P3-4 Analyzing the Effects of Transactions Using T-Accounts, Preparing an Income Statement, and Evaluating the Net Profit Margin Ratio as a Manager LO3-4, 3-5, 3-6

[The following information applies to the questions displayed below.]

Kaylee James, a connoisseur of fine chocolate, opened Kaylee's Sweets in Collegetown on February 1. The shop specializes in a selection of gourmet chocolate candies and a line of gourmet ice cream. You have been hired as manager. Your duties include maintaining the store's financial records. The following transactions occurred in February, the first month of operations.

A.Received four shareholders' contributions totaling $29,400 cash to form the corporation; issued 600 shares of $0.10 par value common stock.

B.Paid three months' rent for the store at $1,860 per month (recorded as prepaid expenses).

C.Purchased and received candy for $6,100 on account, due in 60 days.

D.Purchased supplies for $1,430 cash.

E.Negotiated and signed a two-year $11,000 loan at the bank, receiving cash at the time.

F.Used the money from (e) to purchase a computer for $2,600 (for recordkeeping and inventory tracking); used the balance for furniture and fixtures for the store.

G.Placed a grand opening advertisement in the local paper for $470 cash; the ad ran in the current month.

H.Made sales on Valentine's Day totaling $3,200; $2,715 was in cash and the rest on accounts receivable. The cost of the candy sold was $1,400.

I.Made a $610 payment on accounts payable.

J.Incurred and paid employee wages of $1,800.

K.Collected accounts receivable of $110 from customers.

L.Made a repair to one of the display cases for $140 cash.

M. Made cash sales of $2,900 during the rest of the month. The cost of the candy sold was $1,710.

Required:

1 & 2. Record in the T-accounts the effects of each transaction for Kaylees Sweets in February, referencing each transaction in the accounts with the transaction letter. Show the ending balances in the T-accounts. An example amount has been posted to the Cash T-Account from transaction (l).

Cash					Accounts Receivable
Beg. bal.					Beg. bal.
					End. bal.	0
		140	(l)
End. bal.		140
Supplies					Inventory
Beg. bal.					Beg. bal.
End. bal.	0				End. bal.	0
Prepaid Expenses					Equipment
Beg. bal.					Beg. bal.
End. bal.	0				End. bal.
Furniture and Fixtures					Accounts Payable
Beg. bal.					Beg. bal.
End. bal.					End. bal.		0
Notes Payable					Common Stock
Beg. bal.					Beg. bal.
End. bal.		0			End. bal.		0
Additional Paid-in Capital					Sales Revenue
Beg. bal.					Beg. bal.
End. bal.		0			End. bal.		0
Cost of Goods Sold					Repair Expense
Beg. bal.					Beg. bal.
					End. bal.
End. bal.	0
Advertising Expense					Wage Expense
Beg. bal.					Beg. bal.
End. bal.	0				End. bal.	0