Bob’s Chocolate Chips and More, a bakery specializing in gourmet pizza and chocolate chip
Bob’s Chocolate Chips and More, a bakery specializing in gourmet pizza and chocolate chip cookies, started business on October 1, 2016. The following transactions occurred during the month.
- The company issued 10,000 shares of common stock at $15 per share.
- The company acquired office equipment on October 1 for $50,000 cash.
- The company purchased $25,000 of ingredients on account.
- Rent is $750 a month. On October 1, the company paid rent for October, November, and December.
- The company sold pizza and cookies for $35,000. The transaction was a credit sale. The pizza and cookies cost $11,000 to make.
- The company paid salaries totaling $6,300.
- The company collected $26,000 of the amount owed by customers.
- The company paid $10,500 for ingredients previously purchased on account.
- The company paid $1600 for utilities on its corporate headquarters and $450 for advertising.
- The company borrowed $12,000 from the bank for additional working capital requirements. The company repaid $3,000 by month-end.
- The company paid $500 cash dividends to shareholders during October.
- The company received an order from a customer for two luncheons. The sales price for the order was $20,000 ($10,000 for each luncheon). The customer paid $20,000 in advance for the order.
Assume that the company has a monthly accounting cycle. Use the following information to construct the corresponding adjusting entries on October 31.
- One month of the company’s rent expired during October.
- The company’s equipment originally cost $50,000 and was expected to benefit the company for 5 years. Straight line depreciation method is used. Assume a $5,000 salvage value.
- The company’s employees earned $400 during the last week of October that will be paid on November 6.
- Interest on the bank loan for the month of October was $600. This amount was paid on November 5.
- On October 31, the company delivered one of the two luncheons ordered and paid for in advance by a customer (described in transaction #12). The luncheon cost the company $3,500.
- Complete the following steps:
- Use the FSET template on p.2 to record the October transactions and adjusting entries
- Record the journal entries (including adjusting entries)
- Post them to the corresponding T-accounts (template provide on p.3).
- Prepare a Balance Sheet (as of October 31), an Income Statement (for October), and a Statement of Cash Flows under the direct method (for October). Don’t forget to do closing entries before you prepare the balance sheet.