CASE 1 Charlie Driver has $35,000 saved and has decided to attend college, taking courses in marketing and retailing To help pay his tuition and living expenses, he contracted with a mobile catering company as an independent driver Charlie will run his mobile catering business on a cash basis he has named his business Charlies Convenient Catering, or the 3C Company for short The company sold Charlie, the businesses sole owner, $35,000 in Common Stock The company deposited the $35,000 into the companys bank account (we call this Cash) The company bought a used, fully equipped mobile catering truck for $29,000, and operated from January 4 to December 31, 2005 At the end of the year, the company had $28,110 in the bank and $208 in a cash drawer (total ending Cash of $28,318 The company PAID Invoices (means company paid cash for the inventories) show that the company purchased food, beverages, and supplies inventories for $48,222 The company counted Year ending inventory remaining on the truck of $280 Use the Inventory equation to calculate Cost of Goods Sold Cost of Goods Sold Beginning inventory purchases ending inventory Or you can use your T account to determine the amount of Inventory that was consumed and made its way into Cost of Goods Sold (COGS on the Income Statement) The company PAID invoices for truck operating expenses paid in cash total $3,288 The company had one UNPAID truck operating expense invoice for a truck repair for $188 The company paid Charlie Driver a monthly salary of $2,400 a month for his labor to manage the business and operate the truck (12 months x $24,000 28,800 annual salary ok to input this as a total entry in your JEs and T accounts) The truck has a five year life and a residual value of $4,000, and straight line depreciation is to be used The formula for Annual Depreciation is (First cost Residual value) Life in years Book Value is defined as Equipments First Cost Accumulated Depreciation Charlie asks you to help him put together his business information and reconstruct his cash sales He recorded his daily cash sales in a notebook that cannot be found Calculate 3C Companys sales revenue and prepare an accrual income statement Charlie is concerned that he has less cash now than he had when he started Explain why he should not worry and that he had a great first year The Standard Format for a simple journal entry Write the Journal Entry and Post to the T account Charlie Driver has $35,000 saved and has decided to attend college, taking courses in marketing and retailing To help pay his tuition and living expenses, he contracted with a mobile catering company as an independent driver Charlie will run his mobile catering business on a cash basis he has named his business Charlies Convenient Catering, or the 3C Company for short Sometimes have included some accounts in the Journal Entry as Hints to help you If I did not include the Account Name then you need to fill it in for yourself When it says Charlie Driver think the company instead So the company buys the truck not Charlie personally Charlie invests his own money and form a company called 3C Company The company sells Charlie (the investor) Common Stock Date 1 1 2018 Company sells Common Stock to Charlie in return for him investing $35,000 of cash into the company (Company gets the cash) Write the Journal Entry and Post to the T account The 3C Company buys a catering truck, a fixed asset, for $29,000 Write the Journal Entry and Post to the T account Assume the business operated from Jan 1 to Dec 31, 2018, 1 full year (the problem says started on Jan 4 th which makes no difference) Use the ending account balances per 12 31 2018 physical count of the inventory and the review of documents such as the counting of the cash and the found unpaid invoice Record the Purchases of food, beverages, and supplies inventories for $48,222 by 3C Company for the year This puts the purchases into inventory Write the Journal Entry and Post to the T account Next step Inventory on truck $280 as of 12 31 2018 Use this information to adjust your inventory account The company purchased food, beverages, and supplies inventories for $48,222 but they did not use it all How much inventory did they use (the cost of goods sold) during the year The inventory Equation helps here to determine how much of the purchases were used up to make sales from the truck Calculate Category $ Amount Hint explanation ADD Beginning inventory Its a brand new business How much is On hand 1 second after he opens ADD Purchases for the year SUBTRACT Ending inventory EQUALS Cost of Goods Sold Write the Journal Entry and Post to the T account The company has one unpaid truck repair invoice for $188 If the bill is unpaid then use the Accounts Payable account (not cash as not paid yet, still open) Write the Journal Entry and Post to the T account The company paid cash for truck operating expenses total $3,288 Write the Journal Entry and Post to the T account Depreciation is how accountants use up a fixed asset The formula for annual depreciation is (First Cost Residual Value) Life in years The two accounts to use are Depreciation expense (a non cash reduction to profit) and Accumulated Depreciation Book Value is the value that a fixed asset is on the books of a company and is defined as First Cost Accumulated Depreciation First Cost of the Truck is $29,000 Residual Value (the amount we expect to be able to sell the truck for when its life with 3C is over at the end of 5 years) is $4,000 The expected life of the truck is 5 years of operations Record the Depreciation expense Write the Journal Entry and Post to the T account Charlie was paid a salary of $2,400 a month for his Work as the operator of the truck Record the annual salary that the company paid to its only employee Charlie Driver The problem says Charlie withdrew $2,400 a month for personal expenses Rephrase this to treat Charlie as an employee of the corporation He can be both a shareholder (owner) and a worker (employee) Annual salary, paid in cash 12 months x $2,400 $28,800 Write the Journal Entry and Post to the T account Cash in bank or drawer $28,110 $208 $28,318 ending 12 31 balance Use this number to make your Cash T account (ledger page) match the bank, you will need to make a one time, 12 31 2018 adjustment to record cash sales made by 3C Company (remember, Charlie mislaid his receipt book) Write the Journal Entry and Post to the T account

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CASE 1 Charlie Driver has $35,000 saved and has decided to attend college, taking courses in marketing and retailing. To help pay his tuition and

CASE 1 Charlie Driver has $35,000 saved and has decided to attend college, taking courses in marketing and retailing. To help pay his tuition and living expenses, he contracted with a mobile catering company as an independent driver. Charlie will run his mobile catering business on a cash basis; he has named his business Charlies Convenient Catering, or the 3C Company for short.

The company sold Charlie, the businesses sole owner, $35,000 in Common Stock. The company deposited the $35,000 into the companys bank account (we call this Cash).

The company bought a used, fully equipped mobile catering truck for $29,000, and operated from January 4 to December 31, 2005.

At the end of the year, the company had $28,110 in the bank and $208 in a cash drawer (total ending Cash of $28,318.

The company PAID Invoices (means company paid cash for the inventories) show that the company purchased food, beverages, and supplies inventories for $48,222. The company counted Year ending inventory remaining on the truck of $280. Use the Inventory equation to calculate Cost of Goods Sold. Cost of Goods Sold = Beginning inventory + purchases ending inventory. Or you can use your T-account to determine the amount of Inventory that was consumed and made its way into Cost of Goods Sold (COGS on the Income Statement).

The company PAID invoices for truck operating expenses paid in cash total $3,288. The company had one UNPAID truck operating expense invoice for a truck repair for $188.

The company paid Charlie Driver a monthly salary of $2,400 a month for his labor to manage the business and operate the truck. (12 months x $24,000 = 28,800 annual salary; ok to input this as a total entry in your JEs and T-accounts).

The truck has a five-year life and a residual value of $4,000, and straight-line depreciation is to be used. The formula for Annual Depreciation is (First cost Residual value) / Life in years Book Value is defined as Equipments First Cost Accumulated Depreciation. Charlie asks you to help him put together his business information and reconstruct his cash sales. He recorded his daily cash sales in a notebook that cannot be found. Calculate 3C Companys sales revenue and prepare an accrual income statement. Charlie is concerned that he has less cash now than he had when he started. Explain why he should not worry and that he had a great first year.

The Standard Format for a simple journal entry:

Write the Journal Entry and Post to the T-account

Charlie Driver has $35,000 saved and has decided to attend college, taking courses in marketing and retailing. To help pay his tuition and living expenses, he contracted with a mobile catering company as an independent driver. Charlie will run his mobile catering business on a cash basis; he has named his business Charlies Convenient Catering, or the 3C Company for short.

**** Sometimes have included some accounts in the Journal Entry as Hints to help you. If I did not include the Account Name then you need to fill it in for yourself.

**** When it says Charlie Driver think the company instead. So the company buys the truck not Charlie personally.

Charlie invests his own money and form a company called 3C Company. The company sells Charlie (the investor) Common Stock. Date 1/1/2018 Company sells Common Stock to Charlie in return for him investing $35,000 of cash into the company (Company gets the cash) Write the Journal Entry and Post to the T-account
The 3C Company buys a catering truck, a fixed asset, for $29,000 Write the Journal Entry and Post to the T-account

Assume the business operated from Jan 1 to Dec 31, 2018, 1 full year (the problem says started on Jan 4^th which makes no difference).

Use the ending account balances per 12/31/2018 physical count of the inventory and the review of documents such as the counting of the cash and the found unpaid invoice. Record the Purchases of food, beverages, and supplies inventories for $48,222 by 3C Company for the year. This puts the purchases into inventory.

Write the Journal Entry and Post to the T-account

Next step: Inventory on truck $280 as of 12/31/2018. Use this information to adjust your inventory account. The company purchased food, beverages, and supplies inventories for $48,222 but they did not use it all. How much inventory did they use (the cost of goods sold) during the year? The inventory Equation helps here to determine how much of the purchases were used up to make sales from the truck.

Calculate	Category	$ Amount	Hint / explanation
ADD	Beginning inventory		Its a brand new business. How much is On hand 1 second after he opens?
ADD	Purchases for the year
SUBTRACT	Ending inventory
EQUALS	Cost of Goods Sold

Write the Journal Entry and Post to the T-account

The company has one unpaid truck repair invoice for $188. If the bill is unpaid then use the Accounts Payable account (not cash as not paid yet, still open).

Write the Journal Entry and Post to the T-account

The company paid cash for truck operating expenses total $3,288

Write the Journal Entry and Post to the T-account

Depreciation is how accountants use up a fixed asset. The formula for annual depreciation is (First Cost Residual Value) / Life in years The two accounts to use are Depreciation expense (a non-cash reduction to profit) and Accumulated Depreciation. Book Value is the value that a fixed asset is on the books of a company and is defined as First Cost Accumulated Depreciation. First Cost of the Truck is $29,000; Residual Value (the amount we expect to be able to sell the truck for when its life with 3C is over at the end of 5 years) is $4,000 The expected life of the truck is 5 years of operations.

Record the Depreciation expense. Write the Journal Entry and Post to the T-account

Charlie was paid a salary of $2,400 a month for his Work as the operator of the truck.

Record the annual salary that the company paid to its only employee Charlie Driver. The problem says Charlie withdrew $2,400 a month for personal expenses. Rephrase this to treat Charlie as an employee of the corporation. He can be both a shareholder (owner) and a worker (employee). Annual salary, paid in cash = 12 months x $2,400 = $28,800 Write the Journal Entry and Post to the T-account

Cash in bank or drawer $28,110 + $208 = $28,318 ending 12/31/balance. Use this number to make your Cash T-account (ledger page) match the bank, you will need to make a one time, 12/31/2018 adjustment to record cash sales made by 3C Company (remember, Charlie mislaid his receipt book).