Continuing Cookie Chronicle

(Note: This is a continuation of the Cookie Chronicle from Chapters 1 through 4.)

CCC5 Because Natalie has had such a successful first few months, she is considering other opportunities to develop her business. One opportunity is to become the exclusive distributor of a line of fine European mixers. The current cost of a mixer is approximately $550, and Natalie would sell each one for $1,100. Natalie comes to you for advice on how to account for these mixers. Each appliance has a serial number and can be easily identified.

Natalie asks you the following questions.

1. Would you consider these mixers to be inventory? Or, should they be classified as supplies or equipment?

2. Ive learned a little about keeping track of inventory using both the perpetual and the periodic systems of accounting for inventory. Which system do you think is better? Which one would you recommend for the type of inventory that I want to sell?

3. How often do I need to count inventory if I maintain it using the perpetual system? Do I need to count inventory at all?

In the end, Natalie decides to use the perpetual method of accounting for inventory, and the following transactions happen during the month of January.

Jan. 4 She buys five deluxe mixers on account from Kzinski Supply Co. for $2,750, terms n/30.

6 She pays $100 freight on the January 4 purchase.

7 Natalie returns one of the mixers to Kzinski because it was damaged during shipping. Kzinski issues Cookie Creations credit for the cost of the mixer plus $20 for the cost of freight that was paid on January 6 for one mixer.

8 She collects the amount due from the neighborhood community center that was accrued at the end of December 2014.

12 She sells three deluxe mixers on account for $3,300, FOB destination, terms n/30. The mixers cost $570 each (including freight).

13 Natalie pays her cell phone bill previously accrued in the December adjusting journal entries.

14 She pays $75 of delivery charges for the three mixers that were sold on January 12.

14 She buys four deluxe mixers on account from Kzinski Supply Co. for $2,200, terms n/30.

17 Natalie is concerned that there is not enough cash available to pay for all of the mixers purchased. She issues additional common stock for $1,000.

18 She pays $80 freight on the January 14 purchase.

20 She sells two deluxe mixers for $2,200 cash.

28 Natalie issues a check to her assistant. Her assistant worked 20 hours in January and is also paid for amounts owing at December 31, 2014. Recall that Natalies assistant earns $8 an hour.

28 Natalie collects amounts due from customers in the January 12 transaction.

31 She pays Kzinski all amounts due.

31 Cash dividends of $750 are paid.

As of January 31, the following adjusting entry data are available.

1. A count of brochures and posters reveals that none were used in January.

2. A count of baking supplies reveals that none were used in January.

3. Another months worth of depreciation needs to be recorded on the baking equipment bought in November. (Recall that the baking equipment has a useful life of 5 years or 60 months.)

4. One months worth of amortization (write-off) needs to be recorded on the website. (Recall that the website has a useful life of 2 years or 24 months.)

5. An additional months worth of interest on her grandmothers loan needs to be accrued. (The interest rate is 9%.)

6. One months worth of insurance has expired.

7. Natalie receives her cell phone bill, $75. The bill is for services provided in January and is due February 15. (Recall that the cell phone is used only for business purposes.)

8. An analysis of the unearned revenue account reveals that Natalie has not had time to teach any of these lessons this month because she has been so busy selling mixers. As a result there is no change to the unearned revenue account. Natalie hopes to book the outstanding lessons in February.

9. An inventory count of mixers at the end of January reveals that Natalie has three mixers remaining.

Instructions

Using the information that you have gathered and the general ledger accounts that you have prepared through Chapter 4, plus the new information above, do the following..

(g) Prepare a classified balance sheet as of January 31, 2015.

(c) Totals 12,434

(f) Net income 2,180

(g) Total assets 8,414

CAN SOMEONE HELP ME WITH THE BALANCE SHEET?

here is the previous work from chapter 4 if needed for help.

(c)

COOKIE CREATIONS INC.

Trial Balance

December 31, 2014

Debit Credit

Cash............................................................................... $1,340

Accounts Receivable.................................................... 1,000

Supplies........................................................................... 1,470

Prepaid Insurance......................................................... 1,200

Equipment....................................................................... 1,200

Website............................................................................... 600

Unearned Service Revenue................................................... 810

Notes Payable.......................................................................... 2,000

Common Stock........................................................................ 800

Dividends............................................................................ 500

Service Revenue...................................................................... 4,550

Utilities Expense.................................................................. 50

Salaries and Wages Expense.................................... 800

$8,160 $8,160

CONTINUING COOKIE CHRONICLE (Continued)

(e) COOKIE CREATIONS INC.

Adjusted Trial Balance

December 31, 2014

Debit Credit

Cash............................................................................... $1,340

Accounts Receivable.................................................... 1,450

Supplies.............................................................................. 400

Prepaid Insurance......................................................... 1,100

Equipment....................................................................... 1,200

Accumulated DepreciationEquipment............................ $ 40

Website............................................................................... 575

Accounts Payable................................................................... 75

Interest Payable....................................................................... 23

Salaries and Wages Payable................................................. 56

Unearned Service Revenue................................................... 360

Notes Payable.......................................................................... 2,000

Common Stock........................................................................ 800

Dividends............................................................................ 500

Service Revenue...................................................................... 5,450

Utilities Expense............................................................... 125

Salaries and Wages Expense......................................... 856

Supplies Expense.......................................................... 1,070

Depreciation Expense........................................................ 40

Amortization Expense........................................................ 25

Interest Expense................................................................. 23

Insurance Expense...................................................... 100

$8,804 $8,804

CONTINUING COOKIE CHRONICLE (Continued)

(e) COOKIE CREATIONS INC.

Income Statement

For the Two Months Ended December 31, 2014

Revenue

Service revenue.............................................................. $5,450

Operating expenses

Supplies expense.............................................. $1,070

Salaries and wages expense................................ 856

Utilities expense...................................................... 125

Insurance expense................................................. 100

Depreciation expense............................................... 40

Amortization expense............................................... 25

Interest expense................................................. 23

Total operating expenses................................... 2,239

Net income................................................................................ $3,211

COOKIE CREATIONS INC.

Retained Earnings Statement

For the Two Months Ended December 31, 2014

Retained earnings, November 1..................................................... $ 0

Add: Net income............................................................................... 3,211

3,211

Less: Dividends................................................................................ 500

Retained earnings, December 31.................................................. $2,711

CONTINUING COOKIE CHRONICLE (Continued)

COOKIE CREATIONS INC.

Balance Sheet

December 31, 2014

Assets

Current Assets

Cash...................................................................... $1,340

Accounts receivable............................................ 1,450

Supplies.................................................................... 400

Prepaid insurance.............................................. 1,100

Total current assets............................................. $4,290

Property, plant and equipment

Equipment............................................................. 1,200

Less: Accumulated depr.equip................... 40 1,160

Intangible assets

Website............................................................................ 575

Total assets.............................................................................. $6,025

Liabilities and Stockholders Equity

Current liabilities

Accounts payable.............................................. $ 75

Unearned service revenue..................................... 360

Salaries and wages payable............................. 56

Total current liabilities......................................... $ 491

Long-term liabilities

Notes payable....................................................... 2,000

Interest payable................................................... 23 2,023

Total liabilities....................................................... 2,514

Stockholders equity

Common stock......................................................... 800

Retained earnings.............................................. 2,711

Total stockholders equity.................................. 3,511

Total liabilities and stockholders equity................................................................... $6,025

CONTINUING COOKIE CHRONICLE (Continued)

(g) 31 Service Revenue....................................................... 5,450

Income Summary...................................................... 5,450

31 Income Summary...................................................... 2,239

Supplies Expense..................................................... 1,070

Salaries and Wages Expense................................. 856

Utilities Expense....................................................... 125

Insurance Expense................................................... 100

Depreciation Expense.............................................. 40

Amortization Expense.............................................. 25

Interest Expense....................................................... 23

31 Income Summary...................................................... 3,211

Retained Earnings.................................................... 3,211

31 Retained Earnings....................................................... 500

Dividends.................................................................... 500

(h) COOKIE CREATIONS INC.

Post-Closing Trial Balance

December 31, 2014

Debit Credit

Cash............................................................................... $1,340

Accounts Receivable.................................................. 1,450

Supplies......................................................................... 400

Prepaid Insurance....................................................... 1,100

Equipment..................................................................... 1,200

Accumulated Depr.Equip....................................... $ 40

Website.......................................................................... 575

Accounts Payable........................................................ 75

Interest Payable............................................................ 23

Salaries and Wages Payable..................................... 56

Unearned Service Revenue....................................... 360

Notes Payable............................................................... 2,000

Common Stock............................................................. 800

Retained Earnings....................................................... 2,711

$6,065 $6,065