Question

Prepare a Statement of Earnings for Lava Pizza at January 31, 2019.

Jan The owners, Brad & Jennifer, each put up $250,000 cash as an initial investment into the company. 2 Purchased a pizza oven for $22,000. 3 Purchased inventory from Sysco Company on account for $21,000. 4 Hired five employees to begin work on Feb 15; the salaries for each employee will be set at $12/hour and they are each expected to work 20 hours per week. 5 Took out a loan with TD Bank for $50,000 payable in 90 days. Purchased land adjacent to the restaurant for customer parking at a cost of $10,000; the company paid $5,000 cash and signed a note for the balance due December 31, 2018. 7 Brad purchased a garage behind the restaurant to store personal items for $15,000 cash. 8Purchased a trademark for the company's pizza logo for $21,000 cash. 9 Ashley, Jennifer's sister, decided to join the partnership, and put up $250,000 as an initial investment. 10 Returned spoiled inventory purchased on Jan 3 for a credit equal to $11,000; no sales had occurred at this time. 11 Paid the Sysco Company account balance in-full. 12 Purchased short term investments equal to $5,000 cash. 13 Took out a bank loan with CIBC Bank for $1,000 payable in 10 years. 14 Purchased inventory from HSJ Foods for $10,000: 50% paid cash and the rest on account. 15 Provided a cash loan to a local supplier equal to $15,000; the loan must be repaid within 30 days. 16 Paid insurance on the store front in-advance for $1,500 cash; the coverage begins Feb 1. 19 Declared a dividend of $2,000 for each of the owners. 31 Depreciation on the pizza oven for January was calculated as $1,000. 31 Paid the dividend in-full declared on Jan 19. 31 Income tax payable for the month was calculated as $1,700. 31 The ending balance of the short term investments at January 31 was $2,000. 31 Sales for the month of January totalled $80,000 of which $1,000 was owed on account. 31 | Cost of goods sold for the month of January was $19,000

Answer 1

Lava Pizza Journal Enteries Date Particulars 1.1.2019 Cash a/c Dr. To Capital (Capital Invested Brad & Jennifer) Debit in $ Credit in $ 250000 250000 Dr. 22000 2.1.2019 Equipment a/c To Cash (Oven purchased) 22000 21000 3.1.2019 Inventory a/c Dr. To Accounts Payable (Inventory on account) 21000 4.1.2019 No journal entry 5.1.2019 Dr. 50000 Cash a/c To Bank Loan (Loan from TD Bank) 50000 6.1.2019 Dr. 10000 Land a/c To Cash To Note Payable (Land Purchased) 5000 5000 Dr. 15000 7.1.2019 Garage a/c To Cash (Garage purchased) 15000 8.1.2019 Dr. 21000 Trademark a/c To Cash (Logo purchased) 21000 9.1.2019 250000 Cash a/c chale Dr. To Capital (Capital Invested by Ashley) 250000 11000 10.1.2019 Accounts Payable a/c Dr. To Inventory (Inventory returned) 11000 10000 11.1.2019 Accounts Payable a/c Dr. To Cash (Cash paid to creditors) 21000 - 10000 10000 5000 12.1.2019 Short Term Investments a/c Dr. To Cash (Investments purchased) 5000 15000 13.1.2019 Cash a/c To Bank Loan (Loan from CIBC Bank) 15000

Date Particulars 14.1.2019 Inventory a/c Dr. To Cash To Accounts Payable (Inventory on account) Debit in $ Credit in $ 10000 5000 5000 Dr. 15000 15.1.2019 Note Receivable a/c To Cash (Cash lent to supplier) 15000 Dr. 1500 16.1.2019 Prepaid Insurance a/c To Cash (Insurance advance) 1500 6000 19.1.2019 Cash Dividend a/c Dr. To Dividend Payable (Dividend declared) 2000 x 3 6000 1000 31.1.2019 Depreciation Expense - Equip. a/c Dr To Accum. Depre - Equip. (Depreciation charged to Oven) 1000 Dr. 6000 31.1.2019 Dividend Payable a/c To Cash (Dividend paid in full) 6000 Dr. 31.1.2019 Income Tax Expense a/c To Income Tax Payable (Income Tax accrued) 1700 3000 31.1.2019 Cash a/c Dr. To Short Term Investments (Short Term Investments sold 3000 79000 1000 31.1.2019 Accounts Receivable a/c Dr. Cash a/c Dr. To Sales (Sales on account) 80000 19000 31.1.2019 Cost of goods sold a/c Dr. To Inventory (To record cost of goods sold) 19000

Trial Balance For the Month ending 31.1.2019 Particulars Cash Note Receivable Short Term Investments Accounts Receivable Inventory Prepaid Insurance Land Equipment Accum. Depre - Equip. Garage Trademark Accounts Payable Dividend Payable Income Tax Payable Note Payable Bank Loan Capital Cash Dividend Sales Cost of goods sold Depreciation Expense - Equip. Income Tax Expense Totals Debit in $ Credit in $ 463500 15000 2000 79000 1000 1500 10000 22000 1000 15000 21000 5000 0 1700 5000 65000 500000 6000 80000 19000 1000 1700 657700 657700 80000 Statement of Earnings For the Month ending 31.1.2019 Sales Cost of goods sold Gross Profit Depreciation Expense - Equip. - 19000 61000 -1000 60000 -1700 58300 Income Tax Expense Net Income Statement of Owner's Equiy For the Month ending 31.1.2019 Capital Net Income 500000 58300 558300 -6000 552300 Cash Dividend

Balance sheet As at 31.1.2019 Assets Current Assets Cash Note Receivable Short Term Investments Accounts Receivable Inventory Prepaid Insurance Amounts in $ Amounts in $ Liabilities Amounts in $ Amounts in $ Current Liabilities 463500 Accounts Payable 5000 15000 Income Tax Payable 1700 6700 2000 79000 Non Current Liabilities 1000 Note Payable 5000 1500 562000 Bank Loan 65000 70000 10000 Non Current Assets Land Equipment Accum. Depre - Equip. Garage 22000 -1000 21000 15000 Intangibles Trademark Total Assets Owner's Equity 21000 Capital 629000 Total Liabilities & Equity 552300 629000