Natalie is busy establishing both divisions of her business (cookie classes and mixer sales) and completing her business degree. Her goals for the next 11 months are to sell one mixer per month and to give two to three classes per week. The cost of the fine European mixers is expected to increase. Natalie has just negotiated new terms with Kzinski that include shipping costs in the negotiated purchase price (mixers will be shipped FOB destination). Assume that Natalie has decided to use a periodic inventory system and now must choose a cost flow assumption for her mixer inventory. The following transactions occur in February to May 2008. Feb. 2 Natalie buys two deluxe mixers on account from Kzinski Supply Co. for $1,200 ($600 each), FOB destination, terms n/30. 16 She sells one deluxe mixer for $1,050 cash. 25 She pays the amount owed to Kzinski. Mar. 2 She buys one deluxe mixer on account from Kzinski Supply Co. for $618, FOB destination, terms n/30. 30 Natalie sells two deluxe mixers for a total of $2,300 cash. 31 She pays the amount owed to Kzinski. Apr. 1 She buys two deluxe mixers on account from Kzinski Supply Co. for $1,224 ($612 each), FOB destination, terms n/30. 13 She sells three deluxe mixers for a total of $3,450 cash. 30 Natalie pays the amounts owed to Kzinski. May 4 She buys three deluxe mixers on account from Kzinski Supply Co. for $1,875 ($573.33 each), FOB destination, terms n/30. 27 She sells one deluxe mixer for $1,150 cash. Instructions (a) Prepare jouranl entries for each of the transactions. (b) Determine the cost of goods available for sale. Recall from Chapter 5 that at the end of January, Cookie Creations had three mixers on hand at a cost of $595 each. (c) Calculate (i) ending inventory, (ii) cost of goods sold, (iii) gross profit, and (iv) gross profit rate under each of the following methods: LIFO, FIFO, and average cost. (d) Natalie is thinking of getting a bank loan. If this is the only factor Natalie hs to consider in choosing an inventory cost flow assumption, which cost flow assumption would you recommend that Natalie use? Why?

Continuing Cookie Chronicle Continuing Cookie Chronicle (Note: This is a continuation of the Cookie Chronicle from Chapters 1 through 4.) CCC5 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 $575, and Natalie would sell each one for $1,150. Natalie comes to you for advice on how to account for these mixers. Each appliance has a serial number and can be easily identified. Natalie asks you the following questions. 1. \"Would you consider these mixers to be inventory? Or, should they be classified as supplies or equipment?\" 2. \"I've learned a little about keeping track of inventory using both the perpetual and the periodic systems of accounting for inventory. Which system do you think is better? Which one would you recommend for the type of inventory that I want to sell?\" 3. \"How often do I need to count inventory if I maintain it using the perpetual system? Do I need to count inventory at all?\" 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 6 7 8 12 13 14 14 17 18 20 28 28 31 31 She buys five deluxe mixers on account from Kzinski Supply Co. for $2,875, terms n/30. She pays $100 freight on the January 4 purchase. 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. She collects the amount due from the neighborhood community center that was accrued at the end of December 2009. She sells three deluxe mixers on account for $3,450, FOB destination, terms n/30. The mixers cost $595 each (including freight). Natalie pays her cell phone bill previously accrued in the December adjusting journal entries. She pays $75 of delivery charges for the three mixers that were sold on January 12. She buys four deluxe mixers on account from Kzinski Supply Co. for $2,300, terms n/30. 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. She pays $80 freight on the January 14 purchase. She sells two deluxe mixers for $2,300 cash. Natalie issues a check to her assistant. Her assistant worked 20 hours in January and is also paid for amounts owing at December 31, 2009. Recall that Natalie's assistant earns $8 an hour. Natalie collects amounts due from customers in the January 12 transaction. She pays Kzinski all amounts due. Cash dividends of $750 are paid. 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 month's 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 month's 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 month's worth of interest on her grandmother's loan needs to be accrued. (The interest rate is 9%.) 6. One month's 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.) 1 2 chapter 5 Merchandising Operations and the Multiple-Step Income Statement 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. (c) Totals $12,684 (f) Net income $ 2,305 (g) Total assets $ 8,539 Instructions Using the information that you have gathered and the general ledger accounts that you have prepared through Chapter 4, plus the new information above, do the following. (a) Answer Natalie's questions. (b) Prepare and post the January 2010 transactions. (c) Prepare a trial balance. (d) Prepare and post the adjusting journal entries required. (e) Prepare an adjusted trial balance. (f) Prepare a multiple-step income statement and retained earnings statement for the month ended January 31, 2010. (g) Prepare a classified balance sheet as of January 31, 2010. Continuing Cookie Chronicle Continuing Cookie Chronicle (Note: This is a continuation of the Cookie Chronicle from Chapters 1 through 4.) CCC5 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 $575, and Natalie would sell each one for $1,150. Natalie comes to you for advice on how to account for these mixers. Each appliance has a serial number and can be easily identified. Natalie asks you the following questions. 1. \"Would you consider these mixers to be inventory? Or, should they be classified as supplies or equipment?\" 2. \"I've learned a little about keeping track of inventory using both the perpetual and the periodic systems of accounting for inventory. Which system do you think is better? Which one would you recommend for the type of inventory that I want to sell?\" 3. \"How often do I need to count inventory if I maintain it using the perpetual system? Do I need to count inventory at all?\" 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 6 7 8 12 13 14 14 17 18 20 28 28 31 31 She buys five deluxe mixers on account from Kzinski Supply Co. for $2,875, terms n/30. She pays $100 freight on the January 4 purchase. 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. She collects the amount due from the neighborhood community center that was accrued at the end of December 2009. She sells three deluxe mixers on account for $3,450, FOB destination, terms n/30. The mixers cost $595 each (including freight). Natalie pays her cell phone bill previously accrued in the December adjusting journal entries. She pays $75 of delivery charges for the three mixers that were sold on January 12. She buys four deluxe mixers on account from Kzinski Supply Co. for $2,300, terms n/30. 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. She pays $80 freight on the January 14 purchase. She sells two deluxe mixers for $2,300 cash. Natalie issues a check to her assistant. Her assistant worked 20 hours in January and is also paid for amounts owing at December 31, 2009. Recall that Natalie's assistant earns $8 an hour. Natalie collects amounts due from customers in the January 12 transaction. She pays Kzinski all amounts due. Cash dividends of $750 are paid. 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 month's 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 month's 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 month's worth of interest on her grandmother's loan needs to be accrued. (The interest rate is 9%.) 6. One month's 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.) 1 2 chapter 5 Merchandising Operations and the Multiple-Step Income Statement 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. (c) Totals $12,684 (f) Net income $ 2,305 (g) Total assets $ 8,539 Instructions Using the information that you have gathered and the general ledger accounts that you have prepared through Chapter 4, plus the new information above, do the following. (a) Answer Natalie's questions. (b) Prepare and post the January 2010 transactions. (c) Prepare a trial balance. (d) Prepare and post the adjusting journal entries required. (e) Prepare an adjusted trial balance. (f) Prepare a multiple-step income statement and retained earnings statement for the month ended January 31, 2010. (g) Prepare a classified balance sheet as of January 31, 2010. Continuing Cookie Chronicle Continuing Cookie Chronicle (Note: This is a continuation of the Cookie Chronicle from Chapters 1 through 4.) CCC5 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 $575, and Natalie would sell each one for $1,150. Natalie comes to you for advice on how to account for these mixers. Each appliance has a serial number and can be easily identified. Natalie asks you the following questions. 1. \"Would you consider these mixers to be inventory? Or, should they be classified as supplies or equipment?\" 2. \"I've learned a little about keeping track of inventory using both the perpetual and the periodic systems of accounting for inventory. Which system do you think is better? Which one would you recommend for the type of inventory that I want to sell?\" 3. \"How often do I need to count inventory if I maintain it using the perpetual system? Do I need to count inventory at all?\" 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 6 7 8 12 13 14 14 17 18 20 28 28 31 31 She buys five deluxe mixers on account from Kzinski Supply Co. for $2,875, terms n/30. She pays $100 freight on the January 4 purchase. 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. She collects the amount due from the neighborhood community center that was accrued at the end of December 2009. She sells three deluxe mixers on account for $3,450, FOB destination, terms n/30. The mixers cost $595 each (including freight). Natalie pays her cell phone bill previously accrued in the December adjusting journal entries. She pays $75 of delivery charges for the three mixers that were sold on January 12. She buys four deluxe mixers on account from Kzinski Supply Co. for $2,300, terms n/30. 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. She pays $80 freight on the January 14 purchase. She sells two deluxe mixers for $2,300 cash. Natalie issues a check to her assistant. Her assistant worked 20 hours in January and is also paid for amounts owing at December 31, 2009. Recall that Natalie's assistant earns $8 an hour. Natalie collects amounts due from customers in the January 12 transaction. She pays Kzinski all amounts due. Cash dividends of $750 are paid. 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 month's 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 month's 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 month's worth of interest on her grandmother's loan needs to be accrued. (The interest rate is 9%.) 6. One month's 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.) 1 2 chapter 5 Merchandising Operations and the Multiple-Step Income Statement 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. (c) Totals $12,684 (f) Net income $ 2,305 (g) Total assets $ 8,539 Instructions Using the information that you have gathered and the general ledger accounts that you have prepared through Chapter 4, plus the new information above, do the following. (a) Answer Natalie's questions. (b) Prepare and post the January 2010 transactions. (c) Prepare a trial balance. (d) Prepare and post the adjusting journal entries required. (e) Prepare an adjusted trial balance. (f) Prepare a multiple-step income statement and retained earnings statement for the month ended January 31, 2010. (g) Prepare a classified balance sheet as of January 31, 2010. neo Date Account Titles and Explanation Dec 5 Cash Unearned Service Revenue Service Revenue Debit Credit 90 60 150 8 Cash Accounts Receivable 300 9 Cash Unearned Service Revenue 750 300 750 Neo 15 Accounts Payable Cash 50 16 Accounts Payable Cash 600 19 Cash Unearned Service Revenue 50 600 60 60 23 Cash Accounts Receivable Service Revenue 3,000 1,000 23 Baking supplies Cash 1,250 23 Wages Expense Cash 800 28 Dividend Cash 500 4,000 1,250 800 500 Eon Adjusting Entries: Dec 31 Advertising Supplies Expense Advertising Supplies 45 45 31 Depreciation Expense Accumulated Depreciation 40 31 Amortization Expense Website 25 31 Interest Expense Interest Payable 23 40 25 23 31 Insurance Expense Prepaid Insurance 100 31 Accounts Receivable Service Revenue 450 31 Baking Supplies Expense Baking Supplies 100 450 1,025 1,025 31 Telephone Expense Accounts Payable 75 31 Wages Expense Wages Payable 56 31 Unearned Service Revenue Service Revenue Closing Entries: Service Revenue Income Summary 75 56 450 450 5,450 5,450 Income Summary Wages Expense Telephone Expense Advertising Supplies Expense Depreciation Expense Amortization Expense Interest Expense Insurance Expense Baking Supplies Expense 2,239 Income Summary Retained Earnings 3,211 Retained Earnings Dividend 856 125 45 40 25 23 100 1,025 3,211 500 500 Beg Bal 5-Dec 8-Dec 9-Dec 19-Dec 23-Dec End Bal Beg Bal 23-Dec 31-Dec End Bal Cash 340 15-Dec 90 16-Dec 300 23-Dec 750 23-Dec 60 28-Dec 3,000 4,540 1,340 Accounts Receivable 300 8-Dec 1,000 450 1,750 1,450 50 600 1,250 800 500 5-Dec 31-Dec Common Stock Beg Bal 300 Beg Bal End Bal Advertising Supplies 95 50 45 28-Dec Prepaid Insurance 1,200 1,100 100 Closing Beg Bal Beg Bal End Bal 1,025 Website 600 31-Dec 575 Closing Retained Earnings 500 Closing Dividend 500 Closing 500 Service Revenue 5,450 Beg Bal 5-Dec 23-Dec 31-Dec 31-Dec 5,450 400 150 4,000 450 450 5,450 3,211 2,711 1,025 Baking Equipment 1,200 Accumulated Depreciation 31-Dec 800 300 End Bal Beg Bal 60 750 60 870 360 3,200 Baking Supplies 125 31-Dec 1,250 1,375 350 Beg Bal 23-Dec Unearned Service Revenue 60 Beg Bal 450 9-Dec 19-Dec 510 End Bal Beg Bal 40 25 28-Dec 31-Dec Telephone Expense 50 Closing 75 125 Wages Expense 800 Closing 56 856 Advertising Supplies Expense 31-Dec 45 Closing 125 125 856 856 45 650 75 725 75 31-Dec Depreciation Expense 40 Closing 40 2,000 31-Dec Amortization Expense 25 Closing 25 Wages Payable 31-Dec 56 31-Dec Interest Expense 23 Closing 23 Interest Payable 31-Dec Closing Closing Accounts Payable 50 Beg Bal 600 31-Dec 650 End Bal Notes Payable Beg Bal 15-Dec 16-Dec 23 31-Dec Insurance Expense 100 Closing 100 5,450 31-Dec Baking Supplies Expense 1,025 Closing Income Summary 2,239 Closing 3,211 5,450 5,450 1,025 Cookie Creations Inc Trial Balance December 31, 2009 Debit 1,340 1,000 1,375 95 1,200 1,200 600 Cash Accounts Receivable Baking Supplies Advertising Supplies Prepaid Insurance Baking Equipment Website Notes Payable Unearned Service Revenue Common Stock Dividend 500 Service Revenue Wages Expense 800 Telephone Expense 50 Totals 8,160 Credit 2,000 810 800 4,550 8,160 Cookie Creations Inc Adjusted Trial Balance December 31, 2009 Cash Accounts Receivable Baking Supplies Advertising Supplies Prepaid Insurance Baking Equipment Accumulated Depreciation Website Accounts Payable Wages Payable Interest Payable Unearned Service Revenue Notes Payable Common Stock Dividend Service Revenue Wages Expense Telephone Expense Advertising Supplies Expense Depreciation Expense Amortization Expense Interest Expense Insurance Expense Baking Supplies Expense Totals Debit 1,340 1,450 350 50 1,100 1,200 Credit 40 575 75 56 23 360 2,000 800 500 5,450 856 125 45 40 25 23 100 1,025 8,804 8,804 Cookie Creations Inc Income Statement For the 2-Month Ending December 31, 2009 REVENUES: Service Revenue EXPENSES: Wages Expense Telephone Expense Advertising Supplies Expense Depreciation Expense Amortization Expense Interest Expense Insurance Expense Baking Supplies Expense Net Income Cookie Creations Inc Income Statement December 31, 2009 5,450 856 125 45 40 25 23 100 1,025 Cookie Creations Inc Statement of Retained Earnings For the 2-Month Ending December 31, 2009 Retained Earnings, beginning Add: Net Income Total Less; Dividends Retained Earnings, ending (2,239) 3,211 3,211 3,211 (500) 2,711 ASSETS Current Assets Cash Accounts Receivable Baking Supplies Advertising Supplies Prepaid Insurance Total Current Assets Plant Assets Baking Equipment Accumulated Depreciation Website Total Assets 1,340 1,450 350 50 1,100 4,290 1,200 (40) 1,160 575 6,025 LIABILITIES AND STOCKHOLDERS EQUITY Current Liabilities Accounts Payable 75 Wages Payable 56 Interest Payable 23 Unearned Service Revenue 360 Total Current Liabilities 514 Long Term Liabilities Notes Payable 2,000 Total Liabilities 2,514 Stockholders Equity Common Stock 800 Retained Earnings 2,711 Total Stockholders Equity 3,511 Total Liabilities and Stockholders Equity 6,025 Cookie Creations Inc Post Closing Trial Balance December 31, 2009 Cash Accounts Receivable Baking Supplies Advertising Supplies Prepaid Insurance Baking Equipment Accumulated Depreciation Website Accounts Payable Wages Payable Notes Payable Interest Payable Unearned Service Revenue Common Stock Retained Earnings Totals Debit 1,340 1,450 350 50 1,100 1,200 Credit 40 575 6,065 75 56 2,000 23 360 800 2,711 6,065 Date Account Titles and Explanation Dec 5 Cash Unearned Service Revenue Service Revenue Debit Credit 90 60 150 8 Cash Accounts Receivable 300 9 Cash Neo Unearned Service Revenue 750 300 750 15 Accounts Payable Cash 50 16 Accounts Payable Cash 600 19 Cash Unearned Service Revenue 50 600 60 60 23 Cash Accounts Receivable Service Revenue 3,000 1,000 23 Baking supplies Cash 1,250 4,000 1,250 23 Wages Expense Cash 800 28 Dividend Eon Cash 500 Adjusting Entries: Dec 31 Advertising Supplies Expense Advertising Supplies 800 500 45 45 31 Depreciation Expense Accumulated Depreciation 40 31 Amortization Expense Website 25 31 Interest Expense Interest Payable 23 40 25 23 31 Insurance Expense Prepaid Insurance 100 31 Accounts Receivable Service Revenue 450 31 Baking Supplies Expense Baking Supplies 100 450 1,025 1,025 31 Telephone Expense Accounts Payable 75 31 Wages Expense Wages Payable 56 31 Unearned Service Revenue Service Revenue Closing Entries: Service Revenue Income Summary 75 56 450 450 5,450 5,450 Income Summary Wages Expense Telephone Expense Advertising Supplies Expense Depreciation Expense Amortization Expense Interest Expense Insurance Expense Baking Supplies Expense 2,239 Income Summary Retained Earnings 3,211 Retained Earnings Dividend 856 125 45 40 25 23 100 1,025 3,211 500 500 Cash Beg Bal 5-Dec 8-Dec 9-Dec 19-Dec 23-Dec End Bal End Bal 15-Dec 16-Dec 23-Dec 23-Dec 28-Dec End Bal 50 600 1,250 800 500 Unearned Service Revenue 5-Dec 60 Beg Bal 31-Dec 450 9-Dec 19-Dec 510 End Bal 60 750 60 870 360 3,200 Accounts Receivable Beg Bal 300 8-Dec 23-Dec 1,000 31-Dec 450 1,750 1,450 Beg Bal 23-Dec End Bal 340 90 300 750 60 3,000 4,540 1,340 Baking Supplies 125 31-Dec 1,250 1,375 350 Advertising Supplies Beg Bal 95 50 Prepaid Insurance Beg Bal 1,200 1,100 Common Stock 300 Beg Bal 800 300 Closing Retained Earnings 500 Closing 3,211 2,711 45 28-Dec Dividend 500 Closing 500 100 Closing Service Revenue 5,450 Beg Bal 5-Dec 23-Dec 31-Dec 31-Dec 400 150 4,000 450 450 5,450 Closing 125 1,025 1,025 5,450 Baking Equipment Beg Bal 1,200 Beg Bal Accumulated Depreciation 31-Dec 28-Dec 31-Dec Wages Expense 800 56 856 125 Closing 856 856 Advertising Supplies Expense 31-Dec 45 Closing 45 31-Dec Depreciation Expense 40 Closing 40 2,000 31-Dec Amortization Expense 25 Closing 25 31-Dec 56 31-Dec Interest Expense 23 Closing 23 31-Dec Beg Bal Website 600 575 40 Telephone Expense 50 75 125 23 31-Dec Insurance Expense 100 Closing 100 Baking Supplies Expense 31-Dec 1,025 Closing 1,025 31-Dec 25 Accounts Payable 15-Dec 50 Beg Bal 16-Dec 600 31-Dec 650 End Bal 650 75 725 75 Beg Bal End Bal Notes Payable Wages Payable Interest Payable Closing Closing Income Summary 2,239 Closing 3,211 5,450 5,450 5,450 Cookie Creations Inc Trial Balance December 31, 2009 Debit Cash Accounts Receivable Baking Supplies Advertising Supplies Prepaid Insurance Baking Equipment Website Notes Payable Unearned Service Revenue Common Stock Dividend Service Revenue Wages Expense Telephone Expense Totals Credit 1,340 1,000 1,375 95 1,200 2,000 810 800 500 4,550 800 50 6,360 8,160 Cookie Creations Inc Adjusted Trial Balance December 31, 2009 Debit Cash Accounts Receivable Baking Supplies Advertising Supplies Prepaid Insurance Baking Equipment Accumulated Depreciation Website Accounts Payable Wages Payable Interest Payable Unearned Service Revenue Notes Payable Common Stock Dividend Service Revenue Wages Expense Telephone Expense Advertising Supplies Expense Depreciation Expense Amortization Expense Interest Expense Insurance Expense Baking Supplies Expense Totals Credit 1,340 1,450 350 50 1,100 40 575 75 56 23 360 2,000 800 500 5,450 856 125 45 40 25 23 100 1,025 7,604 8,804 Cookie Creations Inc Income Statement For the 2-Month Ending December 31, 2009 REVENUES: Service Revenue EXPENSES: Wages Expense Telephone Expense Advertising Supplies Expense Depreciation Expense Amortization Expense Interest Expense Insurance Expense Baking Supplies Expense Net Income Cookie Creations Inc Income Statement December 31, 2009 5,450 856 125 45 40 25 23 100 1,025 Cookie Creations Inc Statement of Retained Earnings For the 2-Month Ending December 31, 2009 Retained Earnings, beginning Add: Net Income Total Less; Dividends Retained Earnings, ending (2,239) 3,211 3,211 3,211 (500) 2,711 ASSETS Current Assets Cash Accounts Receivable Baking Supplies Advertising Supplies Prepaid Insurance Total Current Assets Plant Assets Baking Equipment Accumulated Depreciation Website Total Assets 1,340 1,450 350 50 1,100 4,290 1,200 (40) LIABILITIES AND STOCKHOLDERS EQUITY Current Liabilities Accounts Payable 75 Wages Payable 56 Interest Payable 23 Unearned Service Revenue 360 Total Current Liabilities Long Term Liabilities Notes Payable Total Liabilities Stockholders Equity Common Stock 800 Retained Earnings 2,711 Total Stockholders Equity Total Liabilities and Stockholders Equity 1,160 575 6,025 514 2,000 2,514 3,511 6,025 Cookie Creations Inc Post Closing Trial Balance December 31, 2009 Debit Cash Accounts Receivable Baking Supplies Advertising Supplies Prepaid Insurance Baking Equipment Accumulated Depreciation Website Accounts Payable Wages Payable Notes Payable Interest Payable Unearned Service Revenue Common Stock Retained Earnings Totals Credit 1,340 1,450 350 50 1,100 40 575 4,865 75 56 2,000 23 360 800 2,711 6,065 Continuing Cookie Chronicle Continuing Cookie Chronicle (Note: This is a continuation of the Cookie Chronicle from Chapters 1 through 4.) CCC5 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 $575, and Natalie would sell each one for $1,150. Natalie comes to you for advice on how to account for these mixers. Each appliance has a serial number and can be easily identified. Natalie asks you the following questions. 1. \"Would you consider these mixers to be inventory? Or, should they be classified as supplies or equipment?\" 2. \"I've learned a little about keeping track of inventory using both the perpetual and the periodic systems of accounting for inventory. Which system do you think is better? Which one would you recommend for the type of inventory that I want to sell?\" 3. \"How often do I need to count inventory if I maintain it using the perpetual system? Do I need to count inventory at all?\" 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 6 7 8 12 13 14 14 17 18 20 28 28 31 31 She buys five deluxe mixers on account from Kzinski Supply Co. for $2,875, terms n/30. She pays $100 freight on the January 4 purchase. 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. She collects the amount due from the neighborhood community center that was accrued at the end of December 2009. She sells three deluxe mixers on account for $3,450, FOB destination, terms n/30. The mixers cost $595 each (including freight). Natalie pays her cell phone bill previously accrued in the December adjusting journal entries. She pays $75 of delivery charges for the three mixers that were sold on January 12. She buys four deluxe mixers on account from Kzinski Supply Co. for $2,300, terms n/30. 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. She pays $80 freight on the January 14 purchase. She sells two deluxe mixers for $2,300 cash. Natalie issues a check to her assistant. Her assistant worked 20 hours in January and is also paid for amounts owing at December 31, 2009. Recall that Natalie's assistant earns $8 an hour. Natalie collects amounts due from customers in the January 12 transaction. She pays Kzinski all amounts due. Cash dividends of $750 are paid. 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 month's 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 month's 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 month's worth of interest on her grandmother's loan needs to be accrued. (The interest rate is 9%.) 6. One month's 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.) 1 2 chapter 5 Merchandising Operations and the Multiple-Step Income Statement 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. (c) Totals $12,684 (f) Net income $ 2,305 (g) Total assets $ 8,539 Instructions Using the information that you have gathered and the general ledger accounts that you have prepared through Chapter 4, plus the new information above, do the following. (a) Answer Natalie's questions. (b) Prepare and post the January 2010 transactions. (c) Prepare a trial balance. (d) Prepare and post the adjusting journal entries required. (e) Prepare an adjusted trial balance. (f) Prepare a multiple-step income statement and retained earnings statement for the month ended January 31, 2010. (g) Prepare a classified balance sheet as of January 31, 2010. Continuing Cookie Chronicle Continuing Cookie Chronicle (Note: This is a continuation of the Cookie Chronicle from Chapters 1 through 4.) CCC5 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 $575, and Natalie would sell each one for $1,150. Natalie comes to you for advice on how to account for these mixers. Each appliance has a serial number and can be easily identified. Natalie asks you the following questions. 1. \"Would you consider these mixers to be inventory? Or, should they be classified as supplies or equipment?\" 2. \"I've learned a little about keeping track of inventory using both the perpetual and the periodic systems of accounting for inventory. Which system do you think is better? Which one would you recommend for the type of inventory that I want to sell?\" 3. \"How often do I need to count inventory if I maintain it using the perpetual system? Do I need to count inventory at all?\" 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 6 7 8 12 13 14 14 17 18 20 28 28 31 31 She buys five deluxe mixers on account from Kzinski Supply Co. for $2,875, terms n/30. She pays $100 freight on the January 4 purchase. 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. She collects the amount due from the neighborhood community center that was accrued at the end of December 2009. She sells three deluxe mixers on account for $3,450, FOB destination, terms n/30. The mixers cost $595 each (including freight). Natalie pays her cell phone bill previously accrued in the December adjusting journal entries. She pays $75 of delivery charges for the three mixers that were sold on January 12. She buys four deluxe mixers on account from Kzinski Supply Co. for $2,300, terms n/30. 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. She pays $80 freight on the January 14 purchase. She sells two deluxe mixers for $2,300 cash. Natalie issues a check to her assistant. Her assistant worked 20 hours in January and is also paid for amounts owing at December 31, 2009. Recall that Natalie's assistant earns $8 an hour. Natalie collects amounts due from customers in the January 12 transaction. She pays Kzinski all amounts due. Cash dividends of $750 are paid. 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 month's 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 month's 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 month's worth of interest on her grandmother's loan needs to be accrued. (The interest rate is 9%.) 6. One month's 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.) 1 2 chapter 5 Merchandising Operations and the Multiple-Step Income Statement 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. (c) Totals $12,684 (f) Net income $ 2,305 (g) Total assets $ 8,539 Instructions Using the information that you have gathered and the general ledger accounts that you have prepared through Chapter 4, plus the new information above, do the following. (a) Answer Natalie's questions. (b) Prepare and post the January 2010 transactions. (c) Prepare a trial balance. (d) Prepare and post the adjusting journal entries required. (e) Prepare an adjusted trial balance. (f) Prepare a multiple-step income statement and retained earnings statement for the month ended January 31, 2010. (g) Prepare a classified balance sheet as of January 31, 2010. Continuing Cookie Chronicle Continuing Cookie Chronicle (Note: This is a continuation of the Cookie Chronicle from Chapters 1 through 4.) CCC5 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 $575, and Natalie would sell each one for $1,150. Natalie comes to you for advice on how to account for these mixers. Each appliance has a serial number and can be easily identified. Natalie asks you the following questions. 1. \"Would you consider these mixers to be inventory? Or, should they be classified as supplies or equipment?\" 2. \"I've learned a little about keeping track of inventory using both the perpetual and the periodic systems of accounting for inventory. Which system do you think is better? Which one would you recommend for the type of inventory that I want to sell?\" 3. \"How often do I need to count inventory if I maintain it using the perpetual system? Do I need to count inventory at all?\" 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 6 7 8 12 13 14 14 17 18 20 28 28 31 31 She buys five deluxe mixers on account from Kzinski Supply Co. for $2,875, terms n/30. She pays $100 freight on the January 4 purchase. 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. She collects the amount due from the neighborhood community center that was accrued at the end of December 2009. She sells three deluxe mixers on account for $3,450, FOB destination, terms n/30. The mixers cost $595 each (including freight). Natalie pays her cell phone bill previously accrued in the December adjusting journal entries. She pays $75 of delivery charges for the three mixers that were sold on January 12. She buys four deluxe mixers on account from Kzinski Supply Co. for $2,300, terms n/30. 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. She pays $80 freight on the January 14 purchase. She sells two deluxe mixers for $2,300 cash. Natalie issues a check to her assistant. Her assistant worked 20 hours in January and is also paid for amounts owing at December 31, 2009. Recall that Natalie's assistant earns $8 an hour. Natalie collects amounts due from customers in the January 12 transaction. She pays Kzinski all amounts due. Cash dividends of $750 are paid. 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 month's 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 month's 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 month's worth of interest on her grandmother's loan needs to be accrued. (The interest rate is 9%.) 6. One month's 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.) 1 2 chapter 5 Merchandising Operations and the Multiple-Step Income Statement 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. (c) Totals $12,684 (f) Net income $ 2,305 (g) Total assets $ 8,539 Instructions Using the information that you have gathered and the general ledger accounts that you have prepared through Chapter 4, plus the new information above, do the following. (a) Answer Natalie's questions. (b) Prepare and post the January 2010 transactions. (c) Prepare a trial balance. (d) Prepare and post the adjusting journal entries required. (e) Prepare an adjusted trial balance. (f) Prepare a multiple-step income statement and retained earnings statement for the month ended January 31, 2010. (g) Prepare a classified balance sheet as of January 31, 2010. neo Date Account Titles and Explanation Dec 5 Cash Unearned Service Revenue Service Revenue Debit Credit 90 60 150 8 Cash Accounts Receivable 300 9 Cash Unearned Service Revenue 750 300 750 Neo 15 Accounts Payable Cash 50 16 Accounts Payable Cash 600 19 Cash Unearned Service Revenue 50 600 60 60 23 Cash Accounts Receivable Service Revenue 3,000 1,000 23 Baking supplies Cash 1,250 23 Wages Expense Cash 800 28 Dividend Cash 500 4,000 1,250 800 500 Eon Adjusting Entries: Dec 31 Advertising Supplies Expense Advertising Supplies 45 45 31 Depreciation Expense Accumulated Depreciation 40 31 Amortization Expense Website 25 31 Interest Expense Interest Payable 23 40 25 23 31 Insurance Expense Prepaid Insurance 100 31 Accounts Receivable Service Revenue 450 31 Baking Supplies Expense Baking Supplies 100 450 1,025 1,025 31 Telephone Expense Accounts Payable 75 31 Wages Expense Wages Payable 56 31 Unearned Service Revenue Service Revenue Closing Entries: Service Revenue Income Summary 75 56 450 450 5,450 5,450 Income Summary Wages Expense Telephone Expense Advertising Supplies Expense Depreciation Expense Amortization Expense Interest Expense Insurance Expense Baking Supplies Expense 2,239 Income Summary Retained Earnings 3,211 Retained Earnings Dividend 856 125 45 40 25 23 100 1,025 3,211 500 500 Beg Bal 5-Dec 8-Dec 9-Dec 19-Dec 23-Dec End Bal Beg Bal 23-Dec 31-Dec End Bal Cash 340 15-Dec 90 16-Dec 300 23-Dec 750 23-Dec 60 28-Dec 3,000 4,540 1,340 Accounts Receivable 300 8-Dec 1,000 450 1,750 1,450 50 600 1,250 800 500 5-Dec 31-Dec Common Stock Beg Bal 300 Beg Bal End Bal Advertising Supplies 95 50 45 28-Dec Prepaid Insurance 1,200 1,100 100 Closing Beg Bal Beg Bal End Bal 1,025 Website 600 31-Dec 575 Closing Retained Earnings 500 Closing Dividend 500 Closing 500 Service Revenue 5,450 Beg Bal 5-Dec 23-Dec 31-Dec 31-Dec 5,450 400 150 4,000 450 450 5,450 3,211 2,711 1,025 Baking Equipment 1,200 Accumulated Depreciation 31-Dec 800 300 End Bal Beg Bal 60 750 60 870 360 3,200 Baking Supplies 125 31-Dec 1,250 1,375 350 Beg Bal 23-Dec Unearned Service Revenue 60 Beg Bal 450 9-Dec 19-Dec 510 End Bal Beg Bal 40 25 28-Dec 31-Dec Telephone Expense 50 Closing 75 125 Wages Expense 800 Closing 56 856 Advertising Supplies Expense 31-Dec 45 Closing 125 125 856 856 45 650 75 725 75 31-Dec Depreciation Expense 40 Closing 40 2,000 31-Dec Amortization Expense 25 Closing 25 Wages Payable 31-Dec 56 31-Dec Interest Expense 23 Closing 23 Interest Payable 31-Dec Closing Closing Accounts Payable 50 Beg Bal 600 31-Dec 650 End Bal Notes Payable Beg Bal 15-Dec 16-Dec 23 31-Dec Insurance Expense 100 Closing 100 5,450 31-Dec Baking Supplies Expense 1,025 Closing Income Summary 2,239 Closing 3,211 5,450 5,450 1,025 Cookie Creations Inc Trial Balance December 31, 2009 Debit 1,340 1,000 1,375 95 1,200 1,200 600 Cash Accounts Receivable Baking Supplies Advertising Supplies Prepaid Insurance Baking Equipment Website Notes Payable Unearned Service Revenue Common Stock Dividend 500 Service Revenue Wages Expense 800 Telephone Expense 50 Totals 8,160 Credit 2,000 810 800 4,550 8,160 Cookie Creations Inc Adjusted Trial Balance December 31, 2009 Cash Accounts Receivable Baking Supplies Advertising Supplies Prepaid Insurance Baking Equipment Accumulated Depreciation Website Accounts Payable Wages Payable Interest Payable Unearned Service Revenue Notes Payable Common Stock Dividend Service Revenue Wages Expense Telephone Expense Advertising Supplies Expense Depreciation Expense Amortization Expense Interest Expense Insurance Expense Baking Supplies Expense Totals Debit 1,340 1,450 350 50 1,100 1,200 Credit 40 575 75 56 23 360 2,000 800 500 5,450 856 125 45 40 25 23 100 1,025 8,804 8,804 Cookie Creations Inc Income Statement For the 2-Month Ending December 31, 2009 REVENUES: Service Revenue EXPENSES: Wages Expense Telephone Expense Advertising Supplies Expense Depreciation Expense Amortization Expense Interest Expense Insurance Expense Baking Supplies Expense Net Income Cookie Creations Inc Income Statement December 31, 2009 5,450 856 125 45 40 25 23 100 1,025 Cookie Creations Inc Statement of Retained Earnings For the 2-Month Ending December 31, 2009 Retained Earnings, beginning Add: Net Income Total Less; Dividends Retained Earnings, ending (2,239) 3,211 3,211 3,211 (500) 2,711 ASSETS Current Assets Cash Accounts Receivable Baking Supplies Advertising Supplies Prepaid Insurance Total Current Assets Plant Assets Baking Equipment Accumulated Depreciation Website Total Assets 1,340 1,450 350 50 1,100 4,290 1,200 (40) 1,160 575 6,025 LIABILITIES AND STOCKHOLDERS EQUITY Current Liabilities Accounts Payable 75 Wages Payable 56 Interest Payable 23 Unearned Service Revenue 360 Total Current Liabilities 514 Long Term Liabilities Notes Payable 2,000 Total Liabilities 2,514 Stockholders Equity Common Stock 800 Retained Earnings 2,711 Total Stockholders Equity 3,511 Total Liabilities and Stockholders Equity 6,025 Cookie Creations Inc Post Closing Trial Balance December 31, 2009 Cash Accounts Receivable Baking Supplies Advertising Supplies Prepaid Insurance Baking Equipment Accumulated Depreciation Website Accounts Payable Wages Payable Notes Payable Interest Payable Unearned Service Revenue Common Stock Retained Earnings Totals Debit 1,340 1,450 350 50 1,100 1,200 Credit 40 575 6,065 75 56 2,000 23 360 800 2,711 6,065 Date Account Titles and Explanation Dec 5 Cash Unearned Service Revenue Service Revenue Debit Credit 90 60 150 8 Cash Accounts Receivable 300 9 Cash Neo Unearned Service Revenue 750 300 750 15 Accounts Payable Cash 50 16 Accounts Payable Cash 600 19 Cash Unearned Service Revenue 50 600 60 60 23 Cash Accounts Receivable Service Revenue 3,000 1,000 23 Baking supplies Cash 1,250 4,000 1,250 23 Wages Expense Cash 800 28 Dividend Eon Cash 500 Adjusting Entries: Dec 31 Advertising Supplies Expense Advertising Supplies 800 500 45 45 31 Depreciation Expense Accumulated Depreciation 40 31 Amortization Expense Website 25 31 Interest Expense Interest Payable 23 40 25 23 31 Insurance Expense Prepaid Insurance 100 31 Accounts Receivable Service Revenue 450 31 Baking Supplies Expense Baking Supplies 100 450 1,025 1,025 31 Telephone Expense Accounts Payable 75 31 Wages Expense Wages Payable 56 31 Unearned Service Revenue Service Revenue Closing Entries: Service Revenue Income Summary 75 56 450 450 5,450 5,450 Income Summary Wages Expense Telephone Expense Advertising Supplies Expense Depreciation Expense Amortization Expense Interest Expense Insurance Expense Baking Supplies Expense 2,239 Income Summary Retained Earnings 3,211 Retained Earnings Dividend 856 125 45 40 25 23 100 1,025 3,211 500 500 Cash Beg Bal 5-Dec 8-Dec 9-Dec 19-Dec 23-Dec End Bal End Bal 15-Dec 16-Dec 23-Dec 23-Dec 28-Dec End Bal 50 600 1,250 800 500 Unearned Service Revenue 5-Dec 60 Beg Bal 31-Dec 450 9-Dec 19-Dec 510 End Bal 60 750 60 870 360 3,200 Accounts Receivable Beg Bal 300 8-Dec 23-Dec 1,000 31-Dec 450 1,750 1,450 Beg Bal 23-Dec End Bal 340 90 300 750 60 3,000 4,540 1,340 Baking Supplies 125 31-Dec 1,250 1,375 350 Advertising Supplies Beg Bal 95 50 Prepaid Insurance Beg Bal 1,200 1,100 Common Stock 300 Beg Bal 800 300 Closing Retained Earnings 500 Closing 3,211 2,711 45 28-Dec Dividend 500 Closing 500 100 Closing Service Revenue 5,450 Beg Bal 5-Dec 23-Dec 31-Dec 31-Dec 400 150 4,000 450 450 5,450 Closing 125 1,025 1,025 5,450 Baking Equipment Beg Bal 1,200 Beg Bal Accumulated Depreciation 31-Dec 28-Dec 31-Dec Wages Expense 800 56 856 125 Closing 856 856 Advertising Supplies Expense 31-Dec 45 Closing 45 31-Dec Depreciation Expense 40 Closing 40 2,000 31-Dec Amortization Expense 25 Closing 25 31-Dec 56 31-Dec Interest Expense 23 Closing 23 31-Dec Beg Bal Website 600 575 40 Telephone Expense 50 75 125 23 31-Dec Insurance Expense 100 Closing 100 Baking Supplies Expense 31-Dec 1,025 Closing 1,025 31-Dec 25 Accounts Payable 15-Dec 50 Beg Bal 16-Dec 600 31-Dec 650 End Bal 650 75 725 75 Beg Bal End Bal Notes Payable Wages Payable Interest Payable Closing Closing Income Summary 2,239 Closing 3,211 5,450 5,450 5,450 Cookie Creations Inc Trial Balance December 31, 2009 Debit Cash Accounts Receivable Baking Supplies Advertising Supplies Prepaid Insurance Baking Equipment Website Notes Payable Unearned Service Revenue Common Stock Dividend Service Revenue Wages Expense Telephone Expense Totals Credit 1,340 1,000 1,375 95 1,200 2,000 810 800 500 4,550 800 50 6,360 8,160 Cookie Creations Inc Adjusted Trial Balance December 31, 2009 Debit Cash Accounts Receivable Baking Supplies Advertising Supplies Prepaid Insurance Baking Equipment Accumulated Depreciation Website Accounts Payable Wages Payable Interest Payable Unearned Service Revenue Notes Payable Common Stock Dividend Service Revenue Wages Expense Telephone Expense Advertising Supplies Expense Depreciation Expense Amortization Expense Interest Expense Insurance Expense Baking Supplies Expense Totals Credit 1,340 1,450 350 50 1,100 40 575 75 56 23 360 2,000 800 500 5,450 856 125 45 40 25 23 100 1,025 7,604 8,804 Cookie Creations Inc Income Statement For the 2-Month Ending December 31, 2009 REVENUES: Service Revenue EXPENSES: Wages Expense Telephone Expense Advertising Supplies Expense Depreciation Expense Amortization Expense Interest Expense Insurance Expense Baking Supplies Expense Net Income Cookie Creations Inc Income Statement December 31, 2009 5,450 856 125 45 40 25 23 100 1,025 Cookie Creations Inc Statement of Retained Earnings For the 2-Month Ending December 31, 2009 Retained Earnings, beginning Add: Net Income Total Less; Dividends Retained Earnings, ending (2,239) 3,211 3,211 3,211 (500) 2,711 ASSETS Current Assets Cash Accounts Receivable Baking Supplies Advertising Supplies Prepaid Insurance Total Current Assets Plant Assets Baking Equipment Accumulated Depreciation Website Total Assets 1,340 1,450 350 50 1,100 4,290 1,200 (40) LIABILITIES AND STOCKHOLDERS EQUITY Current Liabilities Accounts Payable 75 Wages Payable 56 Interest Payable 23 Unearned Service Revenue 360 Total Current Liabilities Long Term Liabilities Notes Payable Total Liabilities Stockholders Equity Common Stock 800 Retained Earnings 2,711 Total Stockholders Equity Total Liabilities and Stockholders Equity 1,160 575 6,025 514 2,000 2,514 3,511 6,025 Cookie Creations Inc Post Closing Trial Balance December 31, 2009 Debit Cash Accounts Receivable Baking Supplies Advertising Supplies Prepaid Insurance Baking Equipment Accumulated Depreciation Website Accounts Payable Wages Payable Notes Payable Interest Payable Unearned Service Revenue Common Stock Retained Earnings Totals Credit 1,340 1,450 350 50 1,100 40 575 4,865 75 56 2,000 23 360 800 2,711 6,065