Jenna Wbhlwend, a connoisseur o~ tine chocolate, opened lama's Sweets in Collegetoun on February 1 . 2003.
Question:
Jenna Wbhlwend, a connoisseur o\~ tine chocolate, opened lama's Sweets in Collegetoun on February 1 . 2003. The shop specializes in a selection of gourmet chocolate candies and a line o\ gourmet icecream. You have been hired as manager. Your duties include maintaining the store's financial records.
The following transactions occurred in February 2003, the first month of operations.
a. Received four shareholders" contributions totaling $16,000 cash to form the corporation; issued stock.
b. Paid three months' rent for the store at S800 per month (recorded as prepaid expenses).
c. Purchased supplies for $300 cash.
d. Purchased and received candy for $5,000 on account, due in 60 days.
e. Negotiated a two-year $ 1 0,000 loan at the bank.
/. Used the money from
(e) to purchase a computer for $2,500 (for recordkeeping and inventory tracking) and the balance for furniture and fixtures for the store.
g. Placed a grand opening advertisement in the local paper for $425 cash.
h. Made sales on Valentine's Day totaling $1,800; $1,525 was in cash and the rest on accounts receivable.
The cost of the candy sold was $1,000.
i. Made a $500 payment on accounts payable.
j. Incurred and paid employee wages of $420.
k. Collected accounts receivable of $50 from customers.
/. Made a repair to one of the display cases for $1 18 cash.
m. Made cash sales of $2,000 during the rest of the month. The cost of the goods sold was $1,100.
Required: 1. Set up appropriate T-accounts for Cash, Accounts Receivable, Supplies, Merchandise Inventory.
Prepaid Expenses, Equipment, Furniture and Fixtures, Accounts Payable, Notes Payable. Contributed Capital, Sales Revenue, Cost of Goods Sold (Expense). Advertising Expense, Wage Expense, and Repair Expense. All accounts begin with zero balances. 2. Record in the T-accounts the effects of each transaction for Jenna's Sweets in February, referencing each transaction in the accounts with the transaction letter. Show the unadjusted ending balances in the T-accounts. 3. Prepare unadjusted financial statements at the end of February (income statement, statement of retained earnings, and balance sheet). 4. Write a short memo to Jenna offering your opinion on the results of operations during the first month of business. 5. After three years in business, you are being evaluated for a promotion. One measure is how efficiently you managed the assets of the business. The following data are available:
Compute the total asset turnover ratio for 2004 and 2005 and evaluate the results. Do you think you should be promoted? Why?
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