Bob?s Chocolate Chips and More, a bakery specializing in gourmet pizza and chocolate chip cookies, started business on October 1, 2016. The following transactions occurred during the month.

1. The company issued 10,000 shares of common stock at $15 per share.
2. The company acquired office equipment on October 1 for $50,000 cash.
3. The company purchased $25,000 of ingredients on account.
4. Rent is $750 a month. On October 1, the company paid rent for October, November, and December.
5. The company sold pizza and cookies for $35,000. The transaction was a credit sale. The pizza and cookies cost $11,000 to make.
6. The company paid salaries totaling $6,300.
7. The company collected $26,000 of the amount owed by customers.
8. The company paid $10,500 for ingredients previously purchased on account.
9. The company paid $1600 for utilities on its corporate headquarters and $450 for advertising.
10. The company borrowed $12,000 from the bank for additional working capital requirements. The company repaid $3,000 by month-end.
11. The company paid $500 cash dividends to shareholders during October.
12. The company received an order from a customer for two luncheons. The sales price for the order was $20,000 ($10,000 for each luncheon). The customer paid $20,000 in advance for the order.

Adjusting Entries

Assume that the company has a monthly accounting cycle. Use the following information to construct the corresponding adjusting entries on October 31.

1. One month of the company?s rent expired during October.
2. The company?s equipment originally cost $50,000 and was expected to benefit the company for 5 years. Straight line depreciation method is used. Assume a $5,000 salvage value.
3. The company?s employees earned $400 during the last week of October that will be paid on November 6.
4. Interest on the bank loan for the month of October was $600. This amount was paid on November 5.
5. On October 31, the company delivered one of the two luncheons ordered and paid for in advance by a customer (described in transaction #12). The luncheon cost the company $3,500.

Required:

1. Complete the following steps:
   1. Use the FSET template on p.2 to record the October transactions and adjusting entries
   2. Record the journal entries (including adjusting entries)
   3. Post them to the corresponding T-accounts (template provide on p.3).

1. Prepare a Balance Sheet (as of October 31), an Income Statement (for October), and a Statement of Cash Flows under the direct method (for October). Don?t forget to do closing entries before you prepare the balance sheet.

BUSI 610 - Fall 2016 Individual Assignment #1: The Accounting Cycle Bob's Chocolate Chips and More, a bakery specializing in gourmet pizza and chocolate chip cookies, started business on October 1, 2016. The following transactions occurred during the month. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. The company issued 10,000 shares of common stock at $15 per share. The company acquired office equipment on October 1 for $50,000 cash. The company purchased $25,000 of ingredients on account. Rent is $750 a month. On October 1, the company paid rent for October, November, and December. The company sold pizza and cookies for $35,000. The transaction was a credit sale. The pizza and cookies cost $11,000 to make. The company paid salaries totaling $6,300. The company collected $26,000 of the amount owed by customers. The company paid $10,500 for ingredients previously purchased on account. The company paid $1600 for utilities on its corporate headquarters and $450 for advertising. The company borrowed $12,000 from the bank for additional working capital requirements. The company repaid $3,000 by month-end. The company paid $500 cash dividends to shareholders during October. The company received an order from a customer for two luncheons. The sales price for the order was $20,000 ($10,000 for each luncheon). The customer paid $20,000 in advance for the order. Adjusting Entries Assume that the company has a monthly accounting cycle. Use the following information to construct the corresponding adjusting entries on October 31. (a) One month of the company's rent expired during October. (b) The company's equipment originally cost $50,000 and was expected to benefit the company for 5 years. Straight line depreciation method is used. Assume a $5,000 salvage value. (c) The company's employees earned $400 during the last week of October that will be paid on November 6. (d) Interest on the bank loan for the month of October was $600. This amount was paid on November 5. (e) On October 31, the company delivered one of the two luncheons ordered and paid for in advance by a customer (described in transaction #12). The luncheon cost the company $3,500. Required: 1. Complete the following steps: a. Use the FSET template on p.2 to record the October transactions and adjusting entries b. Record the journal entries (including adjusting entries) c. Post them to the corresponding T-accounts (template provide on p.3). 2. Prepare a Balance Sheet (as of October 31), an Income Statement (for October), and a Statement of Cash Flows under the direct method (for October). Don't forget to do closing entries before you prepare the balance sheet. You may want to prepare a worksheet that is similar to the one-page summary worksheet distributed in class for the Chemalite case after you complete question 1 (the summary worksheet is optional). This is an individual assignment. Submit a hard copy of your assignment in class on the due date. Please include your name and the honor pledge on your assignment. 1 FSET Template: Please use the following template to complete the FSET. See the first transaction for example - be sure to include both the amount (e.g., +10,000) and the account name (e.g., Common stock) below the amount in your answers (except for cash). For cash transactions, indicate whether the cash flow should be classified as Operating (O), Investing (I), or Financing (F) next to the transaction description. Transaction 1. Issue common stock (F) 2. Purchase inventory on account 3. Purchase equipment Cash Noncash Asset + Assets +150,000 - Balance Sheet Contra Contrib. = Liabilities + + Capital Assets = +150,000 Common stock = Income Statement Retained Earnings Revenues - Net Income = - - = - = - Expenses = = ... 2 For each journal entry, indicate clearly next to each account whether it is an asset(A), contr-asset(XA), Liability(L), shareholders' equity (SE), Revenues(R), or Expense(E). Follow the format of the following example: (1). Cash (+A) Common stock (+SE) 150,000 150,000 Adjusting Entries Closing Entries 3 4 Summary of T-Accounts Revenues and Expenses (Temporary Income Statement Accounts) Sales Revenue (R) Cost of Goods Sold (E) Wages Expense (E) Utilities Expense (E) Advertising Expense (E) Rent Expense (E) Depreciation Expense (E) Interest Expense (E) Assets (Permanent Balance Sheet Accounts) Cash (A) (1) 150,000 Prepaid Rent (A) Inventory (A) Accounts Receivable (A) Equipment (A) Accumulated Depreciation (XA) Liabilities and Equities (Permanent Balance Sheet Accounts) Accounts Payable (L) Unearned Revenue (L) Interest Payable (L) Loans Payable (L) Common Stock (SE) 150,000 Wages Payable (L) Retained Earnings (SE) (1) 5 Balanc Transaction Cash Asset 1. Issue common stock (F) 150,000 2. Purchase equipment (I) 3. Purchase inventory on account (O) 4. Rent (Oct- Dec) 5. Sold pizza and cookies (O) 5. Cost of cookies cost (O) 6. Paid salaries (O) 7. Collected payment (F) 8. Paid account (O) 9. Paid utilities and advertising 10. Borrowed funds (F) 10. Repaid portion of Borrowed funds (F) 11. Paid dividends (F) 12. Order received (O) -50,000 The Adjusting Process: a. Prepaid rent expired b. Depreciation expense c. Wages for last week in Oct d. Interest paid e. Delivered luncheon + Noncash Assets - Contra Assets 50,000 25000 - -2250 35000 -11000 -6300 26000 -10500 -2050 12000 -26000 -10500 -3000 -500 20000 -750 9000 -9000 -3500 118900 -9000 81750 1 200650 Balance Sheet = Liabilities Contrib. Capital + Retained Earnings 150,000 = Common stock = = 25000 35000 -2050 12000 -3000 -500 400 600 191650 35000 150000 2 217450 32450 Income Statement Revenues = Net Income - = - - = = - Expenses 2250 11000 6300 -2250 35000 -11000 -6300 10500 2050 -10500 -2050 3000 500 -3000 -500 20000 19400 35000 20000 55000 35600 3 4 5 Balance S Transaction 1. Issued common stock for shares (F) 2. Equipment acquired (I) 3. Inventory purchased on account (O) 4. Prepaid rent (O) 5. Pizza sold (O) Cost of sales (O) 6. Salary paid (O) 7. Cash collection 8. Payment made for inventory (O) 9. Utilities expenses (O) Advertising expenses (O) 10. Borrowing (F) Repayment (F) 11. Dividends paid 11. Order received in advance (O) Balance before adjustments Adjustments: Rent expired (O) Depreciation (O) Salaries accrued (O) Interest expense (O) Advance (O) Cost of sales (O) Balance after adjustments Noncash Contra + Assets Assets Cash Asset 150000 -50000 -2250 -6300 26000 -10500 -1600 -450 12000 -3000 -500 20000 133400 50000 25000 2250 35000 -11000 -26000 75250 0 -750 -750 133400 -3500 71000 -750 Balance Sheet = Income Statement Retained Revenue Expense + Contrib. Capital + Earning = s s s 150000 Liabilities 25000 35000 -11000 -6300 35000 11000 6300 -10500 -1600 -450 1600 450 12000 -3000 -500 14500 20000 29000 0 150000 400 600 -10000 15500 19000 150000 0 15150 -750 -750 -400 -600 10000 -3500 19150 35000 19350 750 750 400 600 10000 45000 3500 25350 me Statement Net Income 35000 -11000 -6300 -1600 -450 15650 -750 -750 -400 -600 10000 -3500 19650 Account Cash (+A) Common stock (+SE) Debit Credit 150000 150000 Equipment (+A) Cash (-A) 50000 Inventory (+A) Accouts payable (+L) 25000 Prepaid rent (+A) Cash (-A) 50000 25000 2250 2250 Accounts receivables (+A) Sales (+R) 35000 Cost of goods sold (+E) Inventory (-A) 11000 Salary expense (+E) Cash (-A) 35000 11000 6300 6300 Cash (+A) Accounts receivables (-A) 26000 Accounts payable (-L) Cash (-A) 10500 Utilities expense (+E) Advertising expense (+E) Cash (-A) Cash (+A) Short term debt (+L) Short term debt (-L) Cash (-L) Dividends (-RE) Cash Cash (+A) Unearned revenue (+L) Adjusting entries 26000 10500 1600 450 2050 12000 12000 3000 3000 500 500 20000 20000 Rent expense (+E) Prepaid Rent (-A) 750 Deprciation expense (+E) Accumulated Depreciation (-A) 750 Salaries expense (+E) Salaries payable (+L) 400 Interest expense (+E) Interest payable (+L) 600 Unearned revenue (-L) Sales (+R) 10000 Cost of goods sold (+E) Inventory (-A) 3500 750 750 400 600 10000 3500 Balance S Transaction 1. Issued common stock for shares (F) 2. Equipment acquired (I) 3. Inventory purchased on account (O) 4. Prepaid rent (O) 5. Pizza sold (O) Cost of sales (O) 6. Salary paid (O) 7. Cash collection 8. Payment made for inventory (O) 9. Utilities expenses (O) Advertising expenses (O) 10. Borrowing (F) Repayment (F) 11. Dividends paid 11. Order received in advance (O) Balance before adjustments Adjustments: Rent expired (O) Depreciation (O) Salaries accrued (O) Interest expense (O) Advance (O) Cost of sales (O) Balance after adjustments Noncash Contra + Assets Assets Cash Asset 150000 -50000 -2250 -6300 26000 -10500 -1600 -450 12000 -3000 -500 20000 133400 50000 25000 2250 35000 -11000 -26000 75250 0 -750 -750 133400 -3500 71000 -750 Balance Sheet = Income Statement Retained Revenue Expense + Contrib. Capital + Earning = s s s 150000 Liabilities 25000 35000 -11000 -6300 35000 11000 6300 -10500 -1600 -450 1600 450 12000 -3000 -500 14500 20000 29000 0 150000 400 600 -10000 15500 19000 150000 0 15150 -750 -750 -400 -600 10000 -3500 19150 35000 19350 750 750 400 600 10000 45000 3500 25350 me Statement Net Income 35000 -11000 -6300 -1600 -450 15650 -750 -750 -400 -600 10000 -3500 19650 Account Cash (+A) Common stock (+SE) Debit Credit 150000 150000 Equipment (+A) Cash (-A) 50000 Inventory (+A) Accouts payable (+L) 25000 Prepaid rent (+A) Cash (-A) 50000 25000 2250 2250 Accounts receivables (+A) Sales (+R) 35000 Cost of goods sold (+E) Inventory (-A) 11000 Salary expense (+E) Cash (-A) 35000 11000 6300 6300 Cash (+A) Accounts receivables (-A) 26000 Accounts payable (-L) Cash (-A) 10500 Utilities expense (+E) Advertising expense (+E) Cash (-A) Cash (+A) Short term debt (+L) Short term debt (-L) Cash (-L) Dividends (-RE) Cash Cash (+A) Unearned revenue (+L) Adjusting entries 26000 10500 1600 450 2050 12000 12000 3000 3000 500 500 20000 20000 Rent expense (+E) Prepaid Rent (-A) 750 Deprciation expense (+E) Accumulated Depreciation (-A) 750 Salaries expense (+E) Salaries payable (+L) 400 Interest expense (+E) Interest payable (+L) 600 Unearned revenue (-L) Sales (+R) 10000 Cost of goods sold (+E) Inventory (-A) 3500 750 750 400 600 10000 3500 Clsoing entries Sales (-R) Income Summary (+SE) 45000 Income Summary (-RE) Cost of goods sold (-E) Salary expense (-E) Utilities expense (-E) Advertising expense (-E) Rent expense (-E) Depreciation Expense (-E) Interest expense (-E) 25350 Income summary Retained Earnings 19650 Retained earnings Dividends 45000 14500 6700 1600 450 750 750 600 19650 500 500 Revenues and Expenses (Temporary Income Statement Accounts) Sales Revenue (R) Cost of Goods Sold (E) Utilities Expense (E) Advertising Expense (E) Depreciation Expense (E) Interest Expense (E) Assets (Permanent Balance Sheet Accounts) Cash (A) -1 Inventory (A) 150,000 Prepaid Rent (A) Equipment (A) Liabilities and Equities (Permanent Balance Sheet Accounts) Accounts Payable (L) Unearned Revenue (L) Interest Payable (L) Loans Payable (L) Common Stock (SE) Retained Earnings (SE) 150,000 -1 ods Sold (E) Wages Expense (E) Expense (E) Rent Expense (E) xpense (E) ory (A) Accounts Receivable (A) ment (A) Accumulated Depreciation (XA) Revenue (L) ayable (L) arnings (SE) Wages Payable (L) Income Statement Sales cost of goods sold Gross Profit Expenses Salary expense Utilities expense Adveriting expense Rent expense Depreciation expense Interest expense Total operating expenses Net Income 45000 14500 30500 6700 1600 450 750 750 600 10850 19650 Balance Sheet Assets Current Assets Cash Accounts receivables Inventory Prepaid rent Total Current assets Equipment Less: Accumulated depreciation Total Assets Liabilities and Equity Current liabilities Accounts payable Interest payable Short term debt Salaries payable Unearned revenue Total Current Liabilities 133400 9000 10500 1500 154400 50000 750 49250 203650 14500 600 9000 400 10000 34500 Equity Common stock Retained Earnings Total equity 150000 19150 169150 Total Liabilities and equity 203650 Statement of Cash flows Cash flow from operating expenses Cash reciepts Cash payments: Inventory Salary expense Utilities expense Adveriting expense Rent expense Cash flow from operating activities 46000 10500 6300 1600 450 2250 21100 24900 Cash flow from investing activities Equipment purchased Cash flow from investing activities -50000 -50000 Cash flow from financing activities Issued common stock Short term debt Repayment Dividends paid Cash flow from financing activities 150000 12000 -3000 -500 158500 Net Increase in cash 133400 Balance S Transaction 1. Issued common stock for shares (F) 2. Equipment acquired (I) 3. Inventory purchased on account (O) 4. Prepaid rent (O) 5. Pizza sold (O) Cost of sales (O) 6. Salary paid (O) 7. Cash collection 8. Payment made for inventory (O) 9. Utilities expenses (O) Advertising expenses (O) 10. Borrowing (F) Repayment (F) 11. Dividends paid 11. Order received in advance (O) Balance before adjustments Adjustments: Rent expired (O) Depreciation (O) Salaries accrued (O) Interest expense (O) Advance (O) Cost of sales (O) Balance after adjustments Noncash Contra + Assets Assets Cash Asset 150000 -50000 -2250 -6300 26000 -10500 -1600 -450 12000 -3000 -500 20000 133400 50000 25000 2250 35000 -11000 -26000 75250 0 -750 -750 133400 -3500 71000 -750 Balance Sheet = Income Statement Retained Revenue Expense + Contrib. Capital + Earning = s s s 150000 Liabilities 25000 35000 -11000 -6300 35000 11000 6300 -10500 -1600 -450 1600 450 12000 -3000 -500 14500 20000 29000 0 150000 400 600 -10000 15500 19000 150000 0 15150 -750 -750 -400 -600 10000 -3500 19150 35000 19350 750 750 400 600 10000 45000 3500 25350 me Statement Net Income 35000 -11000 -6300 -1600 -450 15650 -750 -750 -400 -600 10000 -3500 19650 Account Cash (+A) Common stock (+SE) Debit Credit 150000 150000 Equipment (+A) Cash (-A) 50000 Inventory (+A) Accouts payable (+L) 25000 Prepaid rent (+A) Cash (-A) 50000 25000 2250 2250 Accounts receivables (+A) Sales (+R) 35000 Cost of goods sold (+E) Inventory (-A) 11000 Salary expense (+E) Cash (-A) 35000 11000 6300 6300 Cash (+A) Accounts receivables (-A) 26000 Accounts payable (-L) Cash (-A) 10500 Utilities expense (+E) Advertising expense (+E) Cash (-A) Cash (+A) Short term debt (+L) Short term debt (-L) Cash (-L) Dividends (-RE) Cash Cash (+A) Unearned revenue (+L) Adjusting entries 26000 10500 1600 450 2050 12000 12000 3000 3000 500 500 20000 20000 Rent expense (+E) Prepaid Rent (-A) 750 Deprciation expense (+E) Accumulated Depreciation (-A) 750 Salaries expense (+E) Salaries payable (+L) 400 Interest expense (+E) Interest payable (+L) 600 Unearned revenue (-L) Sales (+R) 10000 Cost of goods sold (+E) Inventory (-A) 3500 750 750 400 600 10000 3500 Balance S Transaction 1. Issued common stock for shares (F) 2. Equipment acquired (I) 3. Inventory purchased on account (O) 4. Prepaid rent (O) 5. Pizza sold (O) Cost of sales (O) 6. Salary paid (O) 7. Cash collection 8. Payment made for inventory (O) 9. Utilities expenses (O) Advertising expenses (O) 10. Borrowing (F) Repayment (F) 11. Dividends paid 11. Order received in advance (O) Balance before adjustments Adjustments: Rent expired (O) Depreciation (O) Salaries accrued (O) Interest expense (O) Advance (O) Cost of sales (O) Balance after adjustments Noncash Contra + Assets Assets Cash Asset 150000 -50000 -2250 -6300 26000 -10500 -1600 -450 12000 -3000 -500 20000 133400 50000 25000 2250 35000 -11000 -26000 75250 0 -750 -750 133400 -3500 71000 -750 Balance Sheet = Income Statement Retained Revenue Expense + Contrib. Capital + Earning = s s s 150000 Liabilities 25000 35000 -11000 -6300 35000 11000 6300 -10500 -1600 -450 1600 450 12000 -3000 -500 14500 20000 29000 0 150000 400 600 -10000 15500 19000 150000 0 15150 -750 -750 -400 -600 10000 -3500 19150 35000 19350 750 750 400 600 10000 45000 3500 25350 me Statement Net Income 35000 -11000 -6300 -1600 -450 15650 -750 -750 -400 -600 10000 -3500 19650 Account Cash (+A) Common stock (+SE) Debit Credit 150000 150000 Equipment (+A) Cash (-A) 50000 Inventory (+A) Accouts payable (+L) 25000 Prepaid rent (+A) Cash (-A) 50000 25000 2250 2250 Accounts receivables (+A) Sales (+R) 35000 Cost of goods sold (+E) Inventory (-A) 11000 Salary expense (+E) Cash (-A) 35000 11000 6300 6300 Cash (+A) Accounts receivables (-A) 26000 Accounts payable (-L) Cash (-A) 10500 Utilities expense (+E) Advertising expense (+E) Cash (-A) Cash (+A) Short term debt (+L) Short term debt (-L) Cash (-L) Dividends (-RE) Cash Cash (+A) Unearned revenue (+L) Adjusting entries 26000 10500 1600 450 2050 12000 12000 3000 3000 500 500 20000 20000 Rent expense (+E) Prepaid Rent (-A) 750 Deprciation expense (+E) Accumulated Depreciation (-A) 750 Salaries expense (+E) Salaries payable (+L) 400 Interest expense (+E) Interest payable (+L) 600 Unearned revenue (-L) Sales (+R) 10000 Cost of goods sold (+E) Inventory (-A) 3500 750 750 400 600 10000 3500 Clsoing entries Sales (-R) Income Summary (+SE) 45000 Income Summary (-RE) Cost of goods sold (-E) Salary expense (-E) Utilities expense (-E) Advertising expense (-E) Rent expense (-E) Depreciation Expense (-E) Interest expense (-E) 25350 Income summary Retained Earnings 19650 Retained earnings Dividends 45000 14500 6700 1600 450 750 750 600 19650 500 500 Revenues and Expenses (Temporary Income Statement Accounts) Sales Revenue (R) Cost of Goods Sold (E) Utilities Expense (E) Advertising Expense (E) Depreciation Expense (E) Interest Expense (E) Assets (Permanent Balance Sheet Accounts) Cash (A) -1 Inventory (A) 150,000 Prepaid Rent (A) Equipment (A) Liabilities and Equities (Permanent Balance Sheet Accounts) Accounts Payable (L) Unearned Revenue (L) Interest Payable (L) Loans Payable (L) Common Stock (SE) Retained Earnings (SE) 150,000 -1 ods Sold (E) Wages Expense (E) Expense (E) Rent Expense (E) xpense (E) ory (A) Accounts Receivable (A) ment (A) Accumulated Depreciation (XA) Revenue (L) ayable (L) arnings (SE) Wages Payable (L) Income Statement Sales cost of goods sold Gross Profit Expenses Salary expense Utilities expense Adveriting expense Rent expense Depreciation expense Interest expense Total operating expenses Net Income 45000 14500 30500 6700 1600 450 750 750 600 10850 19650 Balance Sheet Assets Current Assets Cash Accounts receivables Inventory Prepaid rent Total Current assets Equipment Less: Accumulated depreciation Total Assets Liabilities and Equity Current liabilities Accounts payable Interest payable Short term debt Salaries payable Unearned revenue Total Current Liabilities 133400 9000 10500 1500 154400 50000 750 49250 203650 14500 600 9000 400 10000 34500 Equity Common stock Retained Earnings Total equity 150000 19150 169150 Total Liabilities and equity 203650 Statement of Cash flows Cash flow from operating expenses Cash reciepts Cash payments: Inventory Salary expense Utilities expense Adveriting expense Rent expense Cash flow from operating activities 46000 10500 6300 1600 450 2250 21100 24900 Cash flow from investing activities Equipment purchased Cash flow from investing activities -50000 -50000 Cash flow from financing activities Issued common stock Short term debt Repayment Dividends paid Cash flow from financing activities 150000 12000 -3000 -500 158500 Net Increase in cash 133400