Question
You started RunnerTea this past November. Your retail store is located on UTSA Boulevard and its main product is bubble tea of course! You have
You started RunnerTea this past November. Your retail store is located on UTSA Boulevard and its main product is bubble tea of course! You have not yet hired an accountant, so you are now faced with regarding all of the transactions for the first month of operations. Welcome to your new bubble tea business!
1. Your initial start-up funds were raised by selling stock to your friends and obtaining a loan from your parents. You were able to raise $20,000 from this stock sale and $100,000 from the loan.
2. To start making and selling bubble tea, you purchased equipment totaling $150,000. The IRS allows this asset to be depreciated over a 5-year period. You expect these machines to not have a salvage value at the end of this 5-year period.
3. You also purchased other supplies like tea, sugar, flavoring, etc to be ready for opening day. These purchases were made on credit and total $30,000. You have now been in business for the entire month.
4. During this month, you recorded cash sales of $80,000.
5. Due to the amazing amount of sales this month, you now only have $5,000 in inventory remaining and have not purchased any additional inventory during the month.
6. You hired 2 part time workers to help out on weekends when the store sees higher traffic. Your total payroll cost for the month was $4,000. Payroll is deposited electronically on payday.
7. Since it is now the end of the month, you also need to make an interest payment on the loan from your parents. They dont like you very much so are charging you an interest rate of 24%.
8. Your suppliers extended you trade credit of 2/10, net 30 which means payment is now due. You pay off the entire balance for the inventory that was purchased earlier this month.
9. You also need to make a payment for rent (utilities included in rent) for the month which totals $3,000.
10. Finally, before you can go home for the day, in order to keep in accordance with GAAP, you need to record depreciation for the month.
Operating (0) Investing (D) Financing (5) Cash AR Inventory Equipment AD N/P A/P Other Payable Stock RE Revenues Expenses 2 S 6 8 10Step by Step Solution
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