Fluent Essays

Cookie Creations (Chapters 9 and 10) This assignment will focus on the Cookie Creations case study from Chapter 9 (page 9-37) and Chapter 10 (page 10-42) of your textbook. There are two parts to this assignment. Review the case situations for each part (i.e., in each chapter), and then complete the instructions. Part I One of Natalie’s friends, Curtis Lesperance, runs a coffee shop where he sells specialty coffees and prepares and sells muffins and cookies. He is eager to buy one of Natalie’s fine European mixers, which would enable him to make larger batches of muffins and cookies. However, Curtis cannot afford to pay for the mixer for at least 30 days. He asks Natalie if she would be willing to sell him the mixer on credit. Natalie comes to you for advice. She asks you to address the questions below. Curtis has given me a set of his most recent financial statements. What calculations should I do with the data from these statements, and what questions should I ask him after I have analyzed the statements? How will this information help me decide if I should extend credit to Curtis? Is there an alternative other than extending credit to Curtis for 30 days? I am thinking seriously about being able to have my customers use credit cards. What are some of the advantages and disadvantages of letting my customers pay by credit card? The following transactions occurred in June through August 2020. June 1: After much thought, Natalie sells a mixer to Curtis on credit, terms n/30, for $1,150 (cost of mixer $620). June 30: Curtis calls Natalie. He is unable to pay the amount outstanding for another month, so he signs a 1-month, 8.35% note receivable. July 31: Curtis calls Natalie. He indicates that he is unable to pay today but hopes to have a check for her at the end of the week. Natalie prepares the journal entry to record the dishonor of the note. She assumes she will be paid within a week. Aug. 7: Natalie receives a check from Curtis in payment of his balance owed. Instructions: Answer Natalie’s questions in a Word document. Prepare journal entries for the transactions that occurred in June, July, and August in an Excel spreadsheet. Round to the nearest dollar. Note that the company uses a perpetual inventory system. Use the Part I Excel Template to record your transactions. To reiterate, you will write your responses to Natalie’s questions (1–3) in a Word document, and you will complete the journal transactions in an Excel spreadsheet. Your responses to Part I (Natalie’s questions) should be a minimum of one page in length, and you will add your responses for Part II to this document before submitting. Part II Natalie is also thinking of buying a van that will be used only for business. The cost of the van is estimated at $36,500. Natalie would spend an additional $2,500 to have the van painted. In addition, she wants the back seat of the van removed so that she will have a lot of room to transport her mixer inventory as well as her baking supplies. The cost of taking out the back seat and installing shelving units is estimated at $1,500. She expects the van to last 5 years, and she expects to drive it for 200,000 miles. The annual cost of vehicle insurance will be $2,400. Natalie estimates that at the end of the 5-year useful life, the van will sell for $7,500. Assume that she will buy the van on August 15, 2020, and it will be ready for use on September 1, 2020. Natalie is concerned about the impact of the van’s cost on her income statement and balance sheet. She has come to you for advice on calculating the van’s depreciation. Instructions: Determine the cost of the van. Prepare three depreciation tables for 2020, 2021, and 2022: one for straight-line depreciation (similar to the one in Illustration 10-9), one for double-declining balance depreciation (Illustration 10-13), and one for units-of-activity depreciation (Illustration 10-11). Use the Part II Excel Template to determine depreciation. For units-of-activity, Natalie estimates that she will drive the van as follows: 15,000 miles in 2020; 45,000 miles in 2021; and 50,000 miles in 2022. Recall that Cookie Creations has a December 31 year-end. What impact will the three methods of depreciation have on Natalie’s balance sheet at December 31, 2020? What impact will the three methods have on Natalie’s income statement in 2020? What impact will the three methods of depreciation have on Natalie’s income statement over the van’s total 5-year useful life? What method of depreciation would you recommend Natalie use, and why? Use the same Word document that you used to record your Part I responses (one page in length), and add your responses for the Part II questions (1–5), which should be one page in length. In summary, you will submit one Word document containing your responses for Parts I and II (two-page minimum) and two Excel spreadsheets containing Natalie’s journal transactions from Part I and the depreciation tables from Part II. You will upload a total of three files to Blackboard (one Word document and two Excel spreadsheets). There are no resources required for this assignment; however, your Word document should be formatted using APA Style. Attachments area Continuing Case 9-37 Cookie Creations (Note: This is a continuation of the Cookie Creations case from Chapters 1 through 8.) CC9 One of Natalie's friends, Curtis Lesperance, runs a coffee shop where he sells specialty coffees and prepares and sells muffins and cookies. He is eager to buy one of Natalie's fine European mixers, which would enable him to make larger batches of muffins and cookies. However, Curtis cannot afford to pay for the mixer for at least 30 days. He asks Natalie if she would be willing to sell him the mixer on credit. Natalie comes to you for advice. Go to WileyPLUS for complete case details and instructions. Ethics Case EC9 The controller of Diaz Co. believes that the yearly allowance for doubtful accounts for Diaz Co. should be 2% of accounts receivable balance at the end of the year. The president of Diaz Co., nervous that the owners might expect the company to sustain its 10% growth rate, suggests that the controller increase the allowance for doubtful accounts to 4%. The president thinks that the lower net income, which reflects a lower growth rate, will be a more sustainable rate for Diaz Co. Instructions a. Who are the stakeholders in this case? b. Does the president's request pose an ethical dilemma for the controller? c. Should the controller be concerned with Diaz Co.'s growth rate? Explain your answer. Comprehensive Accounting Cycle Review ACR9  Winter Company's balance sheet at December 31, 2019, is presented below. Winter Company Balance Sheet December 31, 2019 Cash $13,100   Accounts payable $  8,750 Accounts receivable 19,780   Owner's capital   32,730 Allowance for doubtful accounts (800) $41,480 Inventory     9,400   $41,480   During January 2020, the following transactions occurred. Winter uses the perpetual inventory method. Jan. 1 Winter accepted a 4-month, 8% note from Merando Company in payment of Merando's $1,200 account. 3 Winter wrote off as uncollectible the accounts of Inwood Corporation ($450) and Goza Company ($280). 8 Winter purchased $17,200 of inventory on account. 11 Winter sold for $28,000 on account inventory that cost $19,600. 15 Winter sold inventory that cost $700 to Mark Lauber for $1,000. Lauber charged this amount on his Visa First Bank card. The service fee charged Winter by First Bank is 3%. 17 Winter collected $22,900 from customers on account. 21 Winter paid $14,300 on accounts payable. 24 Winter received payment in full ($280) from Goza Company on the account written off on January 3. 27 Winter purchased supplies for $1,400 cash. 31 Winter paid other operating expenses, $3,718. Adjustment data: · 1. Interest is recorded for the month on the note from January 1. · 2. Bad debts are expected to be 6% of the January 31, 2020, accounts receivable. · 3. A count of supplies on January 31, 2020, reveals that $560 remains unused. Instructions (You may want to set up T-accounts to determine ending balances.) a. Prepare journal entries for the transactions listed above and adjusting entries. (Include entries for cost of goods sold using the perpetual system.) b. Prepare an adjusted trial balance at January 31, 2020. Totals $74,765 c. Prepare an income statement and an owner's equity statement for the month ending January 31, 2020, and a classified balance sheet as of January 31, 2020. Tot. assets $47,473 Ethics Case 10-42 EC10 Turner Container Company is suffering declining sales of its principal product, nonbiodegradeable plastic cartons. The president, Robert Griffin, instructs his controller, Alexis Landrum, to lengthen asset lives to reduce depreciation expense. A processing line of automated plastic extruding equipment, purchased for $3.5 million in January 2020, was originally estimated to have a useful life of 8 years and a salvage value of $300,000. Depreciation has been recorded for 2 years on that basis. Robert wants the estimated life changed to 12 years total, and the straight-line method continued. Alexis is hesitant to make the change, believing it is unethical to increase net income in this manner. Robert says, “Hey, the life is only an estimate, and I've heard that our competition uses a 12-year life on their production equipment.” Instructions a. Who are the stakeholders in this situation? b. Is the change in asset life unethical, or is it simply a good business practice by an astute president? c. What is the effect of Robert Griffin's proposed change on income before taxes in the year of change? Comprehensive Accounting Cycle Review ACR10 Hassellhouf Company's trial balance at December 31, 2020, is as follows. All 2020 transactions have been recorded except for the items described following the trial balance.    Debit    Credit Cash    $   28,000    Accounts Receivable 36,800 Notes Receivable 10,000 Interest Receivable –0– Inventory 36,200 Prepaid Insurance 3,600 Land 20,000 Buildings 150,000 Equipment 60,000 Patents 9,000 Allowance for Doubtful Accounts $      500 Accumulated Depreciation—Buildings 50,000 Accumulated Depreciation—Equipment 24,000 Accounts Payable 27,300 Salaries and Wages Payable –0– Unearned Rent Revenue 6,000 Notes Payable (due in 2021) 11,000 Interest Payable –0– Notes Payable (due after 2021) 30,000 Owner's Capital 113,600 Owner's Drawings 12,000 Sales Revenue 905,000 Interest Revenue –0– Rent Revenue –0– Gain on Disposal of Plant Assets –0– Bad Debt Expense –0– Cost of Goods Sold 630,000 Depreciation Expense –0– Insurance Expense –0– Interest Expense –0– Other Operating Expenses 61,800 Amortization Expense –0– Salaries and Wages Expense    110,000                    Total $1,167,400 $1,167,400 Unrecorded transactions: · 1. On May 1, 2020, Hassellhouf purchased equipment for $21,200 plus sales taxes of $1,600 (all paid in cash). · 2. On July 1, 2020, Hassellhouf sold for $3,500 equipment which originally cost $5,000. Accumulated depreciation on this equipment at January 1, 2020, was $1,800; 2020 depreciation prior to the sale of the equipment was $450. · 3. On December 31, 2020, Hassellhouf sold on account $9,000 of inventory that cost $6,300. · 4. Hassellhouf estimates that uncollectible accounts receivable at year-end is $3,500. · 5. The note receivable is a one-year, 8% note dated April 1, 2020. No interest has been recorded. · 6. The balance in prepaid insurance represents payment of a $3,600 6-month premium on September 1, 2020. · 7. The building is being depreciated using the straight-line method over 30 years. The salvage value is $30,000. · 8. The equipment owned prior to this year is being depreciated using the straight-line method over 5 years. The salvage value is 10% of cost. · 9. The equipment purchased on May 1, 2020, is being depreciated using the straight-line method over 5 years, with a salvage value of $1,800. · 10. The patent was acquired on January 1, 2020, and has a useful life of 10 years from that date. · 11. Unpaid salaries and wages at December 31, 2020, total $5,200. · 12. The unearned rent revenue of $6,000 was received on December 1, 2020, for 3 months' rent. · 13. Both the short-term and long-term notes payable are dated January 1, 2020, and carry a 9% interest rate. All interest is payable in the next 12 months. Instructions a. Prepare journal entries for the transactions listed above. b. Prepare an updated December 31, 2020, trial balance. Totals $1,205,040 c. Prepare a 2020 income statement and an owner's equity statement. d. Prepare a December 31, 2020, classified balance sheet. Total assets $259,200