bank. The loan must be repaid 10. On October 1, 2014, they start selling Manny's Pale Ale, a local beer for $5.00 per bottle. These are all paid in cash. in three years. The interest rate is 12% per year, and interest must be paid annual to the bank (the first payment is on May 31, 2015.) During the last three months of 2014, they sell 2,130 bottles Manny's costs them $2.50 per bottle 11. Due to some poor accounting, Taco Thursday lost track of how much beer they purchased over the year. However, an inventory count shows that they have 25 cases (600 bottles) of Manny's beer in stock as of December 31,2014. All beer was purchased with cash. Other information: All sales are completed for cash. The food truck has an expected useful life of four (4) years Under a small business program, Taco Thursday will not have to pay any taxes for their first three years of operations. . e Required: Complete journal entries for all transactions and adjustments (using the space provided in the next two pages) for the year ended December 31, 2014. Please clearly label your journal entries

Answer 1

A	B	C	D	E	F	G	H	I
2
3		11)
4		Beginning Inventory	0
5		Number of bottles of Bear Sold	2130
6		Ending inventory of bottles	600
7
8		Ending inventory	=Beginning Inventory + Purchases -Sales
9
10		Using the above equation, number of units purchased can be calculated as follows:
11		Purchases	=Ending inventory + Sales - Beginning Inventory
12			2730	=D6+D5-D4
13
14		Hence number of bottles purchased	2730
15		Cost per bottle purchased	$2.50
16
17		Total purchase cost	$6,825.00	=D14*D15
18
19		Thus journal entry for purchase will be as follows:
20		Account	Debit	Credit
21		Inventory (Beer)	$6,825.00
22		Cash		$6,825.00
23