Reference no: EM132820415
Question - Mrs.L has had such a successful first few months, she is considering other opportunities to develop her business.
One opportunity is the sale of fine European mixers.
The owner of A Supply Co. has approached Mrs. L to become the exclusive distributor of these fine mixers in her state.
The current cost of a mixer is approximately $575, and Mrs. L would sell each one for $1,150.
Each appliance has a serial number and can be easily identified.
In the end, Mrs. L decides to use the perpetual inventory system. Included here are the transactions that happened during the month of January.
As of January 31, the following adjusting entry data is available:
1. A count of baking supplies reveals that none were used in January.
2. Another month's worth of depreciation needs to be recorded on the $1,200 of baking equipment bought in November. (Recall that the baking equipment has a useful life of 5 years or 60 months and no salvage value.)
3. An additional month's worth of interest on her grandmother's $2,000 loan needs to be accrued. The interest rate is 6%.
4. During the month, $110 of insurance has expired.
5. An analysis of the unearned revenue account reveals that Mrs.L has not had time to teach any of these lessons this month because she has been so busy selling mixers. As a result, there is no change to the unearned revenue account. Mrs.L hopes to complete the remaining lessons in February.
6. An inventory count of mixers at the end of January reveals that Mrs.L has three mixers remaining.
Jan. 4 Bought five deluxe mixers on account from ASupply Co. for $2,875, FOB shipping point, terms n/30.
Jan. 6 Paid $100 freight on the January 4 purchase.
Jan. 7 Returned one of the mixers to ASupply Co. because it was damaged during shipping. ASupply Co. issues Mrs.L Cookies credit for the cost of mixer plus $20 for the cost of freight that was paid on January 6 for one mixer.
Jan. 8 Collected $375 of the accounts receivable from December 2013.
Jan. 12 Three deluxe mixers are sold on account for $3,450, FOB destination, terms n/30. (Cost of goods sold is $595 per mixer.)
Jan. 14 Paid the $75 of delivery charges for the three mixers that were sold on January 12.
Jan. 14 Bought four deluxe mixers on account from ASupply Co. for $2,300, FOB shipping point, terms n/30.
Jan. 17 Mrs.L is concerned that there is not enough cash available to pay for all of the mixers purchased. She invests an additional $1,000 cash in Mrs.L Cookies.
Jan. 18 Paid $80 freight on the January 14 purchase.
Jan. 20 Sold two deluxe mixers for $2,300 cash. (Cost of goods sold is $595 per mixer.)
Jan. 28 Mrs.L issued a check to her assistant for all the help the assistant has given her during the month. Her assistant worked 20 hours in January and is also paid the $56 owed at December 31, 2019. (Mrs.L assistant earns $8 an hour.)
Jan. 28 Collected the amounts due from customers for the January 12 transaction.
Jan. 30 Paid a $145 cellphone bill ($75 for the December 2019 account payable and $70 for the month of January). (Recall that the cellphone is used only for business purposes.)
Jan. 31 Paid ASupply Co. all amounts due.
Jan. 31 Mrs.L withdrew $750 cash for personal use.
Required -
a. Prepare and post the January 2020 transactions.
b. Prepare trial balance.
c. Prepare & post the adjusting journal entries required.
d. Prepare adjusted trial balance.
e. Prepare multiple-step income statement for the month ended January 31, 2020.