ACCT 217 Lecture Notes - Lecture 8: Dunder Mifflin, Retained Earnings, General Ledger
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Henriettaâs Pine Bakery
Background
You are an Analyst for the professional service firm, BUSI 1043LLP. Your firm specializes in providing a wide variety of internalbusiness solutions for different clients. Given the outstandingfeedback you received on your first engagement working for BigSpenders Inc., a Senior Manager in the Financial Advisory grouprequested your support on a compilation engagement.
Additional Information
Henriettaâs was established in 1963 when it first opened itsdoors in Dwight, Muskoka on highway 60. Over the past 50 years,there have been four owners and is currently owned by Carine &Geoff Harris who incorporated and took over the store on January 1,2013. Their sons, Kyle and Nicholas have been an intricate part ofthe business from dishwashing to head bakers. Henrietta's has grownover the years with the addition of new items all the time, but the"Sticky Buns and Clouds" remain the most popular items amongst the150 varieties of breads and pastries.
Henriettaâs runs out of 90 square meters (1,000 share feet) ofspace. It has one entrance into the bakery and doors leading out tohighway 60. Henriettaâs pays $5,000 per month for the rental of thespace. Carine and Geoff were able to negotiate with the landlordand were not required to pay the first monthâs rend in advance. Allof the rental payments are current and up to date. For the last twoyears, Henriettaâs has had a very reliable accountant prepare itsyear-end financial statements and everything has been correct. Thisyear, Henriettaâs accountant retired and Geoff did the best hecould recording his own financial information. For the informationhe was not sure about, he kept all of the required supportingdocumentation. Geoff hired your firm, BUSI 1043 LLP to prepare hisfinancial statements for the year. Geoff supplied you with hisunadjusted trial balance and the information in Exhibit I to assistyou.
Supplementary information:
The amount currently sitting in prepaids arose due the insurancepolicy last year. Geoff didnât know how to correct it, so he leftit. This yearâs insurance policy was purchased on November 1 for$9,000. The policy runs from November 1 to October 31 of eachyear.
Geoff has a note that he owed $900 in wages to his employees forthe period ending December 31st.
The loan was incurred when the bakery was opened. The loancarried an interest rate of 8%. The interest is payable two monthsafter year end and the principal is due in 2019.
Henriettaâs will sometimes book special events with smallorganizations that are allowed to pay after the event has takenplace. On December 29th, a small company had a gatheringat the bakery. The company was billed $1,089 and has 30 days to payit. Geoff has not yet recorded this in his financial records.
Henriettaâs declared a dividend of $5,000 on December30th.
Geoff didnât know how to record amortization for the year and soleft it for you to record. Amortization for all assets is chargedusing a straight-line method by taking the cost of the asset anddividing it by its expected useful life. The assets have expecteduseful lives as follows:
Computer: 5 years
Bakery equipment: 10 years
Furniture and fixtures: 20 years
The information shows that Henriettaâs owes $400 for a telephonebill and $400 for electricity for December. These amounts have notbeen recorded yet.
Exhibit I
Henriettaâs Pine Bakery
Unadjusted Trial Balance
December 31, 2015
Account Name | Debit | Credit |
Cash | $35,000 | |
Accounts Receivable | 5,600 | |
Food Inventory | 21,000 | |
Merchandise Inventory | 62,500 | |
Prepaids | 3,400 | |
Computers | 30,000 | |
Accumulated Amortization â Computers | 12,000 | |
Bakery Equipment | 90,000 | |
Accumulated Amortization â Bakery Equipment | 18,000 | |
Furniture and Fixtures | 150,000 | |
Accumulated Amortization â Furniture and Fixtures | 15,000 | |
Accounts Payable | 18,000 | |
Accrued Liabilities | - | |
Interest Payable | ||
Dividend Payable | - | |
Long-term Loan | 220,000 | |
Common Shares | 50,000 | |
Retained Earnings | 22,000 | |
Food Revenue | 468,500 | |
Internet Revenue | 127,000 | |
Merchandise Revenue | 103,000 | |
Food Expense | 240,000 | |
Internet Expense | 54,000 | |
Electricity Expense | 65,000 | |
Telephone Expense | 20,000 | |
Interest Expense | 0 | |
Salary Expense | 200,000 | |
Insurance Expense | 9,000 | |
Supplies Expense | 8,000 | |
Depreciation Expense | - | |
Rent Expense | 60,000 | |
1,053,500 | 1,053,500 |
Required
Based on the information you have, prepare the adjusting journalentries, an adjusting trial balance, the statement of earnings(income statement), statement of financial position (balancesheet), and statement of retained earnings. After you havecompleted the statements, prepare the closing journal entries andthe posting closing trial balance. Ensure you show all of yourwork, and prepare proper journal entries and properly formattedfinancial statements.
Henriettaâs Pine Bakery
Background
You are an Analyst for the professional service firm, BUSI 1043LLP. Your firm specializes in providing a wide variety of internalbusiness solutions for different clients. Given the outstandingfeedback you received on your first engagement working for BigSpenders Inc., a Senior Manager in the Financial Advisory grouprequested your support on a compilation engagement.
Additional Information
Henriettaâs was established in 1963 when it first opened itsdoors in Dwight, Muskoka on highway 60. Over the past 50 years,there have been four owners and is currently owned by Carine &Geoff Harris who incorporated and took over the store on January 1,2013. Their sons, Kyle and Nicholas have been an intricate part ofthe business from dishwashing to head bakers. Henrietta's has grownover the years with the addition of new items all the time, but the"Sticky Buns and Clouds" remain the most popular items amongst the150 varieties of breads and pastries.
Henriettaâs runs out of 90 square meters (1,000 share feet) ofspace. It has one entrance into the bakery and doors leading out tohighway 60. Henriettaâs pays $5,000 per month for the rental of thespace. Carine and Geoff were able to negotiate with the landlordand were not required to pay the first monthâs rend in advance. Allof the rental payments are current and up to date. For the last twoyears, Henriettaâs has had a very reliable accountant prepare itsyear-end financial statements and everything has been correct. Thisyear, Henriettaâs accountant retired and Geoff did the best hecould recording his own financial information. For the informationhe was not sure about, he kept all of the required supportingdocumentation. Geoff hired your firm, BUSI 1043 LLP to prepare hisfinancial statements for the year. Geoff supplied you with hisunadjusted trial balance and the information in Exhibit I to assistyou.
Supplementary information:
The amount currently sitting in prepaids arose due the insurancepolicy last year. Geoff didnât know how to correct it, so he leftit. This yearâs insurance policy was purchased on November 1 for$9,000. The policy runs from November 1 to October 31 of eachyear.
Geoff has a note that he owed $900 in wages to his employees forthe period ending December 31st.
The loan was incurred when the bakery was opened. The loancarried an interest rate of 8%. The interest is payable two monthsafter year end and the principal is due in 2019.
Henriettaâs will sometimes book special events with smallorganizations that are allowed to pay after the event has takenplace. On December 29th, a small company had a gatheringat the bakery. The company was billed $1,089 and has 30 days to payit. Geoff has not yet recorded this in his financial records.
Henriettaâs declared a dividend of $5,000 on December30th.
Geoff didnât know how to record amortization for the year and soleft it for you to record. Amortization for all assets is chargedusing a straight-line method by taking the cost of the asset anddividing it by its expected useful life. The assets have expecteduseful lives as follows:
Computer: 5 years
Bakery equipment: 10 years
Furniture and fixtures: 20 years
The information shows that Henriettaâs owes $400 for a telephonebill and $400 for electricity for December. These amounts have notbeen recorded yet.
Exhibit I
Henriettaâs Pine Bakery
Unadjusted Trial Balance
December 31, 2015
Account Name | Debit | Credit |
Cash | $35,000 | |
Accounts Receivable | 5,600 | |
Food Inventory | 21,000 | |
Merchandise Inventory | 62,500 | |
Prepaids | 3,400 | |
Computers | 30,000 | |
Accumulated Amortization â Computers | 12,000 | |
Bakery Equipment | 90,000 | |
Accumulated Amortization â Bakery Equipment | 18,000 | |
Furniture and Fixtures | 150,000 | |
Accumulated Amortization â Furniture and Fixtures | 15,000 | |
Accounts Payable | 18,000 | |
Accrued Liabilities | - | |
Interest Payable | ||
Dividend Payable | - | |
Long-term Loan | 220,000 | |
Common Shares | 50,000 | |
Retained Earnings | 22,000 | |
Food Revenue | 468,500 | |
Internet Revenue | 127,000 | |
Merchandise Revenue | 103,000 | |
Food Expense | 240,000 | |
Internet Expense | 54,000 | |
Electricity Expense | 65,000 | |
Telephone Expense | 20,000 | |
Interest Expense | 0 | |
Salary Expense | 200,000 | |
Insurance Expense | 9,000 | |
Supplies Expense | 8,000 | |
Depreciation Expense | - | |
Rent Expense | 60,000 | |
1,053,500 | 1,053,500 |
Required
Based on the information you have, prepare the
1) adjusting journal entries,
2) an adjusting trial balance,
3) the statement of earnings (income statement),
4) statement of financial position (balance sheet), andstatement of retained earnings. After you have completed thestatements,
5) prepare the closing journal entries and the
6) posting closing trial balance.
Ensure you show all of your work, and prepare proper journalentries and properly formatted financial statements.
You have been hired as an accountantfor B&G Co., a corporation performing diverse consultingservices in Detroit, Michigan. B&G Co. prepares financialstatements on monthly bases.
ProjectScope: You are to record the transactions forDecember, prepare the monthly adjustments, and prepare thefinancial statements using the Excel workbook provided. Then youwill close the fiscal year and prepare the books for next year.
Directions: The assignment encompasses twofiles: Directions and Transactions (this Word document)and Forms (a separate Excel workbook). Your solutionshould be worked in Excel and the completed Excel workbooksubmitted for grading.
You should use Excel formula whereappropriate and cell references to carry forward values and numbersbetween worksheets within the workbook. Simply typing values inExcel will result in a reduced score, even if the correctsolution is provided. You should use formula whereverpossible.
Analyze the narrative to prepare and record the transactions forDecember to the General Journal.
Post the journal entries to ledger accounts using T-accounts(Donât forget the opening balances from the information given onthe post-closing trial balance on Nov. 30th.)
Prepare Income Statement and the Retained Earnings Statement forthe month ended December 31, 2016 and Balance Sheet as of December31, 2016 in good forms. Use the multi-step format for the IncomeStatement.
Close the temporary accounts, posting any net income or loss toretained earnings.
Due Date: Dec.8th.
Transactionsin December 2016:
Dec. | 1 | The equipment was completely destroyed by the regional earthquake. âLoss by earthquakeâ was recognized. |
1 | Lent cash to another company and received a 2 year, $20,000zero-interest-bearing note. The market rate of interest for a noteof similar risk is 9 percent. | |
1 | Purchased new equipment that costs $12,000 and issued 1,000shares of common stock (no-par stock) to the equipment seller. | |
3 | Cash payment on accounts payable amounted to $6,000. | |
4 | Sold land for $13,000 cash. | |
10 | Collected $15,000 as payment for amounts previously billed(suppose the payment was made within the discount period). | |
13 | One of the customers went bankrupt. B&G wrote off $2,000account receivable. | |
15 | Paid monthly salaries of $20,000 to employees | |
16 | Issued 1,000 shares of preferred stock at $10 per share | |
17 | Purchased 500 shares of ABC corporationâs common stock at $15(per share) and classify the securities as available-for-salessecurities | |
20 | Found that the company incorrectly overstated its Novemberaccount receivable and sales revenue by $1,000 and made a journalentry to correct the error. | |
29 | Performed services for a customer for $30,000 cash | |
30 | Performed $30,000 services on account with the following terms:2/15, n/30. B&G records credit sales using the net method | |
31 | Dividends of $5,000 were declared and paid. $ 1,025 is paid topreferred stockholders and the rest is paid to the common stockholders. | |
31 | ABC corporation declared $ 5 dividend per share (to common stockholders). It will be paid in 2017. |
* Additional information
1. Ignoretax effect.
2. Salariesexpenses incurred but not paid prior to Dec. 31sttotaled $10,500.
3. Thecompany received the bill for utility services (electricity) thatthe firm used during December in the amount of $6,000. The companywill pay the bill in Jan. 2016.
4. $3,000 ofsupplies remained at the end of December.
5. Thecompany use the âAllowanceâ method for possible accounts receivablewrite-offs in the future and estimated that 5% of the outstandingaccount receivable will not be collected.
6. The equipmentpurchased on Dec. 1st depreciates $200 per month.
7. Thecommon stock price of ABC Corporation on December 31st is still $15 per share.
