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Cookie Creations

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Cookie Creations (Chapters 5 and 6)

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This assignment is a continuation of the Cookie Creations case study from previous chapters. From the information gathered in the previous chapters, read the continuation of the Cookie Creations case study below for Chapter 5 and Chapter 6, which can also be found on p. 5-51 and p. 6-45.

The case study allows you to apply what you have learned about accounting for merchandising operations (Chapter 5) and inventories (Chapter 6). This assignment will allow you to practice what you have learned so far.

Part I

Because Natalie has had such a successful first few months, she is considering other opportunities to develop her business. One opportunity is the sale of European mixers. The owner of Kzinski Supply Company has approached Natalie to become the exclusive distributor of these fine mixers in her state. The current cost of a mixer is approximately $575, and Natalie would sell each one for $1,150. Natalie comes to you for advice on how to account for these mixers. Each appliance has a serial number and can be easily identified.

Natalie has come to you for your advice on how to account for these mixers and asks you the questions below, which you must address.

  1. Would you consider these mixers to be inventory, or should these mixers be classified as supplies or equipment?
  2. Which inventory tracking system should Natalie use: perpetual or periodic?
  3. Which system do you think is better: perpetual or periodic?
  4. Which system would you recommend for the type of inventory that Natalie wants to sell?
  5. How often does Natalie need to count inventory if she maintains it using the perpetual system? In contrast, does she need to count inventory at all?

Provide your responses to the questions in a Word document. Use the unit lesson, required unit resources, and suggested unit resources to formulate your response. Your response should be a minimum of two pages in length and include at least two references. Adhere to APA Style when creating citations and references for this assignment.

Part II

Natalie is busy establishing both divisions of her business (cookie classes and mixer sales), and she is completing her business degree. Her goals for the next 11 months are to sell one mixer per month and to give two to three classes per week.

The cost of the fine European mixers is expected to increase. Natalie has just negotiated new terms with the owner of Kzinski Supply Company, which will include shipping costs in the negotiated purchase price (mixers will be shipped free on board (FOB) destination). Assume that Natalie has decided to use a periodic inventory system and now must choose a cost flow assumption for her mixer inventory. The transactions listed below occur in February to May 2020.

Feb. 2: Natalie buys two deluxe mixers on account from Mixer Supply Company for $1,200 ($600 each), FOB destination, terms n/30.

Feb. 16: She sells one deluxe mixer for $1,150 cash.

Feb. 25: She pays the amount owed to Mixer Supply Company.

Mar. 2: She buys one deluxe mixer on account from Mixer Supply Company for $618, FOB destination, terms n/30.

Mar. 30 : Natalie sells two deluxe mixers for a total of $2,300 cash.

Mar. 31: She pays the amount owed to Kzinski Supply Company.

Apr. 1 : She buys two deluxe mixers on account from Mixer Supply Company for $1,224 ($612 each), FOB destination, terms n/30.

Apr. 13: She sells three deluxe mixers for a total of $3,450 cash.

Apr. 30: Natalie pays the amount owed to Mixer Supply Company.

May 4: She buys three deluxe mixers on account from Mixer Supply Company for $1,875 ($625 each), FOB destination, terms n/30.

May 27: She sells one deluxe mixer for $1,150 cash.

For Part II, determine the cost of goods available for sale. You will recall from Chapter 5 (see Part I above) that at the end of January, Cookie Creations had three mixers on hand at a cost of $575 each. For Part II of the assignment, you will calculate the following items: ·

  • ending inventory,
  • cost of goods sold,
  • gross profit, and
  • gross profit rate under each of the following methods: last-in, first-out (LIFO); first-in, first-out (FIFO); and average cost.

Submit Part I and Part II in a single Word document. Your total combined submission should include two pages for Part I and the solutions to Part II.

Cookie Creations

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Cookie Creations

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This assignment is a continuation of the Cookie Creations case study and focuses on Cookie Creations’ liabilities (current and long-term). From the information gathered from the unit lesson, required unit resources, and suggested unit resources, read the Cookie Creations case study below, which is also available on p.11-37 (Chapter 11) and p. 15-38 (Chapter 15) in the textbook.

The case study allows you to apply what you have learned about liabilities and the accounting process. This assignment will allow you to practice what you have learned so far.

Part I

Recall that Cookie Creations sells fine European mixers that it purchases from Kzinski Supply Company. Kzinski warrants the mixers to be free of defects in material and workmanship for 1 year from the date of original purchase. If the mixer has such a defect, Kzinski will repair or replace the mixer free of charge for parts and labor. The product must be shipped prepaid to an authorized Kzinski service center. The consumer pays the cost to ship the mixer. The cost to return the product to the consumer is paid by Kzinski.

The authorized service center is located in Boston. Because Cookie Creations values serving its customers, it pays the shipping to Boston for any mixers needing repair under Kzinski’s warranty terms. Based on past experience, Kzinski has found that approximately 10% of mixers are returned for repair or replacement. The average cost to ship a mixer to Boston is $60.

The following transactions take place in 2020 and 2021.

  1. A total of 30 mixers are sold in 2020.
  2. Four of the mixers sold in 2020 are returned for repair in 2021. The total shipping cost for returning these four mixers to Boston is $210.
  3. A total of 40 mixers are sold in 2021.
  4. Two of the mixers sold in 2021 are returned for repair in 2021. The total shipping cost for returning these two mixers to Boston is $55.

For Part I of the assignment, complete the tasks listed below using Excel.

  1. Calculate Cookie Creations’ warranty liability for the shipping costs at December 31, 2020.
  2. Record the estimated warranty liability at December 31, 2020.
  3. Prepare the summary journal entry (or entries) to record the shipment of the six mixers (four from the 2020 sales and two from the 2021 sales) for warranty repair in 2021. d.
  4. Calculate Cookie Creations’ warranty liability at December 31, 2021. (Hint: Note that there is no liability outstanding for the mixers sold in 2020. The 1-year warranty period has expired.)
  5. Record the estimated warranty liability at December 31, 2021. (Hint: Similar to accounting for bad debts, consider any existing balance in the warranty liability account when you prepare your entry. You will find it helpful to prepare a general ledger account for the warranty liability and to post the above transactions.)
Part II

Natalie and Curtis have been experiencing great demand for their cookies and muffins. As a result, they are now thinking about buying a commercial oven. They know which oven they want and that it will cost $17,000. The company already has $5,000 set aside for the purchase and will need to borrow the rest.

Natalie and Curtis met with a bank manager to discuss their options. She is willing to lend Cookie & Coffee Creations Inc. $12,000 on November 1, 2020, for 3 years at a 5% interest rate. The terms provide for fixed principal payments of $2,000 on May 1 and November 1 of each year plus 6 months of interest.

For Part II of the assignment, complete the tasks listed below.

  1. Prepare a payment schedule for the life of the note.
  2. Prepare the journal entry for the purchase of the oven and the issue of the note payable on November 1, 2020.
  3. Prepare the journal entries on May 1 and November 1 for the note.
  4. Determine the current portion of the note payable and the long-term portion of the note payable at October 31, 2021.

Parts I and II should be submitted in a single Excel spreadsheet. You will use a new tab to complete each transaction for both Parts I and II for a total of nine separate tabs or sheets. Submit the Excel spreadsheet in Blackboard.

Cookie Creations

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Cookie Creations

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Cookie Creations is gearing up for the winter holiday season. During the month of December 2009, the following transactions occur. Dec. 1 Natalie hires an assistant at an hourly wage of $8 to help with cookie making and some administrative duties. 5 Natalie teaches the class that was booked on November 25. The balance outstanding is received. 8 Cookie Creations receives a check for the amount due from the neighborhood school for the class given on November 30. 9 Cookie Creations receives $750 in advance from the local school board for five classes that the company will give during December and January. 15 Pays the cell phone invoice outstanding at November 30. 16 Issues a check to Natalie’s brother for the amount owed for the design of the website. 19 Receives a deposit of $60 on a cookie class scheduled for early January. 23 Additional revenue earned during the month for cookie-making classes amounts to $4,000. (Natalie has not had time to account for each class individually.) $3,000 in cash has been collected and $1,000 is still outstanding. (This is in addition to the December 5 and December 9 transactions.) 23 Additional supplies purchased during the month for sugar, flour, and chocolate chips amount to $1,250 cash. 23 Issues a check to Natalie’s assistant for $800. Her assistant worked approximately 100 hours from the time in which she was hired until December 23. 28 Pays a dividend of $500 to the common shareholder (Natalie). As of December 31, Cookie Creations’ year-end, the following adjusting entry data are provided. 1. A count reveals that $50 of brochures and posters remain at the end of December. 2. Depreciation is recorded on the baking equipment purchased in November. The baking equipment has a useful life of 5 years. Assume that 2 months’ worth of depreciation is required. 3. Amortization (which is similar to depreciation) is recorded on the website. (Credit the Website account directly for the amount of the amortization.) The website is amortized over a useful life of 2 years and was available for use on December 1. 4. Interest on the note payable is accrued. (Assume that 1.5 months of interest accrued during November and December.) Round to nearest dollar. 5. One month’s worth of insurance has expired. 6. Natalie is unexpectedly telephoned on December 28 to give a cookie class at the neighborhood community center on December 31. In early January Cookie Creations sends an invoice for $450 to the community center. 7. A count reveals that $1,025 of baking supplies were used. 8. A cell phone invoice is received for $75. The invoice is for services provided during the month of December and is due on January 15. 9. Because the cookie-making class occurred unexpectedly on December 28 and is for such a large group of children, Natalie’s assistant helps out. Her assistant worked 7 hours at a rate of $8 per hour. 10. An analysis of the unearned revenue account reveals that two of the five classes paid for by the local school board on December 9 still have not been taught by the end of December. The $60 deposit received on December 19 for another class also remains unearned. Instructions Using the information that you have gathered and the general ledger accounts that you have prepared through Chapter 3, plus the new information above, do the following. (a) Journalize the above transactions. (b) Post the December transactions. (Use the general ledger accounts prepared in Chapter 3.) (c) Prepare a trial balance at December 31, 2009. (c) Totals $8,160 (d) Prepare and post adjusting journal entries for the month of December. (e) Prepare an adjusted trial balance as of December 31, 2009. (f) Prepare an income statement and a retained earnings statement for the 2-month period ending December 31, 2009, and a classified balance sheet as of December 31, 2009. (g) Prepare and post closing entries as of December 31, 2009. (h) Prepare a post-closing trial balance

1. A count reveals that $45 of brochures and posters remain at the end of December. 2. Depreciation is recorded on the baking equipment purchased in November. The baking equipment has a useful life of 5 years. Assume that 2 months’ worth of depreciation is required. 3. Amortization (which is similar to depreciation) is recorded on the website. (Credit the Website account directly for the amount of the amortization.) The website is amortized over a useful life of 2 years and was available for use on December 1. 4. Interest on the note payable is accrued. (Assume that 1.5 months of interest accrued during November and December.) Round to nearest dollar. 5. One month’s worth of insurance has expired. 6. Natalie is unexpectedly telephoned on December 28 to give a cookie class at the neighborhood community center on December 31. In early January Cookie Creations sends an invoice for $450 to the community center. 7. A count reveals that $1,025 of baking supplies were used. 8. A cell phone invoice is received for $75. The invoice is for services provided during the month of December and is due on January 15. 9. Because the cookie-making class occurred unexpectedly on December 28 and is for such a large group of children, Natalie’s assistant helps out. Her assistant worked 7 hours at a rate of $8 per hour. 10. An analysis of the unearned revenue account reveals that two of the five classes paid for by the local school board on December 9 still have not been taught by the end of December. The $60 deposit received on December 19 for another class also remains unearned. Instructions Using the information that you have gathered and the general ledger accounts that you have prepared through Chapter 3, plus the new information above, do the following. (a) Journalize the above transactions. (b) Post the December transactions. (Use the general ledger accounts prepared in Chapter 3.) (c) Prepare a trial balance at December 31, 2009. (c) Totals $8,160 (d) Prepare and post adjusting journal entries for the month of December. (e) Prepare an adjusted trial balance as of December 31, 2009. (f) Prepare an income statement and a retained earnings statement for the 2-month period ending December 31, 2009, and a classified balance sheet as of December 31, 2009. (g) Prepare and post closing entries as of December 31, 2009. (h) Prepare a post-closing trial balance

 

Requirements

 

Week One

Chapter 1 and 2 “Continuing Cookie Chronicle” – Review the problem and make notes of your answers.

Week Two

Chapter 3, Part A, prepare journal entries to record the November transactions

Chapter 3, Part B, post the journal entries to the general ledger accounts

Chapter 3, Part C, prepare a trial balance at November 30, 2014

Week Three

Chapter 4, Part A, journalize the transactions

Chapter 4, Part B, post the December transactions to the general ledger accounts

Chapter 4, Part C, prepare a trial balance at December 31, 2014

Chapter 4, Part D, prepare and post adjusting journal entries for December

Chapter 4, Part E, prepare adjusted trial balance at December 31, 2014

Chapter 4, Part F, prepare an income statement, retained earning statement and balance sheet

Chapter 4, Part G, prepare and post closing entires as of December 31, 2014

Chapter 4, Part H, prepare a post-closing trial balance

Week Six

Chapter 13 – Part A, prepare a horizontal and vertical analysis

Chapter 13 – Part B, Calculate several financial ratios as indicated