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.

$$ Complete 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.

$$ Prepare a 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.

$2.$ Prepare 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. $8$ Madison cashes her U$.$S$.$ Savings Bonds and receives $$740,$ which she deposits in her

personal bank account.

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

personal account to the new account.

$11$ Madison pays $$75$ for advertising. Check $152.$

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

Check $153.$

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

$16$ Madison 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

$7\mathrm{.}5\%$ interest.

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

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

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

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

next year. Check $157.$

$30$ A 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 equipm