Question (70 marks)

1. Journalize the transactions, including the adjusting entries and the entry to set up the cost of goods sold at the year end.
2. Prepare the following:
   1. Trial Balance as at May 31, 2018
   2. Income Statement for the month ended May 31, 2018
   3. Statement of Changes in Shareholders Equity for the month ended May 31, 2018
   4. Classified Statement of Financial Position (Balance Sheet) as at May 31, 2018

• Jackson and Vanessa contribute $5,000 each into the business, and the name of the business is J&P Body Care (JPBC)
• JPBC pays rent of $500 per month before the start of each month for the next month to the landlord. The rent included a small supply room for storage and to place the equipment to manufacture their products.
• A fee of 4% of monthly gross sales will be paid to the landlord for electricity, water and internet. This is to be paid on the first day of the month on last months sales.
• Jackson and Vanessa agreed to use a periodic inventory system. Vanessa will count the inventory at the end of the period. Jackson will be responsible for maintaining the financial records of the business.
• They solicited a deal with the supplier, Organic Wholesaler, with payment terms n/10.
• JPBC had its grand opening in May 1 but Jackson and Vanessa started to prepare for the opening starting the last week of April. The transactions of April and May is listed below:

April 22-29, 2018

• Ordered three signs from Famous Sign Company for the business, one to be placed over the counter that has the price list, a 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. Purchase price of all signs $990.00. 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 Vanessa is not working. Since the students will be working less than 20 hours per week withhold taxes and other source deductions do not apply. JPBC 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 store 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.

May 1, 2018

• Opened a Bank account for the business and placed the $10,000 (contribution from Jackson and Vanessa) in the account. While at the bank, Jackson negotiated for the use of Credit card device and processing, once the credit card sales are deposited to the bank, they will charge 4% per transaction. The bank also offered a $15,000 Line of Credit at 6% if the business needed it.
• Wrote cheque to paid landlord the first month and last months rent. As per the agreement last month.
• Famous Sign Company delivered the sign, as per agreement it was paid in cash.

May 2, 2018

• Ordered and received 16 bottles of Organic Body Lotion @$38.00 each, 800 Organic Candy @$0.25 each, 600 Organic Chocolate @$0.70 each, 500 Organic Snacks @$0.08 each, Organic Hand Lotion 3 bottles @$27.00, from Organic Wholesaler.
• Purchased and paid by cheque a used cash register (four years old) for $1,440. When new the cost price was $8,400 with expected life of 10 years, the cash register is estimated to have a 6 year life.
• Vanessa needed a computer for the business, so she gave the business her computer, monitor, and colour printer, when she purchased it August 2, 2017 at Staples Back to School sale the package was on sale for $1,500 regular price was $2,100. The salesperson said the new computer, monitor, and printer would last 5 years when it was purchased.

May 3, 2018

• Paid by cheque $158.00 to Staples for office supplies 1,000 sheets paper for $10.00, six printer toners for $130.00, 6 rolls of paper for cash register $6.00 and assorted office supplies of pens, pencils, paper clips, and post-it-notes for $12.00.

May 4, 2018

• Vanessa printed from her printer 500 flyers to advertise JPBC with its hours of operations for May and June. She used paper acquired at Staples for $5.00 and three color cartages for $65.00. All of the toner and paper was used for the printing.
• Purchased, paid by cheque, and received an additional freezer to store extra products $4,800, expected to last 10 years.
• Purchased advance advertising totaling $1,080 for twice a month ad placement in Muskoka Regional newspaper for six months $90 per issue. First newspaper ad to appear May 14th.

May 5, 2018

• Business insurance for six months Prepaid $1,800
• Cellphone $75.00 per month and paid two months in advance, this package included all long-distance calls in Canada and unlimited day and night calling, and 6G data. The cell phons is use for business purpose.

May 10, 2018

• Ordered and received 18 bottles of Organic Body Lotion @$38.00 each, 950 Organic Candy @$0.25 each, 700 Organic Chocolate @$0.70 each, 400 Organic Snacks @$0.08 each, Organic Hand Lotion 4 bottles @$27.00, from Organic Wholesaler.

May 12, 2018

• Paid for the first shipment.
• First week cash sales $1,012.00 and $2,213.00 credit card sales.

May 14, 2018

• Paid employees for the first week plus benefits,7 days of pay
• Second week cash sales $6,801.00 and $10,621.00 in credit card sales.
• Ordered and received 18 bottles of Organic Body Lotion @$38.00 each, 950 Organic Candy @$0.25 each, 700 Organic Chocolate @$0.70 each, 400 Organic Snacks @$0.08 each, Organic Hand Lotion 4 bottles @$27.00, from Organic Wholesaler.
• Third Week Sales cash $15,234.50 and $20,387.50 in credit card sales.

May 20, 2018

• Paid for the second shipment.
• Ordered and received 20 bottles of Organic Body Lotion @$38.00 each, 9500 Organic Candy @$0.25 each, 800 Organic Chocolate @$0.70 each, 400 Organic Snacks @$0.08 each, Organic Hand Lotion 4 bottles @$27.00, from Organic Wholesaler.

May 24 2018

• Paid for the third shipment.

May 25, 2018

• Ordered and received 20 bottles of Organic Body Lotion @$38.00 each, 950 Organic Candy @$0.25 each, 800 Organic Chocolate @$0.70 each, 300 Organic Snacks @$0.08 each, Organic Hand Lotion 4 bottles @$27.00, from Organic Wholesaler.

May 28, 2018

• Paid employees for two weeks plus benefits, 14 days of pay.

May 30 2018

• Paid for the fourth shipment.
• Vanessa took $4,000 out of the business to pay her first installment of her student loan.

May 31 2018

• Week four sales to the end of the month Cash $19,987.00 and $18,745.00 in credit card sales.

• The last week was very busy, no one had time to sit down. At the end of the day Vanessa noticed that the freezers in the front of the store were close to empty so she went to the supply room and was shocked. The room and freezer were empty except for a handful of sample spoons no one informed her that to order more products. She looked at the inventory sign out sheet no one stole the supplies, there was a post it note on the sheet that said we need to order more. She then ordered supplies for delivery on June 1st , Ordered and received 16 bottles of Organic Body Lotion @$38.00 each, 800 Organic Candy @$0.25 each, 600 Organic Chocolate @$0.70 each, 500 Organic Snacks @$0.08 each, Organic Hand Lotion 3 bottles @$27.00, from Organic Wholesaler.

• Calculated rental fee of 4% of monthly gross sales to the landlord for second part of rental agreement.
• Inventory of Office Supplies left on hand $44.00.
• Inventory on hand amounts to $500