Question
In: Accounting
Stacy and her family visit the local weekend farmers’ market on their weekly shopping trip. Deborah,...
Stacy and her family visit the local weekend farmers’ market on their weekly shopping trip. Deborah, a local candy-producer and friend of Stacy’s family, sells her candy at a booth at the market during December to meet demand for the holidays. Deborah no longer wants to work weekends but wants to continue to maintain interest in her product among farmers’ market customers. Deborah knows that Stacy is a budding entrepreneur and asks if she would like to take over the retail sales at the booth in December. Deborah gives Stacy the following information: • Boxed Specialty Chocolates sells at a market price of $15.00 each. • Deborah can prove that her chocolate has Fair Trade Certification. • Stacy can buy boxed chocolate from Deborah for $8.00 each. • Stacy will be responsible for paying the booth fees for her booth. The booth fee is $350 per month. • Stacy can keep any of the net income from market sales. • Deborah will take returns of all unsold boxes at the end of each month. • Deborah expects to be paid for inventory that Stacy acquired in December but did not return by January 10th. Stacy agrees to Deborah’s offer and decides to sell boxed Specialty Chocolates at the farmers’ market during December 2018 and December 2019. Stacy asks her brother, Paul, to help in her booth and she would pay him $275 for each month. Paul agrees. December 2018 Stacy establishes her business as a corporation with a calendar year end and takes $1,500 out of her personal savings to buy common stock in the corporation. Stacy acquires 320 boxes from Deborah’s storage unit. Stacy pays the market manager the booth fee for December and sets up the booth. Stacy sells 270 boxes of chocolates to market-goers. Stacy pays Paul for his December work. The market manager tells Stacy that booth space for next December is going quickly, so Stacy pays the manager $350 to secure booth space for December 2019. Stacy returns all remaining boxes to Deborah. January 2019 Stacy pays Deborah what she owes her. December 2019 Stacy acquires 400 boxes from Deborah’s storage unit. Stacy sets up the booth. Ms. James of Fair World Trade Coalition comes by representing her charitable organization that tries to make holidays more bearable for the less fortunate in Oregon. Ms. James, seeing the Fair Trade Certification sign, asks Stacy if she would consider making a donation of boxed chocolates to this worthy cause. Stacy says yes and gives Ms. James 15 boxes of chocolate. The Young Professionals Club asks Stacy if they could buy 20 boxes, take them away, and mail her a check for payment in January. Stacy agrees. Stacy sells 325 boxes of chocolates to market-goers. Paul mentions that sales in December were higher than last December and asks for a bonus. Stacy agrees to an $80 bonus. Stacy pays Paul for his December work and the bonus. Stacy returns all remaining boxes. Stacy pays the stockholder a dividend of $2,500. Required to be prepared in Excel: Prepare journal entries for all activity Do not differentiate between general and adjusting entries. Do not include explanations. Use the month and year for the dates on journal entries. Post entries to T-accounts and balance T-accounts. Prepare a multi-step income statement, a statement of retained earnings, and a balance sheet at the end of year (December 31, 2018 and December 31, 2019) using accrual accounting. Prepare closing journal entries and post at the end of each year and balance T-accounts. Head these sets of journal entries “Closing Entries.”
Solutions
Expert Solution
In the books of Stacy’s corporation
Journal Entries
For the year ending 31 Dec 2018
(In $)
|
Date |
Particulars |
Debit |
Credit |
|
2018 |
|||
|
Dec |
Cash A/C DR. |
1,500 |
|
|
To Stacy’s Capital A/C |
1,500 |
||
|
Dec |
Purchases A/C (320 boxes * $8) DR. |
2,560 |
|
|
To Deborah A/C |
2,560 |
||
|
Dec |
Rent expenses A/C DR. |
350 |
|
|
To Cash A/C |
350 |
||
|
Dec |
Cash A/C (270 boxes * $15) DR. |
4,050 |
4,050 |
|
To Sales A/C |
|||
|
Dec |
Salary Expenses A/C DR. |
275 |
|
|
To Cash A/C |
275 |
||
|
Dec |
Prepaid Rent A/C DR. |
350 |
|
|
To Cash A/C |
350 |
||
|
Dec |
Deborah A/C DR. |
400 |
|
|
To Purchase Return A/C {(320-270 boxes) * $8} |
400 |
||
Closing Entries
(in $)
|
Date |
Particulars |
Debit |
Credit |
|
2018 |
|||
|
Dec |
Purchase Return A/C DR. |
400 |
|
|
To Purchase A/C |
400 |
||
Ledger Accounts
(in $)
Cash Account
|
Date |
Particulars |
Amount |
Date |
Particulars |
Amount |
|
2018 |
2018 |
||||
|
Dec |
To Stacy’s Capital A/C |
1,500 |
Dec |
By Rent expenses A/C |
350 |
|
Dec |
To Sales A/C |
4,050 |
Dec |
By Salary Expenses A/C |
275 |
|
Dec |
By Prepaid Rent A/C |
350 |
|||
|
Dec |
By Balance C/D (B/F) |
4,575 |
|||
|
5,550 |
5,550 |
Stacy’s Capital Account
|
Date |
Particulars |
Amount |
Date |
Particulars |
Amount |
|
2018 |
2018 |
||||
|
Dec |
To Balance C/D (B/F) |
1,500 |
Dec |
By Cash A/C |
1,500 |
|
1,500 |
1,500 |
Purchases Account
|
Date |
Particulars |
Amount |
Date |
Particulars |
Amount |
|
2018 |
2018 |
||||
|
Dec |
To Deborah A/C |
2,560 |
Dec |
By Purchase Return A/C |
400 |
|
Dec |
By Profit and loss A/C (B/F) |
2,160 |
|||
|
2,560 |
2,160 |
Deborah Account
|
Date |
Particulars |
Amount |
Date |
Particulars |
Amount |
|
2018 |
2018 |
||||
|
Dec |
To Purchase Return A/C |
400 |
Dec |
By Purchases A/C |
2,560 |
|
Dec |
To Balance C/D (B/F) |
2,160 |
|||
|
2,560 |
2,160 |
Rent expenses Account
|
Date |
Particulars |
Amount |
Date |
Particulars |
Amount |
|
2018 |
2018 |
||||
|
Dec |
To Cash A/C |
350 |
Dec |
By Profit and loss A/C (B/F) |
350 |
|
350 |
350 |
Sales Account
|
Date |
Particulars |
Amount |
Date |
Particulars |
Amount |
|
2018 |
2018 |
||||
|
Dec |
To Profit and loss A/C (B/F) |
4,050 |
Dec |
By Cash A/C |
4,050 |
|
4,050 |
4,050 |
Salary Expenses Account
|
Date |
Particulars |
Amount |
Date |
Particulars |
Amount |
|
2018 |
2018 |
||||
|
Dec |
To Cash A/C |
275 |
Dec |
By Profit and loss A/C (B/F) |
275 |
|
275 |
275 |
Prepaid Rent Account
|
Date |
Particulars |
Amount |
Date |
Particulars |
Amount |
|
2018 |
2018 |
||||
|
Dec |
To Cash A/C |
350 |
Dec |
By Balance C/D (B/F) |
350 |
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