Youve just secured a new client in your accounting practice, Bum-Bum Soda Inc., a brand new small business specializing in low sugar soda pops. The owner, Ms. Dennise Sophie, is a former Vice President of Sales at Coca Cola, but definitely not an accountant. The company produces 12-ounce bottles of sodas called Bum-Bum Pop. The soda is sold wholesale in 12-bottle cases for $100 per case. There is a selling commission of $20 per case . The January direct materials , direct labor, and factory overhead costs are in the below table. Ms. Sophie has also been considering replacing Aspartame with Saccharin or Sucralose. Changing the raw material will result in a new production process. The Saccharin equipment requires an investment of $887,600, while the Sucralose equipment requires an investment of $911,100. No residual value is expected from either project. The new machinery will impact current inventory levels with 1,500 expected cases to be sold with a desired ending inventory of 175 and an estimated beginning inventory of 300. The estimated net cash flows from adopting each new process are below. Your job is to help Ms. Sophie put her affairs in order. Luckily, Bum-Bum Soda Inc. has only been in operation for a month and things have not gotten too out of hand yet! Ms. Sophie has to submit her financial statements to investors and doesnt know where to begin. Its your job to go through the entire operational process for Bum-Bum Soda Inc. and aid Ms. Sophie in preparing for the investor meeting. Direct materials cost behaviour Unit Per Case Cost Per Unit Direct Materials Cost per case asparatame variable 100 oz 0.02 $ 2.00 $ SodaSyrup variable 30 oz 0.3 9 Bottle 12 oz variable 12 bottles 0.5 6 17.00 $ Direct Labour Department cost behaviour Time per case Labour rate per hour Direct Materials cost per case Mixing variable 20 min $18 $6 Packaging variable 5 14.4 1.2 25 min $7.20 Factory Overhead Cost behaviour Total cost Utilities Mixed $600 Facility lease Fixed 14,000 Equipment depreciation Fixed 4,300 Supplies Fixed 660 $19,560 Year Sacharrin Sucralose($) 1 280,000 $ 370,000 2 280,000 $ 150,000 3 280,000 $ 275,000 4 280,000 $ 325,000 Total $1,120,000.00 1,120,000 Cash layout $887,600 $911,100 Budget During July of the current year ,the management of bum-bum Soda asked the controller,Isabella, to prepare AUUst manufacturing and income statement budgets.Demand was expecetd to be 1,500 cases of soda at $100 per case for Augest.Inventory planing information is provided as follows Finished Good Inventory Cases Cost Estimated finished goods inventory,August 1 300 $12,000 Direct finished goods inventory ,August 31 175 $7,000 Material Inventory Aspartame (oz) Soda Syrup (oz.) Bottles (oz.) Estimated finished goods inventory,August 1 250 290 600 Direct finished goods inventory ,August 31 1,000 360 240 There was negligible work in process inventory assumed for either the beginning or end of the month; thus, none was assumed. In addition, there was no change in the cost per unit or estimated units per case operating data from January January Transactions Date Transaction Description January 1 Began business by making a deposit in a company bank account of $20,000, in exchange for 2,000 shares of $10 par value common stock. January 1 Paid the premium on a 1-year insurance policy, $2,400. January 1 Paid the current month's rent expense, $1,900. January 3 Purchased aspartame soda maker equipment from Godan Company, $5,800. Paid $1,000 down and the balance was placed on account. Payments will be $400.00 per month for 12 months. The first payment is due 4/1. Note: Use Accounts Payable for the Balance Due. January 8 Purchased soda syrup from DYR Company on credit, $650. January 10 Paid telephone bill for January, $340. January 11 Sold 100 cases of soda for the first third of January, $11,000. January 18 Made payment to DYR Company, $400. January 20 Sold 250 cases of soda for the second third of January, $25,000. January 31 Sold 75 cases of soda for the last third of January, $7,500. January 31 Paid the current month's electice bill, $250. January 31 Declared and paid cash dividend of $1,000. Use the following account descriptions for journal entries. Chart of Accounts Account Type Account Number Account Title Normal Balance Assets 111 Cash Debit 117 Prepaid Insurance Debit 119 Soda Syrup Debit 144 Aspartame Soda Equipment Debit 145 Accum Dep -Repair Aspartame Soda Equipment Credit Liabilities 212 Accounts Payable Credit 213 Income Tax Payable Credit Stockholders Equity 311 Common Stock Credit 312 Retained Earnings Credit 313 Dividends Debit Revenue 411 Soda Revenue Credit Expenses 511 Store Rent Expense Debit 512 Telephone Expense Debit 513 Insurance Expense Debit 514 Soda Syrup Expense Debit 515 Dep Expense - Aspartame Soda Equipment Debit 516 Income Tax Expense Debit 517 Electric Expense Debit REQUIREMENT #1: Prepare journal entries to record the January transactions in the General Journal below. Remember that Debits must equal CreditsAll of your Journal Entries should balance. General Journal Date Account Number from Chart of Accounts tab Account Title from Chart of Accounts tab Debit Credit January 1 111 Cash 311 Common Stock January 1 117 Prepaid Insurance 111 Cash January 1 511 Store Rent Expense 111 Cash January 3 144 Aspartame Soda Equipment 111 Cash 212 Accounts Payable January 8 119 Soda Syrup 212 Accounts Payable January 10 512 Telephone Expense 111 Cash January 11 111 Cash 411 soda Revenue January 18 212 Accounts Payable 111 Cash January 20 111 Cash 411 Soda Revenue January 31 111 Cash 411 Soda Revenue January 31 517 Electric Expense 111 Cash January 31 313 Dividends 111 Cash 0 -