Genevieve is curious to know if the month of December 2021 has been profitable since she is about to approach the bank for another loan to help finance her growing business. Genevieve remembers from high school accounting classes that in order to determine Purrfect Spa and Doggy Daycare's income, she must first make adjustments. Genevieve puts together the following information for you: 1. One of Purrfect Spa and Doggy Daycare's customers is Geoff Zanetti. Geoff, a local lawyer, has three cats and two dogs that are groomed monthly and washed weekly. Once a month, an invoice is mailed to him at his office. At the end of December, Genevieve mailed an invoice for $400 to Geoff. She has not had time to record this invoice in her accounting records. 2. The Spa had a promotion which ran December 15 to the 22 for half price grooming. Because there were so many existing and new clients to groom, Genevieve asked her friend to help her out and promised to pay her $18 an hour cash, no statutory deductions. Her friend, Janelle, worked four hours each of those 8 days and was paid on January 1. 3. $800 of pet food inventory for resale was purchased on December 27 for cash. Genevieve wasn't sure how to record this purchase so she debited the Supplies account and credited Cash. None of the pet food had been sold by December 31. Various other supplies valued at $300 remain at the end of December. 4. Genevieve likes to pay all her bills on time but the Utilities bill came in late; the amount. is $1289. She looked up in the old textbook what to do and thinks she has properly recorded the amount into Accounts payable and Utilities expense. 5. Genevieve estimates that all her equipment will have a remaining useful life of four years. (Assume Genevieve decides to record a full month's worth of depreciation using the straight-line method) 6. Her Bank is charging 3.6% interest on the $6,000 bank loan Genevieve received on December 1 to assist with the startup of the business. The loan principal plus interest is to be repaid in 12 monthly instalments starting the first of each month. 7. Mid-December, Genevieve went to the bank and signed an agreement which gives the business overdraft protection on her bank account up to $15,000 with the stipulation that the business is showing a profit. 8. In December, Purrfect Spa sold to various customers $900 of holiday gift cards for grooming services. $400 were redeemed before New Year's. Genevieve asks you to prepare the adjusting journal entries in exchange for a free spa day and grooming for your puppies. She also provides the December unadjusted trial balance for reference. She is confused why it doesn't balance. (Hint: Purrfect Spa and Doggy Daycare adjusts its accounts monthly). Purrfect Spa and Doggy Daycare has had a very successful first couple of months. Genevieve has been thinking it may be profitable to sell some kind of locally handcrafted vegan treats suitable for both dogs and cats. She wants the treat to be unique and healthy with simple ingredients and no preservatives, which means they only have a shelf life of 60 days. Genevieve has talked to the owner of a local bakery to see if they could make a tasty treat for pets. La Croissant was excited at the opportunity to create something new and agreed to be Purrfect Spa and Doggy Daycare's supplier of these unique and healthy treats. The baker figures that the cost of producing a 300-gram bag of treats will be approximately $3.30, which includes delivery to the store. These will be small batches and considered to be boutique. Genevieve will sell each bag of treats for $7.00. Genevieve comes to you for advice on how to account for these healthy treats. She wants to have up to date inventory records at all times so she wants to use the perpetual inventory system like you would have assumed. She also wants to use the earnings approach for revenue recognition. Genevieve would like a description of the different cost formulas that she could use to account for the pet treats inventory. Genevieve knows that the cost of the treats is expected to decrease with economies of scale once they become popular. Even though she will be selling the oldest treats first, there is likely a chance that some treats will need to be thrown away. Genevieve asks you to provide a recommendation of the most appropriate cost formula she should use. She also asks that you provide her with an inventory record (she was personally leaning toward the FIFO method), for the February purchases and sales of treats, and the balance in the cat and dog treat inventory accounts. Then, prepare the journal entries for the February transactions, using your recommended method. Due to the increase in business, Genevieve has hired Courtney Fragile part-time for reception, administration, and occasional pet washing duties. The February 2022 transactions are on the next page. The following transactions happen during the month of February 2022: Feb 3 Paid $990 for 300 bags of the pet treats, at $3.30 each received from La Croissant. 4 Paid $1,500 for the February rent. 8 Sold 80 bags of pet treats to various customers, for $560 cash. 11 Collected $150 of the accounts receivable from Jan 2022. 14 Paid for and received 200 bags of pet treats, at $3.25 each from La Croissant. 15 5 bags of pet treats, from the February 14 purchase, split open and got soaked during delivery from the baker. La Croissant issued Purrfect Spa and Doggy Daycare a credit note for the cost of the damaged product, to be used for future purchases. 15 Received a deposit of $1,625.00 from Prairie West Dog School for an order of 250 bags of pet treats to be delivered on March 15. 17 Paid the $612 water bill that was correctly recorded in January. 18 Recorded the past weeks' sale of 235 bags of treats, to various customers, for $1,645 cash. 22 Genevieve was concerned that there was not enough cash available to pay for all of the bills. She invested an additional $1,500 cash in Purrfect Spa and Doggy Daycare. 24 Sold 100 bags of pet treats on-line after being contacted by another local kennel where her friend Janelle works. They had heard great things about the quality of the treats and wanted to test them out at their place of business. Genevieve agreed to sell these on account for $600 (discounted for volume purchase), FOB destination, terms n/10. The treats were sold to Caring for Best Friends, another kennel service operating across town. Genevieve expects to receive their payment in early March. 24 Paid the $35 of delivery charges for the pet treats that were sold on-line to the local kennel on February 24. 25 Issued a cheque to Courtney Fragile for 50 hours worked in February at $16 an hour. 25 Paid $225 to Splendid Advertising ($125 for the January 2022 account payable and $100 for the February advertisement of the pet treats). 26 Purchased and received 280 bags of pet treats, at $3.20 each, totaling $896 on account from La Croissant, terms net 7 days. The owner of La Croissant has agreed to the extension of terms since Genevieve's business is now well established and orders are increasing. 28 Paid La Croissant the amounts due from the Feb 26 purchases less the credit note from Feb 15. 28 Recorded the past weeks' sale of 305 bags of treats, to various customers, for $2,135 cash. 28 Genevieve hasn't heard from Geoff Zanetti so the note was dishonored. At this time, it is expected that Geoff Zanetti will eventually pay the amount owed