Reference no: EM132850066

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 A Supply 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 A Supply Co. because it was damaged during shipping. A Supply 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 A Supply 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 A Supply Co. all amounts due.

Jan. 31 Mrs. L withdrew $750 cash for personal use.

Required -

a. Prepare & 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.