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Accounting 101

Surname: 1
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Date:
Accounting 101
NOVEMBER TRANSACTIONS
8: Natalie purchases $500 of Cookie Creations' common stock.
11: Cookie Creations purchases paper and other office supplies for $95. (Use Supplies.)
14: Cookie Creations pays $125 to purchase baking supplies, such as flour, sugar, butter, and
chocolate chips. (Use Supplies.)
15: Cookie Creations purchases an excellent top-of-the-line food processor and mixer for $300
on account.
16: The company needs more cash to sustain its operations. Natalie's grandmother lends the
company $2,000 cash, in exchange for a two-year, 9% note payable. Interest and the principal
are repayable at maturity.
17: Cookie Creations pays $900 for additional baking equipment.
18: Natalie schedules her first class for November 29. She will receive $100 on the date of the
class.
25: Natalie books a second class for December 5 for $150. She receives a $60 cash down
payment, in advance.
29: Natalie teaches her first class, booked on November 18, and collects the $100 cash.
30: Natalie's brother develops a website for Cookie Creations Inc. that the company will use for
advertising. He charges the company $600 for his work, payable at the end of December.
(Because the website is expected to have a useful life of two years before upgrades are needed, it
should be treated as an asset called Website.)
30: Cookie Creations pays $1,200 for a one-year insurance policy.
30: Natalie teaches a group of elementary school students how to make Santa Claus cookies. At
the end of the class, Natalie leaves an invoice for $300 with the school principal. The principal
says that he will pass it along to the business office and it will be paid some time in December.
30: Natalie receives a $50 invoice for use of her cell phone. She uses the cell phone exclusively
for Cookie Creations Inc. business. The invoice is for services performed in November, and
payment is due on December 15.
DECEMBER TRANSACTIONS Cookie Creations is gearing up for the winter holiday season.
During the month of December 2014, the following transactions occur.
Surname: 2
Dec.
1. Natalie hires an assistant at an hourly wage of $8 to help with cookie making and some
administrative duties.
5. Natalie teaches the class that was booked on November 25. The balance outstanding is
received.
8. Cookie Creations receives a check for the amount due from the neighborhood school for the
class given on November 30.
9. Cookie Creations receives $750 in advance from the local school board for five classes that
the company will give during December and January.
15 Pays the cell phone invoice outstanding at November 30.
16. Issues a check to Natalie's brother for the amount owed for the design of the website.
19. Receives a deposit of $60 on a cookie class scheduled for early January.
23. Additional revenue during the month for cookie-making classes amounts to $4,000. (Natalie
has not had time to account for each class individually.) $3,000 in cash has been collected and
$1,000 is still outstanding. (This is in addition to the December 5 and December 9 transactions.)
23. Additional baking supplies purchased during the month for sugar, flour, and chocolate chips
amount to $1,250 cash.
23. Issues a check to Natalie's assistant for $800. Her assistant worked approximately 100 hours
from the time in which she was hired until December 23.
28. Pays a dividend of $500 to the common shareholder (Natalie).
As of December 31, Cookie Creations' year-end, the following adjusting entry data are provided.
1. Cookie Creations received a utility bill for $20
2. Depreciation is recorded on the baking equipment purchased in November. The baking
equipment has a useful life of 5 years. Assume that 2 months' worth of depreciation is required.
3. Amortization (which is similar to depreciation) is recorded on the website. (Credit the Website
account directly for the amount of the amortization.) The website is amortized over a useful life
of 2 years and was available for use on December 1.
4. Interest on the note payable is accrued. (Assume that 1.5 months of interest accrued during
November and December.) Round to the nearest dollar.
5. One month's worth of insurance has expired.
6. Natalie is unexpectedly telephoned on December 28 to give a cookie class at the neighborhood
community center on December 31. In early January, Cookie Creations sends an invoice for
$450 to the community center.
7. A count reveals that $1,025 of baking supplies were used.
8. A cell phone invoice is received for $75. The invoice is for services provided during the
month of December and is due on January 15.
Surname: 3
9. Because the unexpected cookie-making class on December 31 was for such a large group of
children, Natalie's assistant helps out. Her assistant worked 7 hours at a rate of $8 per hour.
10. An analysis of the Unearned Service Revenue account reveals that two of the five classes
paid for by the local school board on December 9 still have not been taught by the end of
December. The $60 deposit received on December 19 for another class also remains unearned.
In November 2014, after having incorporated Cookie Creations Inc., Natalie begins operations.
She will focus on offering cooking classes. The following events occur.
1. Journalize the November and December transactions.
Journal entries to record the November transactions
Date
Details
Debit
Credit
2014 Nov-8
Cash
$500
Common stock
$500
11
Supplies
$95
Cash
$95
14
Supplies
$125
Cash
$125
15
Equipment
$300
Common stock
$300
16
Cash
$2,000
Notes payable
$2,000
17
Banking equipment
$900
Cash
$900
25
Cash
$60
Unearned revenue
$60
Surname: 4
29
Cash
$100
Service revenue
$100
30
Website (Asset)
$600
Accounts payable
$600
30
Prepaid insurance
$1,200
Cash
$1,200
30
Accounts receivable
$300
Service revenue
$300
30
Telephone expense
$50
Telephone expenses payable
$50
Journals to record the December transactions.
Date
Details
Debit
2014 Dec-1
No journal entry needed
5
Cash
$90
Unearned service income
$60
Service revenue account
8
Cash
$300
Accounts receivable
9
Cash
$750
Unearned service revenue
Surname: 5
15
Accounts payable
$50
Cash
16
Accounts payable
$600
Cash
19
Cash
$60
Unearned service revenue
23
Cash
$3,000
Accounts receivable
$1,000
Service revenue
23
Supplies
$1,250
Cash
23
Salaries and wages
$800
Cash
28
Dividends
$500
Cash
2. Post the November and December entries to a ledger using T-accounts
Posting journal entries of November to the General leger
Cash
Debit
Credit
Date
Amount
Date
Amount
Nov-8
$500
Nov-11
$95
Surname: 6
16
$2,000
14
$125
25
$60
17
$900
29
$100
30
$1,200
Balance
$340
Total
$2,660
Total
$2,660
Common stock
8
$500
15
$300
Balance
$800
Total
$800
Total
$800
Supplies
11
$95
14
$125
Balance
$220
Total
$220
Total
$220
Asset
30
$600
Balance
$600
Total
$600
Total
$600
Prepaid insurance
30
$1,200
Balance
$1,200
Total
$1,200
Total
$1,200
Accounts payable
30
$600
30
$50
Surname: 7
Balance
$650
Total
$650
Total
$650
Telephone expenses
30
$50
Balance
$50
Total
$50
Total
$50
Unearned revenue
25
$60
Balance
$60
Total
$60
Total
$60
Accounts receivable
30
$300
Balance
$300
Total
$300
Total
$300
Service revenue
29
$100
30
$100
Balance
$400
Total
$400
Total
$400
Notes payable
16
$2,000
Balance
$2,000
Total
$2,000
Total
$2,000
Surname: 8
Equipment
16
$300
17
$900
Balance
$1,200
Total
$1,200
Total
$1,200
Posting journal entries of December to the General leger
Cash
Debit
Credit
Date
Amount
Date
Amount
Nov-30 Bal. b/f
$340
Dec-15
$50
Dec-5
$90
16
$600
8
$300
23
$1,250
9
$750
23
$800
19
$60
28
$500
23
$3,000
Balance
$1,340
Total
$4,540
Total
$4,540
Accounts Receivable
Nov-30 Bal. b/f
$300
Dec-8
$300
Dec-23
$1,000
Balance
$1,000
Total
$1,300
Total
$1,340
Supplies
Nov-30 Bal. b/f
$220
Dec-23
$1,250
Balanced
$1,470
Total
$1,470
Total
$1,470
Prepaid insurance
Surname: 9
Nov-30 Bal. b/f
$1,200
Balance
$1,200
Total
$1,200
Total
$1,200
Equipment
Nov-30 Bal b/f
$1,200
Balance
$1,200
Total
$1,200
Total
$1,200
Asset (Website)
Nov-30 Bal b/f
$600
Balance
$600
Total
$600
Total
$600
Unearned service revenue
Dec-5
$60
Nov-30 Bal. b/f
$60
Dec-9
$750
Balance
$810
19
$60
total
$870
Total
$870
Accounts payable
Dec-15
$50
Nov-30 Bal. b/f
$650
16
$600
Total
$650
Total
$650
Notes payable
Balance
$2,000
Nov-30 Bal. b/f
$2,000
Total
$2,000
Total
$2,000
Common stock
Balance
$800
Nov-30 Bal. b/f
$800
Total
$800
Total
$800
Surname: 10
Dividends
Dec-28
$500
Balance
$500
Total
$500
Total
$500
Service revenue
Nov-30 Bal. b/f
$400
Dec-5
$150
Balance
$4,550
23
$4,000
Total
$4,550
Total
$4,550
Utilities expense
Nov-30 Bal. b/f
$50
Balance
$50
Total
$50
Total
$50
Salaries and wages expense
Dec-23
$800
Balance
$800
Total
$800
Total
$800
3. Prepare a trial balance at December 31, 2014.
Trial Balance
December 31, 2014
Debit
Credit
Cash
$1,340
Accounts receivable
$1,000
Supplies
$1,470
Prepaid insurance
$1,200
Equipment
$1,200
Surname: 11
Asset (website)
$600
Unearned service revenue
$810
Notes payable
$2,000
Common stock
$800
Dividends
$500
Service revenue
$4,550
Utilities expense
$50
Salaries and wages expense
$800
$8,160
$8,160
4. Prepare and post adjusting journal entries for the month of December.
Adjustments
Dec-31
Utilities expenses
$20
Accounts payable
31
Depreciation expenses
$40
Acc. Depreciation- Equip.
31
Amortization expense (600/24)
$25
Website
31
Interest expense (2,000 * 0.09 * 1.5/12)
$23
Interest payable
31
Insurance expense (1,200/12)
$100
Prepaid insurance
31
Supplies expense
$1,025
Supplies
Surname: 12
31
Utilities expense
$75
Accounts payable
31
Salaries and wages expense (8 * 7)
$56
Salaries and wages payable
31
Unearned service revenue (750 * 3/5)
$450
Service revenue
5. Prepare an adjusted trial balance as of December 31, 2014.
Adjusted Trial Balance
December 31, 2014
Debit
Credit
Cash
$1,340
Accounts receivable
$1,450
Supplies
$445
Prepaid insurance
$1,100
Equipment
$1,200
Accumulated depreciation
$40
Asset (website)
$575
Accounts payable
$95
Unearned service revenue
$360
Notes payable
$2,000
Interest payable
$23
Salaries and wages payable
$56
Common stock
$800
Dividends
$500
Surname: 13
Service revenue
$5,450
Utilities expense
$145
Salaries and wages expense
$856
Supply expense
$1,025
Depreciation expense
$40
Amortization expense
$25
Interest expense
$23
Insurance expense
$100
$8,824
$8,824
6.Prepare an income statement and a retained earnings statement for the 2-month period
ending December 31, 2014, and a classified balance sheet as of December 31, 2014.
Income Statement
For the 2-month Ended December 31, 2014
Revenues
$
$
Service revenue
5,450
Total revenue
5,450
Operating expense
Salaries and wages
856
Supplies expense
1,025
Utilities expense
145
Insurance expense
100
Depreciation expense
40
Amortization expense
25
Interest expense
23
Total operating expense
(2,214)
Net Profit/Loss
3,236
Retained Earning Statement
For the 2-month Ended 31, 2014
Retained earning Nov-1
$0
Add: Net Profit/Loss
$3.236
Less: Dividends
($500)
Retained Earnings, Dec-31
2,736
Surname: 14
Balance Sheet
As of December 31, 2014
$
$
Current assets
Cash
1,340
Accounts receivable
1,450
Supplies
445
Prepaid insurance
1,100
Total current assets
4,335
Fixed assets
Equipment
1,200
Less: Acc. Depreciation
(40)
Intangible assets (website)
575
1,735
Total assets
6,070
Equity & Liability
Current liabilities
Accounts payable
95
Unearned service revenue
360
Salaries and wages payable
56
Total current liabilities
511
Long-term liabilities
Notes payable
2,000
Interest payable
23
Total long-term liabilities
2,023
Total liabilities
2,534
Shareholder’s Equity
Common stock
800
Retained earning
2,736
Total Equity
3,536
Total Equity & Liabilities
6,070

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