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Continuing Cookie Chronicle 1

Continuing Cookie Chronicle

Part 2 After establishing their companys fiscal year-end to be October 31, Natalie and Curtis began operating Cookie & Coffee Creations Inc. on November 1, 2015. The company had the following selected transactions during its first fiscal year of operations.

Jan. 1 Issued an additional 800 preferred shares to Natalies brother for $4,000 cash.

June. 30 Repurchased 750 shares issued to the lawyer, for $500 cash. The lawyer had decided to retire and wanted to liquidate all of her assets.

Oct. 15 The company had a very successful first year of operations and as a result declared dividends of $28,000, payable November 15, 2016. (Indicate the amounts payable to the preferred stockholders and to the common stockholders.)

Oct. 31 The company earned revenues of $472,500 and incurred expenses of $416,500 (including the $750 legal expense from November 1 but excluding income tax). Record income tax expense, assuming the company has a 20% income tax rate.

Instructions

(a) Prepare the journal entries to record each of the above transactions.

Date	Account Titles	Debit	Credit
Jan. 1	Cash	4,000
	Preferred stock		4,000
June. 30	Treasury Stock	500
	Cash		500
Oct. 15	Cash Dividends	28,000
	Dividends Payable		28,000
Oct. 31	Income Tax Expense	11,200
	Income Tax Payable		11,200

(b) Prepare all of the closing entries required on October 31, 2016.

Date	Account Titles	Debit	Credit
Oct. 31	Sales Revenue	472,500.00
	Income Summary		472,500.00
Oct. 31	Income Summary	750
	Legal Expenses		750
Oct. 31	Income Summary	28,000
	Dividend Expense		28.000
Oct. 31	Income Summary	11,200
	Income Tax Expenses		11,200
Oct. 31	Income Summary	16,800
	Retained Earrnings		16,800