Part 1 - Case: Sallys Ice Cream Parlour

Sally Barnes a third year Accounting student finished her exams early from York

University this year and went back home to Huntsville Ontario to look for a summer job. If

Sally doesnt find a job in town she would have to work in the families Ice Cream factory,

and outlet store. Barnes Ice Cream uses milk from Jersey cows which is the best for making

ice cream from local farmers to manufacture fresh custom Ice Cream for Restaurants and

specialty stores in Southern Ontario.

Going back and living at home was so comforting and nice since Huntsville during

the summer is a hot bed of all types of activities. She started walking down Main Street

with her resume in hand looking and applying for a summer job. The town of Huntsville

has over 20,000 plus residence and another 25,000 from the surrounding cottages. It is busy

for three seasons a year with something going on every Friday, Saturday and Sunday. A lot

has changed with the Huntsville Festival of the Arts running daily for the entire months

of July and August to Labour Day week end. Concerts in the Park and on the Docks

every Wednesday at noon and night, starting in May until the end of August, and her

favorite growing up as child was Thursday Night movies in the Park all summer long.

Sally walked into the corner Drug Store located on Main Street beside the Swing

Bridge and the Park were all of the Summer activities happen, where she had her first Part

time job when she was a high school student. Dr. Bob Wilder owns the drug store which

has been in the family for over 80 years. In the early 1950s Bobs grandfather built a fully

functional Ice Cream Parlor in the front half of the store with a counter and six ice cream

parlor type stools. Dr. Wilder was talking to Ted Lee the local handyman about redesigning

the store and wanted to make the Ice Cream Parlor smaller since it was seasonal, taking too

much of his time managing the staff at the Ice Cream stand, handling different operational

issues and taking up too much of the floor space in the store year round.

It was perfect timing when Sally walked into the Drug Store. Sally overheard the

conversation between Dr. Wilder and Ted about the redesigning of the Ice Cream parlor

and the problems he had making it work.

Sally was thinking out loud and said this sounded like a Business Case from her

ADMS2500 course. She could purchase the Ice Cream, cups, spoons, cones, and other

material from the family business, rent the floor space at the drug store, hire her own staff,

and have different hours then the Drug Store so the business can be open for business when

the activities in town are on.

She approached both Dr. Wilder and Ted to bring up her idea. After hearing the

details, Ted suggested that this can be done by placing a movable wall between the Drug

Store and the Ice Cream Parlor section of the store, placing wheels on the Ice Cream

freezers for scooping Ice Cream, by adding another door to the front of the store, and then

placing the movable wall between the two doors and the wall where the Ice Cream Parlor

is. Ted said that this design would allow one to go into either store when the other is not

open, also by placing the wheels on the freezers then can be moved to the wall to sale Ice

Products in the winter since Ice Cream Parlor would be open from the May 1st to October

31st.

Sally called her mother about this business venture who congratulated her on a great

idea. Mrs. Barnes suggested to Sally that the family Ice Cream business could supply Ice

Cream products in the freezer under consignment for November to April since the freezers

can move against the wall.

ADMS2500 Topic A Fall 2016 4

The next day Sally met with Dr. Wilder to work out the details. The meeting was

very productive and they agreed to the following:

Dr. Wilder would pay for the design work, the movable wall, plumbing, doors,

wheels on the freezer that is owned by Dr. Wilder, installation of signs to the store,

and any other for the new Ice Cream Parlor.

Sally will pay the first and last months of rent on May 1st and then on the first day

of each month for that month to Dr. Wilder. The rent included the front of the store

where the Ice Cream Parlour is and a small supply room for storage and to place

another freezer for extra Ice Cream.

A fee of 4% of monthly gross sales will be paid to Dr. Wilder for the cleaning of the

Ice Cream Parlor area, electricity, water, internet, use of the Ice Cream freezers

owned by the Drugstore, and garbage removal. This is to be paid on the first day of

the month on last months sales.

All other expenses for the Parlor will be paid by Sally.

Sally did the following:

April 22-29, 2016

Ordered three signs from Huntsville Sign Company for the business, one to be

placed over the counter that has the price list, a sandwich board sign will be placed outside

when the store is open for business, the other to be placed on the outside of the building,

these signs will be used all year round since Ice Cream will be sold in the Drug store on

consignment from November to April. Purchase price of all signs $1,200, however the

owner of Huntsville Sign Company was her uncle and sold it to her for less. The signs will

last three years before needing replacement. To be paid in full upon delivery.

Conducted interviews and hire students that will make $15.00 per hour, an assistant

manager will make $19.00 an hour to work when Sally is not working. Since the students

will be working less than 20 hours per week withhold taxes and other source deductions do

not apply. The Ice Cream Parlour will be open seven days a week from May 1st to October

30th, payroll wage cost will be $475.00 per day from May 1st to September 6th. After

September 6th the Ice Cream Palour will require only one person to operate and two people

on the weekends. All students hired will start working May 1st. The employer will be

paying 14% in benefits for each employee of their gross wage. These Benefits are payable

45 days after date on pay cheque. The employees first pay cheque will be dated May 14th

for the first week of work (7 days) and every two weeks after that.

Sally made arrangements with her parents for the purchase of supplies and ice

cream. Since she is family, her father would give her next morning delivery before the

Parlour opens, the deliveries will be paid in full 10 days after received. Her father

suggested that for inventory keeping that all of the Ice Cream related inventory items can

be kept together as one amount (the value of all the Ice Cream, Cones, spoons, and syrup

be one lump sum). Barnes Ice Cream does this for the Factory store and makes inventory

record keeping easier.

Prepare journal entries and T Accounts in ACCRUAL and CASH Basis for this case.Students are asked to round numbers to fit 2 decimal places in all questions.