Question

After researching the different forms of business organization, Natalie Koebel decides to operate “Cookie Creations” as a corporation. She then starts the process of getting the business running. In November 2015, the following activities take place.

Nov.   8      Natalie cashes her U.S. Savings Bonds and receives $520, which she deposits in her personal bank account.

8      She opens a bank account under the name “Cookie Creations” and transfers $500 from her personal account to the new account in exchange for common stock.

11      Natalie pays $65 to have advertising brochures and posters printed. She plans to distribute these as opportunities arise. (Hint: Use Advertising Expense.)

13      She buys baking supplies, such as flour, sugar, butter, and chocolate chips, for $125 cash.

14      Natalie starts to gather some baking equipment to take with her when teaching the cookie classes. She has an excellent top-of-the-line food processor and mixer that originally cost her $750. Natalie decides to start using it only in her new business. She estimates that the equipment is currently worth $300. She invests the equipment in the business in exchange for common stock.

16      Natalie realizes that her initial cash investment is not enough. Her grandmother lends her $2,000 cash, for which Natalie signs a note payable in the name of the business. Natalie deposits the money in the business bank account. (Hint: The note does not have to be repaid for 24 months. As a result, the notes payable should be reported in the accounts as the last liability and also on the balance sheet as the last liability.)

17      She buys more baking equipment for $900 cash.

20      She teaches her first class and collects $125 cash.

25      Natalie books a second class for December 4 for $150. She receives $30 cash in advance as a down payment.

30      Natalie pays $1,320 for a one-year insurance policy that will expire on December 1, 2016.

CCC2 (Continued)

Instructions:

(a) Prepare journal entries to record the November transactions.

(b) Post the journal entries to general ledger accounts.

(c) Prepare a trial balance at November 30.

Answer 1

	Date	Account titles			Debit	Credit
	Nov. 8	No entry
	Nov. 8	Cash			500
		Common stock				500
		(Cash brought into business)
	Nov. 11	Advertising expense			65
		Cash				65
		(Payment towards Advertising
		brouchers and posters)
	Nov. 13	Supplies			125
		Cash				125
		(Purchased baking supplies)
	Nov. 14	Equipment			300
		Common stock				300
		(Equipment brought into business)
	Nov. 16	Cash			2000
		Notes payable				2000
		(Cash borrowed through notes)
	Nov. 17	Equipment			900
		Cash				900
		(Purchased baking equipment)
	Nov. 20	Cash			125
		Service revenue				125
		(Collected revenue)
	Nov. 25	Cash			30
		Unearned Service revenue				30
		(Advance received)
	Nov. 30	Prepaid insurance			1320
		Cash				1320
		(Insurance for one year paid in advance)