I just need help with part 2/ stage 2 please.

ZZ POPS ICE-CREAM Introduction The objective of this practice set is to provide students with an opportunity to 'do' the accounting tasks that learn in ACCY 301 Financial Accounting. As accounting students will learn shortly after commencing their studies, the accounting cycle comprises many steps. In this practice set, all the steps are covered as students are guided through the process of recording transactions for a sole trader business for one month, completing adjusting and closing entries, and preparing financial statements. Although the task is complex, student feedback is always that 'the practice set is the best way to learn accounting'. Business background Zita Zapata opens a new ice-cream business in April 2021 and calls it ZZ Pops Ice-cream (ZZ Pops). ZZ Pops prepares gourmet ice-creams for sale to the public as well as for catering. The business is open six days per week (Mon-Sat) from 9am to 5 pm Zita employs two of her friends, Darius and Fatime to work in the ice-cream shop. Zita conducts many transactions in the month of April in the course doing business. She knows that you have taken an accounting class, so at the end of the month she asks you to do the accounting for her business for the month of April. Zita tells you she would like to keep a track of the cost of goods sold as she goes, so you advise her that she should adopt a perpetual inventory system). Below are the transactions for ZZ Pops for the month of April. Transactions for April 2021 Date Transaction Week 1 April 1 Zita contributes $7,000 to commence the business 1 Zita borrows $15,000 from Fremont Bank for three years with interest charged at 9% (annually) Zita hires two staff to be paid every 2 weeks (on a Thursday) Zita signs a rent contract on a shop and pays $2,300 for two months' rent (April and May). She purchases four ice-cream freezers for $600 each. The estimated life is 8 years using straight line depreciation and Zita believes that she could sell the freezers at the end of this time for $120 each. Zita rents a portable ice-cream trailer for catering. She pays $200 for the month of April. Zita purchases an ipad which will be used as a cash register for $576. The estimated life is 4 years using straight-line depreciation. Zita also purchases supplies (ice-cream boxes, napkins etc.) for $140 cash.? Zita purchases bulk ice-cream on credit from Sandhu Stores for $1,024. Zita pays $960 for insurance for the year April 1, 2021-March 31, 2022. 3 4 2 6 Hint: While this business is a sole proprietorship, you are required to account for this cash contribution as you would for a corporation 2 Hint: Supplies are those types of supplies that are used up in the course of doing business. They are not part of cost of goods. 10 11 12 14 | 18 19 21 22 24 26 Week 2 On Saturday 10th April, Zita supplied ice-cream for Lucy Hernandez' wedding. That evening, she sent Mr. Hernandez an invoice for $810. Terms 3/10, n/30 (The cost of materials was $340) Mr. Hernandez rang to complain that four buckets of ice-cream had melted. Zita agreed to give him a credit for $110. Zita purchases candy for add-in ice-cream mixing for $116 cash. Ice-cream cash sales for the week are $1,700. (The cost of sales was $730) Week 3 Wages of $360 per employee, per week were paid to employees for the two-week period April 15 ended April 15th. Zita withheld a total of $160 ($80 from each employee) for taxes. Mr. Hernandez paid for his daughter's wedding (less amount for returned ice-creams) Purchased supplies for $70 on credit. Paid for ice-cream ingredients bought on April 6. Purchased ice-cream ingredients for $3,880 on credit. Zita supplied ice-cream for a graduation function for La Vista Community College and 20 prepared an invoice for $1500. Terms 3/10, n/30 (The cost of materials was $695) Recorded ice-cream cash sales for the week, $3384. (The cost of ingredients was $1322) Week 4 Paid for supplies purchased April 19. Paid $220 to 'Adriana's Ads' for advertising Received gas bill of $116. Recorded ice-cream cash sales for the week, $2,950. (The cost of ingredients was $1136) Week 5 Wages of $360 per employee, per week were paid to employees for the two-week period 29 ended April 15th. Zita withheld a total of $160 ($80 from each employee) for taxes. La Vista paid the amount owing from the April 20 graduation ceremony. Zita paid herself an amount of $600 from the business profits 3 Recorded ice-cream cash sales for the final two days $856. (The cost of ingredients was $380) Further information: This part will be completed on Stage 2. Please refer to Stage 2 below for more details. a) Adjust prepaid rent and prepaid insurance b) A count of supplies indicates that $45 remain on hand at month end. c) Interest on the bank loan is charged at 9 per cent per annum and is paid quarterly with the next payment of $1,440.26 due on 1 July (round interest expense to the nearest dollar). 4 d) An electricity bill for $162 for April was received on 2 July. The amount has not yet been recorded. e) The estimated telephone for April is $42. f) Depreciation is charged in proportion for each month (depreciation is charged in full for the month the asset is purchased) g) Calculate accrued wages for April 29 and April 30. * Hint: While this is a sole proprietorship, you are required to account for this amount as you would dividends. * The loan is a principal and interest loan. However, it is not too complicated on the first month as Zita borrowed the money on April 1, 2021 28 a 30 Accounting system information The business prepares adjusting entries at the end of each month (Please review the chapter on adjusting entries and ensure that you have made all appropriate adjustments). The business maintains a general ledger to record postings from the general journal. In practice, the business would be required to collect and pay sales tax on its sales; however, for the purposes of this exercise, sales tax has been excluded. NOTE: all amounts in this practice set should be rounded to the nearest dollar. Required After reading the introduction carefully and gaining familiarity with the business operations and the accounting system, complete the following: Stage 1 (Journal entries, I accounts and Unadjusted trial balance) 50 points 1. Make appropriate journal entries for the ZZ Pops's transactions for the month of April 2021. - Prepare in Excel. 2. Post journal transactions to the ledger accounts as specified in the 'accounting system information section of the introduction. - Prepare in Excel. 3. Prepare the unadjusted trial balance as at 30 April. - Prepare in Excel. Stage 2 (Adjustments, Income Statements, Balance Sheet) - 50 points. The points include the analysis. 4. I will be providing the solution to Stage 1. Make the appropriate corrections to the journal entries, ledger accounts and unadjusted trial balance. 5. I will also be providing the adjusted entries after Stage 1 has been completed. Based on the adjustments that are provided, complete the following Financial Statements: a) Income Statement - Prepare in Excel b) Balance Sheet - Prepare in Excel c) Then write an analysis Stage 2 (Analysis) 1. Zita invites you out for a coffee to discuss your accounting for the first month. She says to you "I've always felt so comfortable being creative, but I'm not very good on the business side. I had a look at your university textbook by Kimmel et ai and so many things just don't make sense to me. Even though I've read the discussion of accounting principles and concepts, I cannot understand them. Can you explain the following to me? a) What form of business organization is ZZ Pops considered to be? What are the advantages and disadvantages of me changing the business structure? b) Why did you say that I could not include the rent for my apartment as well as my groceries in the accounts? After all, these are genuine expenses that I incurred. c) Why did you include the amount for the electricity bill in the accounts for April but we have not yet paid it? 2. Zita tells you that she is thinking of expanding her business and has the opportunity to purchase four small mobile carts similar to the one that was rented for the Hernandez wedding. The costs of purchasing these four carts will be $16,000 and the carts have a useful life of five years. Normally, these carts would cost $48,000 to buy, but the original owner passed away two years ago and the carts have been locked in storage all this time. The family has a list of original clients, including festival organizers, so, although it is not guaranteed that she would get that business back, there appears to be an opportunity to get some immediate business. The only other potential buyer is her direct competition, and she fears that if he buys the carts, that he might take some of the new clientele that she has generated in the shop this month. She asks your advice as to whether this is a potentially profitable move. Using the financial statements you have prepared, outline to Zita whether or not you think she should buy the mobile carts and provide reasons for your recommendations. (Your answer should specifically reference at least two items from each statement). 3. Do you think ZZ Pops is in a good financial position at the end of April? Explain your answer using at least two ratios that you have studied this semester. ZZ POPS ICE-CREAM Introduction The objective of this practice set is to provide students with an opportunity to 'do' the accounting tasks that learn in ACCY 301 Financial Accounting. As accounting students will learn shortly after commencing their studies, the accounting cycle comprises many steps. In this practice set, all the steps are covered as students are guided through the process of recording transactions for a sole trader business for one month, completing adjusting and closing entries, and preparing financial statements. Although the task is complex, student feedback is always that 'the practice set is the best way to learn accounting'. Business background Zita Zapata opens a new ice-cream business in April 2021 and calls it ZZ Pops Ice-cream (ZZ Pops). ZZ Pops prepares gourmet ice-creams for sale to the public as well as for catering. The business is open six days per week (Mon-Sat) from 9am to 5 pm Zita employs two of her friends, Darius and Fatime to work in the ice-cream shop. Zita conducts many transactions in the month of April in the course doing business. She knows that you have taken an accounting class, so at the end of the month she asks you to do the accounting for her business for the month of April. Zita tells you she would like to keep a track of the cost of goods sold as she goes, so you advise her that she should adopt a perpetual inventory system). Below are the transactions for ZZ Pops for the month of April. Transactions for April 2021 Date Transaction Week 1 April 1 Zita contributes $7,000 to commence the business 1 Zita borrows $15,000 from Fremont Bank for three years with interest charged at 9% (annually) Zita hires two staff to be paid every 2 weeks (on a Thursday) Zita signs a rent contract on a shop and pays $2,300 for two months' rent (April and May). She purchases four ice-cream freezers for $600 each. The estimated life is 8 years using straight line depreciation and Zita believes that she could sell the freezers at the end of this time for $120 each. Zita rents a portable ice-cream trailer for catering. She pays $200 for the month of April. Zita purchases an ipad which will be used as a cash register for $576. The estimated life is 4 years using straight-line depreciation. Zita also purchases supplies (ice-cream boxes, napkins etc.) for $140 cash.? Zita purchases bulk ice-cream on credit from Sandhu Stores for $1,024. Zita pays $960 for insurance for the year April 1, 2021-March 31, 2022. 3 4 2 6 Hint: While this business is a sole proprietorship, you are required to account for this cash contribution as you would for a corporation 2 Hint: Supplies are those types of supplies that are used up in the course of doing business. They are not part of cost of goods. 10 11 12 14 | 18 19 21 22 24 26 Week 2 On Saturday 10th April, Zita supplied ice-cream for Lucy Hernandez' wedding. That evening, she sent Mr. Hernandez an invoice for $810. Terms 3/10, n/30 (The cost of materials was $340) Mr. Hernandez rang to complain that four buckets of ice-cream had melted. Zita agreed to give him a credit for $110. Zita purchases candy for add-in ice-cream mixing for $116 cash. Ice-cream cash sales for the week are $1,700. (The cost of sales was $730) Week 3 Wages of $360 per employee, per week were paid to employees for the two-week period April 15 ended April 15th. Zita withheld a total of $160 ($80 from each employee) for taxes. Mr. Hernandez paid for his daughter's wedding (less amount for returned ice-creams) Purchased supplies for $70 on credit. Paid for ice-cream ingredients bought on April 6. Purchased ice-cream ingredients for $3,880 on credit. Zita supplied ice-cream for a graduation function for La Vista Community College and 20 prepared an invoice for $1500. Terms 3/10, n/30 (The cost of materials was $695) Recorded ice-cream cash sales for the week, $3384. (The cost of ingredients was $1322) Week 4 Paid for supplies purchased April 19. Paid $220 to 'Adriana's Ads' for advertising Received gas bill of $116. Recorded ice-cream cash sales for the week, $2,950. (The cost of ingredients was $1136) Week 5 Wages of $360 per employee, per week were paid to employees for the two-week period 29 ended April 15th. Zita withheld a total of $160 ($80 from each employee) for taxes. La Vista paid the amount owing from the April 20 graduation ceremony. Zita paid herself an amount of $600 from the business profits 3 Recorded ice-cream cash sales for the final two days $856. (The cost of ingredients was $380) Further information: This part will be completed on Stage 2. Please refer to Stage 2 below for more details. a) Adjust prepaid rent and prepaid insurance b) A count of supplies indicates that $45 remain on hand at month end. c) Interest on the bank loan is charged at 9 per cent per annum and is paid quarterly with the next payment of $1,440.26 due on 1 July (round interest expense to the nearest dollar). 4 d) An electricity bill for $162 for April was received on 2 July. The amount has not yet been recorded. e) The estimated telephone for April is $42. f) Depreciation is charged in proportion for each month (depreciation is charged in full for the month the asset is purchased) g) Calculate accrued wages for April 29 and April 30. * Hint: While this is a sole proprietorship, you are required to account for this amount as you would dividends. * The loan is a principal and interest loan. However, it is not too complicated on the first month as Zita borrowed the money on April 1, 2021 28 a 30 Accounting system information The business prepares adjusting entries at the end of each month (Please review the chapter on adjusting entries and ensure that you have made all appropriate adjustments). The business maintains a general ledger to record postings from the general journal. In practice, the business would be required to collect and pay sales tax on its sales; however, for the purposes of this exercise, sales tax has been excluded. NOTE: all amounts in this practice set should be rounded to the nearest dollar. Required After reading the introduction carefully and gaining familiarity with the business operations and the accounting system, complete the following: Stage 1 (Journal entries, I accounts and Unadjusted trial balance) 50 points 1. Make appropriate journal entries for the ZZ Pops's transactions for the month of April 2021. - Prepare in Excel. 2. Post journal transactions to the ledger accounts as specified in the 'accounting system information section of the introduction. - Prepare in Excel. 3. Prepare the unadjusted trial balance as at 30 April. - Prepare in Excel. Stage 2 (Adjustments, Income Statements, Balance Sheet) - 50 points. The points include the analysis. 4. I will be providing the solution to Stage 1. Make the appropriate corrections to the journal entries, ledger accounts and unadjusted trial balance. 5. I will also be providing the adjusted entries after Stage 1 has been completed. Based on the adjustments that are provided, complete the following Financial Statements: a) Income Statement - Prepare in Excel b) Balance Sheet - Prepare in Excel c) Then write an analysis Stage 2 (Analysis) 1. Zita invites you out for a coffee to discuss your accounting for the first month. She says to you "I've always felt so comfortable being creative, but I'm not very good on the business side. I had a look at your university textbook by Kimmel et ai and so many things just don't make sense to me. Even though I've read the discussion of accounting principles and concepts, I cannot understand them. Can you explain the following to me? a) What form of business organization is ZZ Pops considered to be? What are the advantages and disadvantages of me changing the business structure? b) Why did you say that I could not include the rent for my apartment as well as my groceries in the accounts? After all, these are genuine expenses that I incurred. c) Why did you include the amount for the electricity bill in the accounts for April but we have not yet paid it? 2. Zita tells you that she is thinking of expanding her business and has the opportunity to purchase four small mobile carts similar to the one that was rented for the Hernandez wedding. The costs of purchasing these four carts will be $16,000 and the carts have a useful life of five years. Normally, these carts would cost $48,000 to buy, but the original owner passed away two years ago and the carts have been locked in storage all this time. The family has a list of original clients, including festival organizers, so, although it is not guaranteed that she would get that business back, there appears to be an opportunity to get some immediate business. The only other potential buyer is her direct competition, and she fears that if he buys the carts, that he might take some of the new clientele that she has generated in the shop this month. She asks your advice as to whether this is a potentially profitable move. Using the financial statements you have prepared, outline to Zita whether or not you think she should buy the mobile carts and provide reasons for your recommendations. (Your answer should specifically reference at least two items from each statement). 3. Do you think ZZ Pops is in a good financial position at the end of April? Explain your answer using at least two ratios that you have studied this semester