Comments:

This is an example that illustrates accounting capturing organization history on an event$-$by$-$event basis. This means that whenever an event happens, the accounting system records the event.

The lectures have a brief review of the accounting cycle. The text has three chapters, pages $327$ through $472,$ that describes the accounting cycle.

For the exam, you will want to be able to

a$.$ Given an event, provide the journal entry.

b$.$ Given a journal entry, describe the effect on the assets, liabilities, shareholders' equity, revenues, and expenses.

Here are some check figures:

Net Income is $$18,233$

Total Assets are $$123,083$

Total Liabilities are $$14,850$

Shareholders' Equity is $$108,233$

Problem statement:

Bob's Chocolate Chips and More, a bakery specializing in gourmet pizza and chocolate chip cookies, started business October $1,2023.$ The following transactions occurred during the month.

a$.$ Common stock of $$90,000$ was sold at par to start the business.

b$.$ Equipment, consisting of mixers and ovens, was acquired October $1$ for $$30,000$ cash. The equipment is expected to last five years and can be sold at that time for $$5,000.$ Management uses the straight$-$line method to calculate depreciation expense.

c$.$ Ingredients costing $$15,000$ were purchased on account during the month and all but $$5,000$ was paid for by the end of the month.

d$.$ Rent is $$500$ a month. October, November, and December's rent was paid October $5.$

e$.$ A payment of $$800$ for utilities was made during the month.

f$.$ Sixty percent of the ingredients purchased in part c were prepared and sold for $$35,000$ on account; $$26,000$ was collected on accounts receivable during the month.

g$.$ Wages of $$5,200$ were paid during the month. Moreover, wages for the last three days of the month amounted to $$400$ and will be paid during the first week of November.

h$.$ Borrowed $$12,000$ as a Note Payable from the bank for additional working capital requirements, and $$3,000$ was repaid by month$-$end. Interest on the unpaid loan balance amounted to $$450$ at the end of October and was paid on November $5.$

Required:

Prepared the journal entries and adjusting entries.

Prepare the income statement for October.

Prepare the balance sheet as of October $31,2023.$