I will like the solution to Madi's Mad Mad World Taxidermy Journal Entries, Trial Balance and Adjusting Journal entries for the transactions during the month of March.

MADI'S NOTES

March 1, 2018

Today is the day I start my business. Opened a company bank account for Mad Mad World Taxidermy, and deposited $500 cash, I also provided my

$15,958 car (2016 Volkswagen Jetta), and $800 worth sewing equipment for the company. Exchanged all of these assets for shares in my new company, Mad Mad World Taxidermy.

March 1

My friend (a lawyer) helped me set up the company. He billed me $200 for legal fees which I think is a phenomenal deal. I havent paid the bill yet.

March 1

Purchased supplies on account - $50.

March 2

Purchased 10 How to Taxidermy books for cash. Plan to sell them along with my taxidermy rats. Cost $8 each. (These books are inventory).

March 2

Borrowed $3,000 cash from my brother (hes rich). I signed a note promising to pay him back the full amount PLUS 5% annual interest on or before his birthday (October 4) can you believe that cheapskate would charge his only sister INTEREST!?!

March 2

Purchased a one-year insurance policy on the assets of the business - $185. Paid cash.

March 3

Purchased 3 rats from Petland*1 these rats will be used in my first 3 taxidermy pieces paid $27 cash. Made Rat #1 into Santa Claus, Rat #2 became a College student, and Rat #3 became a sports superfan.

Note rats are Madis inventory.) When Madi purchases her rats, they are already dead. The rats are sold by pet stores to snake owners as snake food

March 4

Went to my first artisan market. Sold the College student rat for $60, and the Sports fan rat for $50. Received cash for the College student rat, but the sports fan sale was to my friend Patrick, who promised to pay me later he better not forget. Also, paid a $25 fee to have a table at the market. Sold 6 How to Taxidermy Books for $15 each received cash.

March 5

To celebrate my first sale, I took myself out to dinner. $50. Used the

companys bank account to pay, I didnt do any work or anything, but I was too tired to cook from the day at the market, so I think I should include this in my business costs. This is expensable right?

March 8

Purchased three more rats from Petland - $30. Made the first into a Mermaid, the second into a ballerina and the third into a wizard.

March 9

Ran out of supplies, purchased $100 more. Paid cash.

March 10

Purchased 5 more How to Taxidermy Books for cash. Cost $9 each.

March 12

Paid the legal bill.

March 14

Hired a friend (very limited hours) to help me out. Ill pay $12/hour to help with setup and selling at events.

March 15

Attended another artisan market (cost to have a table: $25.) Sold the Mermaid for $100 and wizard rat for $60. Both were sold on account, with customers promising to pay within 30 days. Sold 8 How to Taxidermy books all for cash - $15 each.

March 17

Purchased four more rats from Petland - $44 cash. Made a race car driver, a cowboy, a school teacher and a poker player.

March 18

Purchased 12 more How to Taxidermy books for cash - $10 each.

March 20

Sold three (!) rats on Etsy. Santa Claus - $90, the ballerina - $60, and the cowboy - $40. Etsy takes a 10% of revenue, but the rest of the money has appeared in my account. Woohoo!

March 23

Attended the artisan market and sold the poker player - $80, and the school teacher $100. Both were on account. Id better start collecting some of this money soon!! Paid the exhibitor cost of $25 cash. Sold 4 How to Taxidermy books - $15 cash each.

March 24

Paid my friend four hours of wages from the March 23 market.

March 25

Purchased 3 more rats from Petland - $36, cash. An astronaut, a zombie and a zombie hunter.

March 26

Ran out of supplies again, purchased more - $80 cash.

March 27

The zombie and zombie hunter sold as a package deal on Etsy $220. Etsy took its 10% fee, but the rest of the money landed in my bank account.

March 28

Received payment for a custom order for a very fancy Princess Rat. $250. Will begin making the rat in the next few days.

March 29

Received but did not pay my telephone bill. $45.

March 30

Received a bill for internet hosting for March $20 paid.

March 31

Celebrated my first month in business and I bought myself a new bracelet (with the companys cash) -$100.

RESOURCES FOR MADI'S NOTES

Your Notes

Dont forget about month-end adjustments! I will need to:

1. Accrue interest on the note from Madis brother.

Note: Round to the nearest full month.

2. Adjust prepaid insurance.

Note: Round to the nearest full month.

3. Adjust supplies a count at year end reveals $20 of supplies are on hand.
4. Depreciate capital assets
   1. For the car, assume a residual value of $5,000 and a ten-year or 100,000km useful life. The car was driven 150kms for the month. Use units-of- production depreciation.
   2. For the sewing equipment, assume a residual value of $100 and an eight year useful life. Use straightline depreciation.
5. When discussing an allowance for doubtful accounts, Madi really wasnt sure. Lets assume 10% of receivables will be uncollectible using the aging of receivables method (note they are all <30 days old).
6. At year-end the special order from March 28 was 80% complete.
7. When dealing with rat inventory, because each piece is unique, use specific unit identification method.
8. When dealing with book inventory, use the weighted average method. Round the average cost per book to THREE decimal places in journal entries round to the nearest $1.
9. Assume an income tax rate of 15% on net income before taxes. If income before taxes is NEGATIVE, assume taxes of ZERO. Round any decimal to the nearest dollar (DR Income tax exp, CR Income taxes payable)

NOTE: All Adjusting Entries are to be rounded to the nearest month and to the nearest whole dollar.

QUESTIONS:

• Journal entries for all transactions for Mad Mad World Taxidermy based on Madis Notebook as below.

• T-Accounts.

• An unadjusted trial balance.

• Adjusting journal entries. (Show calculations.)

• An adjusted trial balance.

• An income statement, a statement of changes in equity, and a balance sheet.

Also, write two separate one-page memos addressed to Madi Lowe.

• The first will outline why it is critical that she keep good accounting records. Why does accounting matter for a small business like hers, and why must she keep track of her transactions.

• The second should examine the March 5 and March 31 transactions. What is the appropriate accounting treatment of these items? Why? (They may be the same or may be different from each other). Explain to Madi Lowe how those transactions ought to be treated.

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