Cookie Creations 5

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. 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 2017.
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, 2017. 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.

Ignore income tax effects.

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Prepare the January 2018 transactions. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Record journal entries in the order presented in the problem.)

Date	Account Titles and Explanation	Debit	Credit
Jan. 4
Jan. 6
Jan. 7
Jan. 8
Jan. 12
	(To record sales revenue)
Jan. 12
	(To record cost of goods sold)
Jan. 13
Jan. 14
Jan. 14
Jan. 17
Jan. 18
Jan. 20
	(To record sales revenue)
Jan. 20
	(To record cost of goods sold)
Jan. 28
	(To record Natalie's assistant payment details)
Jan. 28
	(To record amounts due from customers)
Jan. 31
	(To record payments made to Kzinski)
Jan. 31
	(To record cash dividends paid)

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Post the January 2018 transactions. (Post entries in the order of journal entries presented in the previous part.)

Cash
Date	Explanation	Debit	Credit	Balance
	Balance
Accounts Receivable
Date	Explanation	Debit	Credit	Balance
	Balance
Inventory
Date	Explanation	Debit	Credit	Balance
Supplies
Date	Explanation	Debit	Credit	Balance
	Balance
Prepaid Insurance
Date	Explanation	Debit	Credit	Balance
	Balance
Equipment
Date	Explanation	Debit	Credit	Balance
	Balance
Accumulated DepreciationEquipment
Date	Explanation	Debit	Credit	Balance
	Balance
Website
Date	Explanation	Debit	Credit	Balance
	Balance
Accounts Payable
Date	Explanation	Debit	Credit	Balance
	Balance
Salaries and Wages Payable
Date	Explanation	Debit	Credit	Balance
	Balance
Interest Payable
Date	Explanation	Debit	Credit	Balance
	Balance
Unearned Service Revenue
Date	Explanation	Debit	Credit	Balance
	Balance
Notes Payable
Date	Explanation	Debit	Credit	Balance
	Balance
Common Stock
Date	Explanation	Debit	Credit	Balance
	Balance
Retained Earnings
Date	Explanation	Debit	Credit	Balance
	Balance
Dividends
Date	Explanation	Debit	Credit	Balance
Sales Revenue
Date	Explanation	Debit	Credit	Balance
Cost of Goods Sold
Date	Explanation	Debit	Credit	Balance
Salaries and Wages Expense
Date	Explanation	Debit	Credit	Balance
Freight-out
Date	Explanation	Debit	Credit	Balance

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Prepare a trial balance.

Cookie CreationS INC. Trial Balance
	Debit	Credit
	$	$
	$	$

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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.

Prepare the adjusting journal entries required. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Record journal entries in the order presented in the problem.)

No.	Date	Account Titles and Explanation	Debit	Credit
1.	Jan. 31
2.	Jan. 31
3.	Jan. 31
4.	Jan. 31
5.	Jan. 31
6.	Jan. 31
7.	Jan. 31
8.	Jan. 31
9.	Jan. 31

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Post the adjusting journal entries required.

Cash
Date	Explanation	Debit	Credit	Balance
Jan.1	Balance			1,340
6			100	1,240
8		450		1,690
13			75	1,615
14			75	1,540
17		1,000		2,540
18			80	2,460
20		2,200		4,660
28			216	4,444
28		3,300		7,744
31			4,380	3,364
31			750	2,614
Accounts Receivable
Date	Explanation	Debit	Credit	Balance
Jan. 1	Balance			1,450
8			450	1,000
12		3,300		4,300
28			3,300	1,000
Inventory
Date	Explanation	Debit	Credit	Balance
Jan. 4		2,750		2,750
6		100		2,850
7			570	2,280
12			1,710	570
14		2,200		2,770
18		80		2,850
20			1,140	1,710
Supplies
Date	Explanation	Debit	Credit	Balance
Jan. 1	Balance			400
Prepaid Insurance
Date	Explanation	Debit	Credit	Balance
Jan. 1	Balance			1,100
	Adjusting
Equipment
Date	Explanation	Debit	Credit	Balance
Jan. 1	Balance			1,200
Accumulated DepreciationEquipment
Date	Explanation	Debit	Credit	Balance
Jan. 1	Balance			40
	Adjusting
Website
Date	Explanation	Debit	Credit	Balance
Jan. 1	Balance			575
	Adjusting
Accounts Payable
Date	Explanation	Debit	Credit	Balance
Jan. 1	Balance			75
4			2,750	2,825
7		570		2,255
13		75		2,180
14			2,200	4,380
31		4,380		0
	Adjusting
Salaries and Wages Payable
Date	Explanation	Debit	Credit	Balance
Jan. 1	Balance			56
28		56		0
Interest Payable
Date	Explanation	Debit	Credit	Balance
Jan. 1	Balance			23
	Adjusting
Unearned Service Revenue
Date	Explanation	Debit	Credit	Balance
Jan. 1	Balance			360
Notes Payable
Date	Explanation	Debit	Credit	Balance
Jan. 1	Balance			2,000
Common Stock
Date	Explanation	Debit	Credit	Balance
Jan. 1	Balance			800
17			1,000	1,800
Retained Earnings
Date	Explanation	Debit	Credit	Balance
Jan. 1	Balance			2,711
Dividends
Date	Explanation	Debit	Credit	Balance
Jan. 31		750		750
Sales Revenue
Date	Explanation	Debit	Credit	Balance
Jan. 12			3,300	3,300
20			2,200	5,500
Cost of Goods Sold
Date	Explanation	Debit	Credit	Balance
Jan. 12		1,710		1,710
20		1,140		2,850
Salaries and Wages Expense
Date	Explanation	Debit	Credit	Balance
Jan. 28		160		160
Utilities Expense
Date	Explanation	Debit	Credit	Balance
	Adjusting
Depreciation Expense
Date	Explanation	Debit	Credit	Balance
	Adjusting
Amortization Expense
Date	Explanation	Debit	Credit	Balance
	Adjusting
Insurance Expense
Date	Explanation	Debit	Credit	Balance
	Adjusting
Freight-out
Date	Explanation	Debit	Credit	Balance
Jan. 14		75		75
Interest Expense
Date	Explanation	Debit	Credit	Balance
	Adjusting

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Prepare an adjusted trial balance.

Cookie CreationS INC. Adjusted Trial Balance
	Debit	Credit
	$	$
	$	$

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Prepare a multiple-step income statement.

Cookie CreationS INC. Income Statement
		$
	$
		$

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Prepare a retained earnings statement for the month ended January 31, 2018. (List items that increase retained earnings first.)

Cookie CreationS INC. Retained Earnings Statement
	$
:
:
	$

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Prepare a classified balance sheet as of January 31, 2018. (List current assets in order of liquidity.)

Cookie CreationS INC. Balance Sheet
Assets
			$
					$
:
					$
Liabilities and Stockholders' Equity
			$
					$
					$