After researching the different forms of business organization, Natalie Koebel d
ID: 2543355 • Letter: A
Question
After researching the different forms of business organization, Natalie Koebel decides to operate “Cookie Creations” as a proprietorship. She then starts the process of getting the business running. In November 2016, the following activities take place.
Natalie pays $1320 for a one-year insurance policy that will expire on December 1, 2017.
It is the end of November and Natalie has been in touch with her grandmother. Her grandmother asked Natalie how well things went in her first month of business. Natalie, too, would like to know if she has been profitable or not during November. Natalie realizes that in order to determine Cookie Creations’ income, she must first make adjustments.
Natalie puts together the following additional information.
Using the information that you have gathered through Chapter 2, and based on the new information above, do the following.
Post the adjusting journal entries. (Post entries in the order of journal entries presented in the previous question.)
Cash
Date
Explanation
Ref.
Debit
Credit
Balance
Nov. 30
Balance
245
Accounts Receivable
Date
Explanation
Ref.
Debit
Credit
Balance
Nov. 30
J2
Date
Explanation
Ref.
Debit
Credit
Balance
Nov. 30
Balance
125
30
J2
Prepaid Insurance
Date
Explanation
Ref.
Debit
Credit
Balance
Nov. 30
Balance
1,320
Equipment
Date
Explanation
Ref.
Debit
Credit
Balance
Nov. 30
Balance
1,200
Accumulated Depreciation—Equipment
Date
Explanation
Ref.
Debit
Credit
Balance
Nov. 30
Accounts Payable
Date
Explanation
Ref.
Debit
Credit
Balance
Nov. 30
J2
Interest Payable
Date
Explanation
Ref.
Debit
Credit
Balance
Nov. 30
J2
Unearned Service Revenue
Date
Explanation
Ref.
Debit
Credit
Balance
Nov. 30
Balance
30
Notes Payable
Date
Explanation
Ref.
Debit
Credit
Balance
Nov. 30
Balance
2,000
Date
Explanation
Ref.
Debit
Credit
Balance
Nov. 30
Balance
800
Service Revenue
Date
Explanation
Ref.
Debit
Credit
Balance
Nov. 30
Balance
125
30
J2
Utilities Expense
Date
Explanation
Ref.
Debit
Credit
Balance
Nov. 30
J2
Advertising Expense
Date
Explanation
Ref.
Debit
Credit
Balance
Nov. 30
Supplies Expense
Date
Explanation
Ref.
Debit
Credit
Balance
Nov. 30
J2
Depreciation Expense
Date
Explanation
Ref.
Debit
Credit
Balance
Nov. 30
J2
Interest Expense
Date
Explanation
Ref.
Debit
Credit
Balance
Nov. 30
J2
Nov. 8 Natalie cashes her U.S. Savings Bonds and receives $520, which she deposits in her personal bank account. 8 She opens a bank account under the name “Cookie Creations” and transfers $500 from her personal account to the new account. 11 Natalie pays $65 for advertising. 13 She buys baking supplies, such as flour, sugar, butter, and chocolate chips, for $125 cash. (Hint: Use Supplies account.) 14 Natalie starts to gather some baking equipment to take with her when teaching the cookie classes. She has an excellent top-of-the-line food processor and mixer that originally cost her $750. Natalie decides to start using it only in her new business. She estimates that the equipment is currently worth $300. She invests the equipment in the business. 16 Natalie realizes that her initial cash investment is not enough. Her grandmother lends her $2,000 cash, for which Natalie signs a note payable in the name of the business. Natalie deposits the money in the business bank account. (Hint: The note does not have to be repaid for 24 months. As a result, the note payable should be reported in the accounts as the last liability and also on the balance sheet as the last liability.) 17 She buys more baking equipment for $900 cash. 20 She teaches her first class and collects $125 cash. 25 Natalie books a second class for December 4 for $150. She receives $30 cash in advance as a down payment. 30Natalie pays $1320 for a one-year insurance policy that will expire on December 1, 2017.
Explanation / Answer
Note: Only accounts affected by the adjusting entries have been shown above.
Accounts Receivable Date Explanation Ref. Debit Credit Balance Nov. 30 Invoice J2 300 300 Supplies Date Explanation Ref. Debit Credit Balance Nov. 30 Balance 125 30 Supplies used J2 35 90 Accumulated Depreciation-Equipment Date Explanation Ref. Debit Credit Balance Nov. 30 Depreciation J2 20 20 Accounts Payable Date Explanation Ref. Debit Credit Balance Nov. 30 Utilities bill received J2 45 45 Interest Payable Date Explanation Ref. Debit Credit Balance Nov. 30 Interest accrued J2 5 5 Service Revenue Date Explanation Ref. Debit Credit Balance Nov. 30 Balance 125 30 Invoice J2 300 425 Utilities Expense Date Explanation Ref. Debit Credit Balance Nov. 30 Utilities bill received J2 45 45 Supplies Expense Date Explanation Ref. Debit Credit Balance Nov. 30 Supplies used J2 35 35 Depreciation Expense Date Explanation Ref. Debit Credit Balance Nov. 30 Depreciation ($1200/60 months) J2 20 20 Interest Expense Date Explanation Ref. Debit Credit Balance Nov. 30 Interest accrued ($2000 x 6% x 1/12 x 1/2) J2 5 5