Question

Step 1: Complete the following in the “General Journal” tab at the bottom of the Janie’s Cupcakes, Inc. Student Workbook). The following events occur in July 2014: • July 1 – You take $10,000 from your personal savings account and buy common stock in Janie’s Cupcakes, Inc.. • July 1 – Paid $4000 on a lease for bakery space. The lease is for 1 year, and requires first and last month’s rent up front. Lease period is effective July 1st 2016 through June 30th, 2017. • July 1 – You have baking equipment, including an oven and mixer, which you have been using for your home-based business for one year and will now start using in the bakery. The current book value of the equipment is $8,000, and you transfer the equipment into the business in exchange for additional common stock. The equipment has a 5-year useful life, and an original cost of $10,000. • July 2 – Your parents lend the company $10,000 cash, in exchange for a ten-year, 3% note payable. Interest is payable quarterly, and the principal is due at maturity. • July 4 -Purchased $5000 in baking supplies from vendor, on account • July 10 – Paid $325 to the City Licensing office for a business license. • July 14 – Went to Costco and paid $750 for Miscellaneous Supplies, such as paper products, office supplies, etc. • July 15 – Hire counter staff at $12 per hour. Pay periods are the 1st through the 15th and 16th through the end of the month with paydays being 7-days after the end of each pay period. • July 30- Received utility bill for July in amount of $185. Payment is due on August 25th • July 31- Accrue 40 hours of wages earned by your employee for period of July 16th through 31st. . • Total July bakery sales were $6,500. Of this amount, $1500 was on account for a local restaurant. Step 2: Complete the following transactions in the August section of the General Journal tab in your workbook • August 1-Pay rent on bakery space $2000 • August 1 – Buy a 12-month insurance policy for $600. Payment in full was required at the policy’s inception. Policy effective dates August 1, 2016 through July 31st, 2017 • August 3 – Paid $250 for a website and social media advertising. • August 7 - paid employee for period ending 7/31 • August 8 - Receive payments from local restaurant towards accounts receivable in amount of $1000. • August 15- Purchase additional baking supplies in amount of $4000 from vendor, on account. • August 15 – Accrue wages earned for employee from period of 1st through 15th of August. Employee worked 50 hours this pay period. • August 20- paid $7500 toward baking supplies vendor payable • August 22- paid employee for period ending 8/15 • August 25 – paid July utility bill • August 31- received utility bill for August in amount of $235. Payment is due on September 25th. • August 31- Accrue wages earned for employee for period of August 16th through August 31st . Employee worked 48 hours this pay period. • August bakery sales total $12,500. Of this, half was on accounts. Step 3: Complete the following transactions in the September area of the General Journal tab in your workbook. • September 1- paid rent • September 3 - Purchased 25 T-shirts with Jane’s Cupcakes logo for resale. Each shirt was $9.00. Since you are just starting out with selling this type of merchandise, you decide to use the periodic method to track your inventory, and the FIFO method for Inventory measurement. In addition to recording the Journal entry for this purchase transaction, you should also begin to complete the Purchases chart and COGS computation in Step 4. • September 5 - Receive $4000 from customers on Account • September 7 -paid employee for period ending 8/31 • September 11-purchase baking supplies in amount of $ 7,000 from vendor on account. • September 13- Paid on supplies vendor account in amount of $5000 • September 15- Accrue 52 hours of employee wages for period of September 1st through September 15th • September 20-Purchase 25 more T-shirts for resale to customers. Each shirt cost $9.80 wholesale price. Remember to adjust your purchases record in Step 4. • September 22 – Pay employees • September 25 - pay August utility bill • September 30-Accrue 58 hours of employee wages for period of September 16th through September 30th • Total September bakery sales $17,500. $7,000 of these sales on accounts receivable. Additionally, you determine that you sold 35 T-shirts for $15 each. All 25 T-shirts from the Sept 3rd purchase were sold, and an additional 10 T-shirts from the Sept 20th purchase were sold. The remaining shirts have a dollar value of $147. • September 30 - Record the adjustment to inventory to determine the Cost of Goods Sold of sold T-shirts and make the accompanying Journal entry. • September 30 – Paid Dividends of $5000 Step 4: Post Inventory-related entries to the FIFO Inventory record. Transfer the Inventory purchases, sales and ending balances to the Inventory Record worksheet. Remember that when using the FIFO method, the “oldest” items are sold first, removing the cost of those items from inventory and transferring it to Cost of Goods Sold.

Step 1   

Janie's Cupcakes, Inc.   

GENERAL JOURNAL   

  

  

Date Account Titles and Explanation Debit Credit

1-Jul   

  

Invest Cash for stock   

  

1-Jul   

  

  

Signed 1-year lease   

  

1-Jul   

  

Invest Equipment for stock   

  

2-Jul   

  

Borrow money from parents   

  

4-Jul   

  

Purchase baking supplies on account   

  

10-Jul   

  

Bought Business license   

  

14-Jul   

  

General Supplies from Costco   

  

30-Jul   

  

Accrued liabilities - due Aug 25th   

  

31-Jul   

  

Accrued wages for July 16-31   

  

31-Jul   

  

  

July Sales   

STEP 2   

1-Aug   

  

Paid rent   

  

1-Aug   

  

Bought 1-year Insurance policy   

  

3-Aug   

  

Paid for website and advertising   

  

7-Aug   

  

Paid employee for July 16-31st   

  

8-Aug   

  

Received payment on account   

  

15-Aug   

  

Purchased Baking supplies   

  

15-Aug   

  

Accrued wages Aug 1-15   

  

20-Aug   

  

Paid on Vendor Account   

  

22-Aug   

  

Paid employees for Aug 1-15   

  

25-Aug   

  

Paid Utility bill from July   

  

31-Aug   

  

Accrued liabilities - due Sept 25th   

  

31-Aug   

  

Accrued Wages for Aug 16-31   

  

31-Aug   

  

  

August Sales   

  

STEP 3   

1-Sep   

  

Paid rent   

  

3-Sep   

  

Bought 25 T-shirts for resale at $9.00 ea   

  

5-Sep   

  

Received Payment on customer account   

  

7-Sep   

  

Paid employees for pd ending 8/31   

  

11-Sep   

  

Purchased Baking Supplies   

  

13-Sep   

  

Paid on vendor account   

  

15-Sep   

  

Accrued wages 52 hours x $12   

  

20-Sep   

  

Bought 25 more t-shirts at $9.80 ea   

  

22-Sep   

  

paid employees for pd ending 9/15   

  

25-Sep   

  

Paid August Utility Bill   

  

30-Sep   

  

Accrued liabilites of 58 hours x $12   

  

30-Sep   

  

  

September Bakery Sales   

  

30-Sep   

  

To record t-shirt sales ( 35 x $15)   

  

30-Sep   

  

To adjust Inventory for Sales - FIFO   

  

  

30-Sep   

  

Paid Dividend   

  

STEP 4
Date	Purchases				Beginning inventory
	Units @	Cost per Unit =	Total		Plus: Purchases
3-Sep					Cost of goods available for sale
20-Sep					Less: Ending inventory (per physical count)
					Cost of goods sold
Totals			$ -

Answer 1

In The Books of Janie's Cupcakes Inc.

General Journal

Date	Account Titles & Explanation	Debit ($)	Credit ($)
2014 Jul 1	Common Stock a/c.......................dr to Capital a/c	10000	10000
1	Lease for Bakery Space a/c .................dr to Bank	4000	4000
1	Equipment a/c ................................dr to Common Stock (Being equipment purchased agst common stock)	8000	8000
2	Bank a/c ...........................................dr to 3% Loan or 3% Debenture a/c ( Being loan received from parents)	10000	10000
4	Purchase a/c ..........................................dr to Vendor a/c	5000	5000
10	Business License Fees a/c ................................dr to Bank	325	325
14	Miscellaneous a/c ......................................dr to Bank	750	750
30	Utility a/c ............................................dr to Accrued Utility a/c	185	185
31	Wages a/c ..............................dr to Accrued Wages a/c (wages paid @ $12 per hour for 40 hr)	480	480
31	Bank a/c ................................................dr Customer a/c or Sundry Debtors a/c........dr to Sales	5000 1500	6500
Aug 1	Rent a/c .........................................dr to Bank	2000	2000
1	Insurance Premium a/c ................................dr to Bank a/c	600	600
3	Advertisement a/c ....................................dr to Cash	250	250
7	Accrued Wages a/c .....................................dr to Bank	480	480
8	Cash a/c .....................................................dr to Customer a/c (Received from Local Restaurant)	1000	1000
15	Purchase a/c .........................................dr to Vendor	4000	4000
15	Wages a/c ..................................................dr to Accrued Wages (Wages may be paid for 50 hrs)	600	600
20	Vendor a/c ..............................................dr to Bank	7500	7500
22	Accrued Wages a/c..........................................dr to Bank	600	600
25	Accrued Utility a/c.........................................dr to Bank	185	185
31	Utility a/c ...................................................dr to Accrued Utility a/c	235	235
31	Wages a/c ..................................................dr to Accrued Wages a/c (wages payable for 48 hrs @ $12 per hr)	576	576
31	Bank a/c ......................................................dr Customer a/c..................................................dr to Sales	6250 6250	12500
Sep 1	Rent a/c .....................................................dr to Bank a/c	2000	2000
3	T Shirt a/c ..............................................dr to Bank (25 Shirt purchased @$9 for re sale purpose)	225	225
5	Bank a/c ....................................................dr to Customer a/c	4000	4000
7	Accrued Wages a/c........................................dr to Bank a/c	576	576
11	Purchase a/c...............................................dr to Vendor	7000	7000
13	Vendor a/c ........................................................dr to Bank	5000	5000
15	Wages a/c ..............................................dr to Accrued Wages a/c	624	624
20	T Shirt a/c ..............................................dr to Bank (25 Shirt purchased @$ 9.80 )	245	245
22	Accrued Wages a/c .....................................dr to Bank	624	624
25	Accrued Utility a/c .......................................dr to Bank a/c	235	235
30	Wages a/c...................................................dr to Accrued Wages (Wages paid for 58 hrs @$12)	696	696
30	Bank a/c .................................................dr Customer a/c............................................dr to Sales	10500 7000	17500
30	Bank a/c.............................................................dr to T Shirt a/c (35 shirt sold @$15)	525	525
30	T Shirt a/c ..................................................dr to Profit & Loss Adjustment a/c ( In case of stock value: market price or cost price is heigher must be taken into account,here 225-147)	78	78
30	Dividend a/c ............................................................dr to Bank	5000	5000

Step 4

Date	Unit Purchase	Rate	Total	Beginning Inventory : nil
Sep 3	25	9	225	Plus: Purchase $470
Sep 20	25	9.80	245	Cost of Goods Available for Sale - 470
				Lessending inventory 323
				Cost of Goods Sold 15 X 9.80= 147