Question

Cookie Creations 5 Because Natalie has had such a successful first few months, she is considering other opportunities to develop her business. One opportunity is the sale of fine European mixers. The owner of Kzinski Supply Co. has approached Natalie to become the exclusive distributor of these fine mixers in her state. The current cost of a mixer is approximately $575, and Natalie would sell each one for $1,150. Natalie comes to you for on advice how to account for these mixers. Each appliance has a serial number and can be easily identified. The trial balance for Continuing Cookie Chronicle as on December 31, 2011 is as follows: Continuing Cookie Chronicle Trial Balance December 31, 2011 Debit Credit Account Cash $1,180 Accounts Receivable 875 Supplies 350 Prepaid Insurance 1,210 Equipment 1,200 Accumulated Depreciation Equipment $40 Accounts Payable 75 Salaries and Wages Payable 56 Unearned Service Revenue 300 Interest Payable 15 Notes Payable 2,000 Owner's Capital 2,329 $4,815 $4,815 In the end, Natalie decides to use the perpetual inventory system. The following transactions happen during the month of January Bought five deluxe mixers on account from Kzinski Supply Co. for $2,875, FOB shipping point, terms n/30 Ja n. 4 6 Paid $100 freight on the January 4 purchase. Returned one of the mixers to Kzinski because it was damaged during shipping. Kzinski issues Continuing Cookie Chronicle credit for the cost of mixer plus $20 for the cost of freight that was paid on nuary 6 for one mixer Ja 8 Collected $375 of the accounts receivable from December 2015. Three deluxe mixers are sold on account for $3,450, FOB destination, terms n/30. (Cost of goods sold is $595 per 12 mixer.) Paid the $75 of delivery charges for the three mixers that were sold on 14 Ja nuary 12 Bought four deluxe mixers on account from Kzinski Supply Co. for $2,300, FOB shipping point, terms n/30 14 Natalie is concerned that there is not enough cash available to pay for al of the mixers purchased. She invests an 17 additional $1,000 cash in Continuing Cookie Chronicle. 18 Paid $80 freight on the January 14 purchase. Sold two deluxe mixers for $2,300 cash. (Cost of goods sold is $595 per mixer.) 20 Natalie issued a check to her assistant for all the help the assistant has given her during the month 28 Her assistant worked 20 hours in nuary and is also paid the $56 owed at December 31, 2016. (Natalie's assistant earns $8 an Ja hour 28 Collected the amounts due from customers for the January 12 transaction. Paid a $145 utility bill ($75 for the December 2016 accounts payable and $70 for the month of January) 30 31 Paid Kzinski all amounts due 31 Natalie withdrew $750 for personal use.

Answer 1

Date	Account Title & Explanations			Debit
Jan. 4	Inventory			$2,875
	Accounts Payable
Jan. 6	Freight-in			$100
	Cash
Jan. 7	Accounts Payable (($2,875/5)+$20)			$595
	Inventory
Jan. 8	Cash			$375
	Accounts Receivable
Jan. 12	Accounts Receivable			$3,450
	Sales Revenue
	(To record sales revenue)
Jan. 12	Cost of goods sold (3 units * $595)			$1,785
	Inventory
	(To record cost of goods sold)
Jan. 14	Freight-out			$75
	Cash
	(To record freight charges paid)
Jan. 14	Inventory			$2,300
	Accounts Payable
	(To record purchases made)
Jan. 17	Cash			$1,000
	Owner's Capital
Jan. 18	Freight-in			$80
	Cash
Jan. 20	Cash			$2,300
	Sales Revenue
	(To record sales revenue)
Jan. 20	Cost of goods sold (2 units * $595)			$1,190
	Inventory
	(To record cost of goods sold)
Jan. 28	Salaries and Wages Expenses			$160
	(20 hrs* $8)
	Salaries and Wages Payable			$56
	Cash
	(To record salaries and wages paid)
Jan. 30	Cash			$3,450
	Accounts Receivable
	(To record amount collected from customers)
Jan. 30	Utilities Expenses			$70
	AccountsPayable			$75
	Cash
Jan. 31	Accounts Payable			$4,580
	($2,875-$595+$2,300)
	Cash
	(To record payments made to creditors)
Jan. 31	Owner's Drawings			$750
	Cash
	(To record amount withdrawn for personal use)
Cash
Date	Explanation Ref	Debit	Credit	Balance
	Balance			$1,180
Jan. 6	J1		$100	$1,080
Jan. 8	J1	$375		$1,455
Jan. 14	J1		$75	$1,380
Jan. 17	J1	$1,000		$2,380
Jan. 18	J1		$80	$2,300
Jan. 20	J1	$2,300		$4,600
Jan. 28	J1		$216	$4,384
Jan. 30	J1	$3,450		$7,834
Jan. 30	J1		$145	$7,689
Jan. 31	J1		$4,580	$3,109
Jan. 31	J1		$750	$2,359
Accounts Receivable
Date	Explanation Ref	Debit	Credit	Balance
	Balance			$875
Jan. 8	J1		$375	$500
Jan. 12	J1	$3,450		$3,950
Jan. 30	J1		$3,450	$500
Inventory
Date	Explanation Ref	Debit	Credit	Balance
	Balance			$0
Jan. 4	J1	$2,875		$2,875
Jan. 6	J1	$100		$2,975
Jan. 7	J1		$595	$2,380
Jan. 12	J1		$1,785	$595
Jan. 14	J1	$2,300		$2,895
Jan. 18	J1	$80		$2,975
Jan. 20	J1		$1,190	$1,785
Supplies
Date	Explanation Ref	Debit	Credit	Balance
Jan. 1	Balance			$350
Prepaid insurance
Date	Explanation Ref	Debit	Credit	Balance
Jan. 1	Balance			$1,210

Equipment
Date	Explanation Ref	Debit	Credit	Balance
Jan. 1	Balance			$1,200
Accumulated Depreciation - Equipment
Date	Explanation Ref	Debit	Credit	Balance
Jan. 1	Balance			$40

Accounts Payable
Date	Explanation Ref	Debit	Credit	Balance
Jan. 1	Balance			$75
Jan. 4			$2,875	$2,950
Jan. 7	J1	$595		$2,355
Jan. 14	J1		$2,300	$4,655
Jan. 30	J1	$75		$4,580
Jan. 31	J1	$4,580		$0
Salaries and Wages Payable
Date	Explanation Ref	Debit	Credit	Balance
Jan. 1	Balance			$56
Jan. 28	J1	$56		$0
Unearned Service Revenue
Date	Explanation Ref	Debit	Credit	Balance
Jan. 1	Balance			$300
Interest Payable
Date	Explanation Ref	Debit	Credit	Balance
Jan. 1	Balance			$15

Notes Payable
Date	Explanation Ref	Debit	Credit	Balance
Jan. 1	Balance			$2,000
Owner's Capital
Date	Explanation Ref	Debit	Credit	Balance
Jan. 1	Balance			$2,329
Jan. 17	J1		$1,000	$3,329
Owner's Drawings
Date	Explanation Ref	Debit	Credit	Balance
Jan. 1	Balance			$0
Jan. 31	J1	$750		$750
Sales Revenue
Date	Explanation Ref	Debit	Credit	Balance
Jan. 12	J1		$3,450	$3,450
Jan. 20	J1		$2,300	$5,750
Cost of goods sold
Date	Explanation Ref	Debit	Credit	Balance
Jan. 12	J1	$1,785		$1,785
Jan. 20	J1	$1,190		$2,975
Salaries and Wages Expense
Date	Explanation Ref	Debit	Credit	Balance
Jan. 28	J1	$160		$160
Utilities Expense
Date	Explanation Ref	Debit	Credit	Balance
Jan. 30	Adjusting J1	$70		$70

Freight out
Date	Explanation Ref	Debit	Credit	Balance
Jan. 14	J1	$75		$75

Continuing Cookie Chronicle
Trial Balance
January 31, 2017
Account			Debit	Credit
Cash			$2,359
Accounts Receivable			$500
Inventory			$1,785
Supplies			$350
Prepaid insurance			$1,210
Equipment			$1,200
Accumulated Depreciation - Equipment				$40
Unearned Service Revenue				$300
Interest Payable				$15
Notes Payable				$2,000
Owner's Capital				$3,329
Owner's Drawings			$750
Sales Revenue				$5,750
Cost of goods sold			$2,975
Salaries and Wages Expense			$160
Utilities Expense			$70
Freight out			$75
Total			$11,434	$11,434

Adjusting Entries

No.	Date	Account Title & Explanations			Debit	Credit
1	Jan. 31	No Entry			$0
		No Entry				$0
2	Jan. 31	Depreciation Expenses			$20
		($1,200/60 months)
		Accumulated Depreciation-Equipment				$20
3	Jan. 31	Interest Expenses			$10
		($2,000*6%/12)
		Interest Payable				$10
4	Jan. 31	Insurance Expense			$110
		Prepaid Insurance				$110
5	Jan. 31	No Entry			$0
		No Entry				$0
6	Jan. 31	No Entry			$0
		No Entry				$0

Cash
Date	Explanation Ref	Debit	Credit	Balance
	Balance			$1,180
Jan. 6	J1		$100	$1,080
Jan. 8	J1	$375		$1,455
Jan. 14	J1		$75	$1,380
Jan. 17	J1	$1,000		$2,380
Jan. 18	J1		$80	$2,300
Jan. 20	J1	$2,300		$4,600
Jan. 28	J1		$216	$4,384
Jan. 30	J1	$3,450		$7,834
Jan. 30	J1		$145	$7,689
Jan. 31	J1		$4,580	$3,109
Jan. 31	J1		$750	$2,359
Accounts Receivable
Date	Explanation Ref	Debit	Credit	Balance
	Balance			$875
Jan. 8	J1		$375	$500
Jan. 12	J1	$3,450		$3,950
Jan. 30	J1		$3,450	$500
Inventory
Date	Explanation Ref	Debit	Credit	Balance
	Balance			$0
Jan. 4	J1	$2,875		$2,875
Jan. 6	J1	$100		$2,975
Jan. 7	J1		$595	$2,380
Jan. 12	J1		$1,785	$595
Jan. 14	J1	$2,300		$2,895
Jan. 18	J1	$80		$2,975
Jan. 20	J1		$1,190	$1,785
Supplies
Date	Explanation Ref	Debit	Credit	Balance
Jan. 1	Balance			$350
Prepaid insurance
Date	Explanation Ref	Debit	Credit	Balance
Jan. 1	Balance			$1,210
Jan. 31	Adjusting J2		$110	$1,100
Equipment
Date	Explanation Ref	Debit	Credit	Balance
Jan. 1	Balance			$1,200
Accumulated Depreciation - Equipment
Date	Explanation Ref	Debit	Credit	Balance
Jan. 1	Balance			$40
Jan. 31	Adjusting J2		$20	$60
Accounts Payable
Date	Explanation Ref	Debit	Credit	Balance
Jan. 1	Balance			$75
Jan. 4			$2,875	$2,950
Jan. 7	J1	$595		$2,355
Jan. 14	J1		$2,300	$4,655
Jan. 30	J1	$75		$4,580
Jan. 31	J1	$4,580		$0
Salaries and Wages Payable
Date	Explanation Ref	Debit	Credit	Balance
Jan. 1	Balance			$56
Jan. 28	J1	$56		$0
Unearned Service Revenue
Date	Explanation Ref	Debit	Credit	Balance
Jan. 1	Balance			$300
Interest Payable
Date	Explanation Ref	Debit	Credit	Balance
Jan. 1	Balance			$15
Jan. 31	Adjusting J2		$10	$25
Notes Payable
Date	Explanation Ref	Debit	Credit	Balance
Jan. 1	Balance			$2,000
Owner's Capital
Date	Explanation Ref	Debit	Credit	Balance
Jan. 1	Balance			$2,329
Jan. 17	J1		$1,000	$3,329
Owner's Drawings
Date	Explanation Ref	Debit	Credit	Balance
Jan. 1	Balance			$0
Jan. 31	J1	$750		$750
Sales Revenue
Date	Explanation Ref	Debit	Credit	Balance
Jan. 12	J1		$3,450	$3,450
Jan. 20	J1		$2,300	$5,750
Cost of goods sold
Date	Explanation Ref	Debit	Credit	Balance
Jan. 12	J1	$1,785		$1,785
Jan. 20	J1	$1,190		$2,975
Salaries and Wages Expense
Date	Explanation Ref	Debit	Credit	Balance
Jan. 28	J1	$160		$160
Utilities Expense
Date	Explanation Ref	Debit	Credit	Balance
Jan. 30	Adjusting J1	$70		$70
Depreciation Expense
Date	Explanation Ref	Debit	Credit	Balance
Jan. 31	Adjusting J2	$20		$20
Insurance Expense
Date	Explanation Ref	Debit	Credit	Balance
Jan. 31	Adjusting J2	$110		$110
Freight out
Date	Explanation Ref	Debit	Credit	Balance
Jan. 14	J1	$75		$75
Interest Expense
Date	Explanation Ref	Debit	Credit	Balance
Jan. 31	Adjusting J2	$10		$10

Continuing Cookie Chronicle
Adjusted Trial Balance
January 31, 2017
Account			Debit	Credit
Cash			$2,359
Accounts Receivable			$500
Inventory			$1,785
Supplies			$350
Prepaid insurance			$1,100
Equipment			$1,200
Accumulated Depreciation - Equipment				$60
Unearned Service Revenue				$300
Interest Payable				$25
Notes Payable				$2,000
Owner's Capital				$3,329
Owner's Drawings			$750
Sales Revenue				$5,750
Cost of goods sold			$2,975
Salaries and Wages Expense			$160
Utilities Expense			$70
Depreciation Expense			$20
Insurance Expense			$110
Freight out			$75
Interest Expense			$10
Total			$11,464	$11,464

Continuing Cookie Chronicle
Income Statement
January 31, 2017
Account			Debit	Credit
Sales Revenue				$5,750
Less: Cost of Goods Sold				($2,975)
Gross Margin				$2,775
Salaries and Wages Expense			$160
Utilities Expense			$70
Depreciation Expense			$20
Insurance Expense			$110
Freight out			$75
Total Operating Expenses				($435)
Operating income				$2,340
Interest Expense				($10)
Net Income				$2,330