SWEET TREATS PRACTICE SET

Madison Carter spent much of her childhood learning the art of cookie-making from her grandmother. They spent many enjoyable hours mastering every type of cookie imaginable and later creating new recipes that were both healthy and delicious. Now at the start of her second year in college, Madison is investigating various possibilities for starting her own business as part of the requirements of the entrepreneurship program in which she is enrolled.

A long-time friend insists that Madison has to somehow include cookies in her business plan. After a series of brainstorming sessions, Madison settles on the idea of operating a cookie-making school called "Sweet Treats". She will start on a part-time basis and offer her services "in-house". Now that she has started thinking about it, the possibilities seem endless. During the fall, she will concentrate on holiday cookies. She will offer individual lessons and group sessions.

Madison decides to operate Sweet Treats as a sole proprietorship beginning on October 8^th, with her year end at December 31^st.She purchased a new cell phone to use only for business operations.She also created a checklist to help her remember which elements of the accounting cycle need to be completed daily, monthly, and yearly.

Daily:

(October) Record transactions in the general journal and post to the general ledger.

(November & December) Record transactions in the four special journals, as needed -cash receipts journal, cash payments journal, purchases journal, and sales journal. Use the general journal to record anything that does not go into the special journals.

(November & December) Post transactions into the two subsidiary ledgers, as needed - the accounts receivable subsidiary ledger and accounts payable subsidiary ledger.Use the general ledger to post anything that comes directly from the general journal.

Monthly:

Journalize and post adjusting entries.

a worksheet for each month.

(November & December) Post special journals totals to the necessary general ledger accounts.

Yearly:

Create financial statements for the year end December 31^st - multi-step income statement, owner's equity statement, balance sheet, and statement of cash flows.

Journalize and post the closing entries.

post-closing trial balance.

Madison continues to stay in touch with her grandmother during the first few months of operation. She appreciates that her grandmother has been so supportive of her.Madison has dreams of opening up a local Sweet Treats shop when she graduates from college.She wants to hire more employees and start offering more classes.

INSTRUCTIONS

1.Record the following transactions according to Madison's checklist above.Be sure to read any new details given prior to each months' transactions.

2.any necessary worksheets or forms according to Madison's checklist above.

3.Record all information in the provided spreadsheets.Be sure to include headers, dates, explanations, and totals when appropriate.Add rows as needed.

4.Follow all recording, journalizing, and posting rules provided in your textbook.

The following transactions occurred during the month of October.

Oct.8Madison cashes her U.S. Savings Bonds and receives $740, which she deposits in her personal bank account.

8She opens a bank account under the name Sweet Treats and transfers $600 from her personal account to the new account.

11Madison pays $75 for advertising.Check 152.

13She buys baking supplies, such as flour, sugar, butter, and chocolate chips, for $140 cash. Check 153.

15Madison purchases a food processor for $300. Check 154.

16Madison realizes that her initial cash investment is not enough. Her grandmother lends her $5,000 cash, for which Madison signs a note payable in the name of the business. Madison deposits the money in the business bank account. The note will be repaid in 24 months at 7.5% interest.

17She buys more baking equipment for $900 cash.Check 155.

20She teaches her first class and collects $135 cash.

25Madison withdraws $100 from the business for personal expenditures.Check 156.

30Madison pays $1,200 for a one-year insurance policy that will expire on November 1 of the next year.Check 157.

30A friend of Madison's asked her to teach a class at the neighborhood school, Newbury Elementary School. Madison agreed and taught a group of 35 first-grade students how to make gingerbread cookies. The next day, Madison prepared an invoice for $300 and left it with the school principal. The principal said that he will pass the invoice along to the head office, and it will be paid sometime in November.

As of October 31, the following adjusting entry data is available.

1.A count reveals that $45 of baking supplies were used during October.

2.Madison estimates that her baking equipment depreciates $10 per month.

3.Madison has decided to accrue the interest each month just to be sure her books correctly reflect what needs to be repaid.She will accrue a full month's interest in October, since she wouldn't even be off the ground without her grandma's help.

4.Madison had a friend assist her with the Newbury Elementary School class. She decides to hire her friend as an employee. She owes her $45 for the October 30 class, that she will pay on November 15.

At the beginning of November, Madison decides to expand her business by selling fine European mixers. The owner of Batter Blender Supply Co. has approached Madison to become the exclusive distributor of these fine mixers in her state. The current cost of a mixer is $580, and Madison plans to sell each mixer for $1,200. Each appliance has a serial number and can be easily identified.Madison uses the perpetual inventory system to account for these fine mixers.She also decides to start using special journals and subsidiary ledgers to help keep track of her new customers and vendors, sales and purchases, and cash flows. (Hint: Refer to Chapter 11 to calculate the cost of inventory.)

The following transactions occurred during the month of November.

Nov.4Bought five mixers on account from Batter Blender Supply Co. for $ 2,900, terms n/30.

6Paid $75 freight on the November 4 purchase.Check 158.

9Bought four mixers on account from Batter Blender Supply Co. for $ 2,320, terms n/30.

10Madison is concerned that there is not enough cash available to pay for all of the mixers purchased. She invests an additional $2,000 cash in Sweet Treats.

11Paid $60 freight on the November 9 purchase.Check 159.

15Madison issued a check to her assistant for all the help at the elementary school on October 30.(Recall this amount was accrued at the end of October.)Check 160.

20Paid a $155 cell phone bill (Hint: Use Utilities Expense).Check 161.

21Paid Batter Blender the amount due from the November 4 purchase. Check 162.

22Collected $300 from the October 30 transaction with Newbury Elementary School.

23Three mixers are sold to Peter's Pastries on account for $3,600, terms n/30. Invoice 1011.(Hint: You must record both the revenue and expense components on all sales transactions.)

26Sold three mixers for $3,600 cash.

29Paid Batter Blender the amount due from the November 9 purchase.Check 163.

30Paid her assistant for the last two weeks of November in the amount of $960. Check 164

30Madison withdrew $750 cash for personal use.Check 165.

As of November 30, the following adjusting entry data is available.

1.A count of baking supplies reveals that none were used in November.

2.Another month's worth of depreciation needs to be recorded on the baking equipment bought in October.

3.One month's worth of insurance has expired.

4.Madison records another month of accrued interest on her grandma's loan.

\fWNY General Ledger Cash No. 101 Date Explanation Ref. Debit Credit Balance UI A Oct. 8 Owner's Capital 600.00 600.00 Oct. 11 Advertising Expense 75.00 525.00 6 Oct. 13 Supplies 140.00 385.00 7 Oct. 16 Note Payable 5,000.00 5,385.00 8 Oct. 17 Equipment 900.00 4,485.00 9 Oct. 20 Service Revenue 135.00 4,620.00 10 Oct. 25 Owner's Drawing 100.00 4,520.00 11 Oct. 30 Prepaid Insurance 1,200.00 3,020.00 12 13 14 15 16 17 18 19 Accounts Receivable No. 112 20 Date Explanation Ref. Debit Credit Balance 21 Oct. 30 Service Revenue 300.00 300.00 22 23 24 25 26 27 28 29 30 Inventory No. 120 31 Date Explanation Ref. Debit Credit Balance 32 33 34 35 36 37 38 39 40 41 42 43Baking Supplies No. 126 Date Explanation Ref Debit Credit Balance Oct. 13 Cash 125.00 125.00 Oct. 31 Supplies Expense 45.00 95.00 Prepaid Insurance No. 130 Date Explanation Ref. Debit Credit Balance Oct. 30 Cash 1,200.00 1,200.00 Equipment No. 157 Date Explanation Ref. Debit Credit Balance Oct. 15 Owner's Capital 300.00 300.00 Oct. 17 Cash 900.00 1,200.00 Accumulated Depreciation-Equipment No. 158 Date Explanation Ref. Debit Credit Balance Oct. 31 Depreciation Expense 10.00 10.00 Accounts Payable No. 201 Date Explanation Ref. Debit Credit Balance94 Salaries and Wages Payable No. 212 95 Date Explanation Ref. Debit Credit Balance 96 Oct. 31 Salaries and Wages Expense 45.00 45.00 97 98 99 100 101 102 103 Interest Payable No. 230 104 Date Explanation Ref Debit Credit Balance 105 Oct. 31 Interest Expense 31.25 31.25 106 107 108 109 110 111 Notes Payable No. 270 112 Date Explanation Ref. Debit Credit Balance 113 Oct. 16 Cash 5,000.00 5,000.00 114 115 116 117 118 119 Owner's Capital No. 301 120 Date Explanation Ref Debit Credit Balance 121 Oct. 8 Cash 600.00 600.00 122 Oct. 15 Equipment 300.00 900.00 123 124 125 126 127 Owner's Drawing No. 306 128 Date Explanation Ref Debit Credit Balance 129 Oct. 25 Cash 100.00 100.00 130 131 132 133 134 135 Income Summary No. 350 136 Date Explanation Ref. Debit Credit BalanceIncome Summary No. 350 Date Explanation Ref Debit Credit Balance Service Revenue No. 400 Date Explanation Ref. Debit Credit Balance Oct. 20 Cash 135.00 135.00 Oct. 30 Accounts Recievable 300.00 435.00 Sales Revenue No. 401 Date Explanation Ref. Debit Credit Balance Cost of Goods Sold No. 505 Date Explanation Ref. Debit Credit Balance Advertising Expense No. 610 Date Explanation Ref. Debit Credit Balance Oct. 11 Cas 75.00 75.00Baking Supplies Expense No. 631 Date Explanation Ref. Debit Credit Balance Oct. 31 Baking Supplies 45.00 45.00 Depreciation Expense No. 711 Date Explanation Ref Debit Credit Balance Oct. 31 Accumulated Depreciation 10.00 10.00 Insurance Expense No. 722 Date Explanation Ref. Debit Credit Balance Salaries and Wages Expense No. 726 Date Explanation Ref. Debit Credit Balance Oct. 31 Salaries and Wages Payable 45.00 45.00 Rent Expense No. 729 Date Explanation Ref. Debit Credit Balance Utilities Expense No. 732Purchases Journal P1 Inventory Dr. 3 Date Account Credited Terms Ref. Accounts Payable Cr. 4 9 10 11 12 November Totals 13 Accounts 14\fSales Journal S1 Invoice Accts. Rec. Dr. COGS Dr. Date Account Debited No. Ref. Sales Rev. Cr. Inventory Cr. November Totals Accounts 112 and 401 Sales Journal S2\fNovember Worksheet Trial Balance Adjustments Adjusted Trial Bal. Income Statement Balance Sheet Account Titles Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr. Cash Accounts Receivable nventory Baking Supplies Prepaid Insurance Equipment Accum. Depr.-Equipment Accounts Payable Salaries and Wages Payable Interest Payable Notes Payable Owner's Capital Owner's Drawings Service Revenue Sales Revenue Cost of Goods Sold Advertising Expense Baking Supplies Expense Depreciation Expense Insurance Expense Salaries and Wages Expense Rent Expense Utilities Expense Interest Expense TOTALS Net Income TOTALS