Question
The students names are: Victoria, Matt, Jean & Tracy. They form a company (partnership) and name it Chicago Summers. They decide to use the same
The students names are: Victoria, Matt, Jean & Tracy. | |||||||||||
They form a company (partnership) and name it "Chicago Summers". They decide to use the same name for the ice cream shop. | |||||||||||
The students divide the duties - Matt and Victoria will make the purchases needed to produce the Ice Creams. They will hire | |||||||||||
two helpers to be at the ice cream shop during business hours, prepare and sell the ice cream. Jean will supervise the employees | |||||||||||
She also will be in charge of counting the materials at the end of each business day and communicate to Victoria and Matt how | |||||||||||
much more they need to purchase. Tracy is in charge of keeping the accounting records of the company as well as preparing the financial | |||||||||||
statements for each month |
Setting up the shop | |||||||||||
6/1 | Each of the students/owners invests $15,000 of cash in the Chicago Summer Company. | ||||||||||
The students open a business checking account with City Bank and deposit their initial investments. | |||||||||||
6/1 | They sign a 2-year lease to rent a space on Michigan Avenue for the Chicago Summers Ice cream shop. | ||||||||||
Monthly rent of the space is $2000, payable on the first day of each month. | |||||||||||
6/2 | They purchase Ice cream Equipments, on account for 12,600, payable in three equal installments, in the next three months | ||||||||||
The first installment is due for payment in July 2nd. It is estimated that the equipment has a life of 7 years with no | |||||||||||
salvage value. | |||||||||||
6/2 | They purchase Furniture for the Ice Cream Shop on account for 10,000 on account, payable in 45 days. | ||||||||||
It is estimated that the furniture will be used for 5 years, with no salvage value. | |||||||||||
6/2 | They purchase a laptop for $1200 on account to be used exclusively in keeping track of the accounting records. | ||||||||||
Payment for the computer is due in 45 days. Estimated life of the laptop is 3 years with no salvage value. | |||||||||||
6/2 | They purchase a QuickBooks software, to be used in Accounting, for $1500 on account - payable in 45 days. | ||||||||||
It is estimated that the software will be used for 10 years. | |||||||||||
6/5 | They call a technician to install the Ice Cream equipment. Estimated bill of the technician is $700. At the end of the | ||||||||||
month, the company has not yet received the bill, however, the technician completed in full his installation work. | |||||||||||
6/5 | They hire two employees. Total salary cost for the two employees is $1500 a month, payable at the end of | ||||||||||
the month. | |||||||||||
Starting the Operations | |||||||||||
6/5 | Victoria & Matt are in charge of purchasing the key materials to make the ice cream. At the beginning of the month | ||||||||||
they purchase the following: | |||||||||||
Description | Quantity in LB | Price | Total Cost | ||||||||
Milk | 200 | $ 1.25 | $ 250.00 | ||||||||
Sugar | 200 | $ 0.75 | $ 150.00 | ||||||||
Vanilla | 1 | $ 500.00 | $ 500.00 | ||||||||
Cacao | 200 | $ 3.00 | $ 600.00 | ||||||||
Butter | 200 | $ 2.00 | $ 400.00 | ||||||||
6/5 | They incur freight costs of $50, which they pay in full | ||||||||||
6/15 | Victoria and Matt purchase additional materials. Because of market changes, they realize that prices for their key | ||||||||||
ingredients have gone up. | |||||||||||
Description | Quantity in LB | Price | Total Cost | ||||||||
Milk | 200 | $ 1.35 | $ 270.00 | ||||||||
Sugar | 200 | $ 0.90 | $ 180.00 | ||||||||
Butter | 100 | $ 2.20 | $ 220.00 | ||||||||
6/30 | Throughout the month, the Chicago Summers ice cream shop is able to generate a total of $6,000 in cash sales. | ||||||||||
Inventory | |||||||||||
6/30 | Jean is in charge of keeping track of key material quantities. She knows that most of the materials purchased | ||||||||||
during the month have been used in making ice cream. However some quantities still are left unused. These will be | |||||||||||
used in the next month's production of ice cream. At the end of the month, Jean performs a physical count of the | |||||||||||
materials left. Below is the result of the count. | |||||||||||
Description | Quantity in LB | ||||||||||
Milk | 50 | ||||||||||
Sugar | 70 | ||||||||||
Vanilla | 0.5 | ||||||||||
Cacao | 50 | ||||||||||
Butter | 90 | ||||||||||
June's financial statement | |||||||||||
6/30 | Tracy is in charge of keeping the accounting records. She records all the economic events presented above by doing the following: | ||||||||||
Preparing the journal entries, | |||||||||||
Posting the appropriate journal entries in the T accounts | |||||||||||
Preparing the Trial balance for the month of June | |||||||||||
Completing the Balance Sheet and Income Statement for the month of June |
1. | Analyze each of June's transactions and prepare the journal entries | |||||||||
Calculate the depreciation and amortization expenses for the month of June for the tangible and intangible assets | ||||||||||
Calculate Cost of Goods Sold assuming the company uses a periodic inventory system and FIFO for cost method | ||||||||||
Post the appropriate journal entries in T accounts | ||||||||||
Prepare a trial balance | ||||||||||
Prepare the Balance Sheet and Income Statement for the month of June. |
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