Please prepare all the required journal entries, including adjusting entries and closing entries. Assume that the building is depreciated on a straight-line basis over 20 years.
If there are any events that do not require a journal entry, please provide an explanation as to why not.
Foodnow is a prepared meal delivery service that was started by Paulina to offer customers within the Toronto area foodboxes. The food boxes allow novice chefs the chance to prepare healthy meals. The company buys ingredients in bulk and then uses an assembly line process to prepare a range of 6-10 different meals. Paulina assumes that the primary customers will be millennials and senior citizens. Over the course of the first year of operations, the following events occurred: Jan 1: Paulina incorporates Foodnow using an online incorporation service. The service charges her $1000 to incorporate the company with herself as the sole shareholder. Since the company doesn't yet have a bank account, she pays the $1000 using her personal debit card. Jan 1: Paulina borrows $250,000 from her parents to help finance the purchase of a small building in an industrial park. She then goes to the bank and borrows $250,000 against her condominium. The $500,000 is used to purchase the building. She makes a note to herself that her monies should be recorded as a long-term shareholder loan. Her parent's loan is also long term. Her parents told her that they expect an interest payment of 10% every January 1st. Jan 2: Paulina goes to the bank and transfers $9,000 from her personal bank account to the company bank account. She also makes a note to herself that this $9,000 plus the $1,000 that she charged on her debit card yesterday were part of her purchase of 100 shares of the company. Jan 5: She purchases a City of Toronto business license for two calendar years at a cost of $1000 and pays with the company bank card. Jan 6: Paulina buys a commercial business insurance policy for general liability. The cost is $2400 per year which is paid monthly. She gives the insurance company the direct banking information and the company processes a payment for $200. Jan 30: After some investigation, Paulina buys food processing equipment for $300,000. The equipment is expected to have a life of 10 years. February 28: Paulina gathers a bunch of receipts from her purse pertaining to promotion expenses. During the month, Paulina visited different organizations caring for the elderly to promote the Foodnow service. She spent $800 on lunches and small gifts. Unfortunately, she couldn't find the company bank card so she payed with her personal bank card. March 1: Paulina signs a contract with a local marketing firm. The marketing firm will receive $5,000 per month for the March-June period. In return, they will actively promote her business on social media. Paulina estimates that $10,000 pertains to the design of a website and social media accounts and the remainder of the monies is for active promotion work. She estimates that the website will be good for 2 years before it needs to be redesigned. March 2: Paulina realizes that she doesn't have enough money and that she needs a small loan to help cover some of the current expenses. The bank gave her a $100,000 line of credit but took a personal guarantee against her condominium. April 1: The socializing with the social service organizations dealing with the elderly pays off as she signs her first contract. The contract is worth $10,000 per month and it is for delivering 500 meals monthly to an assisted living complex. The organization provides a $10,000 deposit for the first month's meals. Paulina agrees to start delivering meals on May 1. April 15: In preparation for May 1st, Paulina buys ingredients for the first two weeks of meals at a cost of $1250. She also buys some peripheral food ingredients that are indirectly used in a variety of different meals. These cooking supplies cost $2000 and will need to be replenished every six months. May-December 31: Foodnow had revenues of $180,000. This amount does not include the original $10,000 deposit provided by the social service organization. Between May 1st and December 31st, Foodnow purchased $60,000 of food ingredients. On December 31", Paulina checked the freezer and noted that there was still about $5,000 of perishable and non-perishable food items. She also threw out several bags of 'spoiled' food that she estimated had a cost of $500. Cash wage payments for the year were $45,000. On December 31st, she still owed employees $2500. In addition to the monthly bank account withdrawal for insurance. She noted that there was a $1000 monthly withdrawal for the July-December period for the on-going social media work of the marketing firm. Also, the electricity company made a cash withdrawal for $300 monthly (these withdrawals started last January). Interest on the line of credit was $3500 over the year. The bank withdrew these monies directly from the bank account. Unearned revenue at the end of December was $25,000. These were from customers who had, during December, paid in advance for January's meals. Some customers had an agreement whereby they could pay their bill at the end of each month. At the end of December, customers still owed Foodnow $1000. These transactions were not included in the $180,000 revenue amount
