On The Go Case Study Principles of Accounting Assignment
Susan Shu has hired you to be her accountant. She's starting a specialty slow cooker store named On The Go. She is contributing $150,000 in cash to, the business. She will sell 2 types of slow cookers. Speedy will sell for $100 and Slow will sells for $50. All sales will be for cash EXCEPT where except where noted. It will use a perpetual inventory system. Its inventory will be valued using LIFO. Assume that units sold during the week included units that were received during the week.
Oct - 01 Susan Shu contributes $150,000 cash to the business.
Oct - 01 Susan signs a 3 year lease on a storefront shop for $800 per month. She makes a payment of $4,800 to the landlord which represents the first 6 months of rent.
Oct - 01 Susan makes a payment of $1,200 for a one-year liability insurance policy.
Oct - 01 Susan hires her daughter to help in the shop. She will work 40 hours a week (8 hours per day) for $15.00 per hour. She will be paid each Monday for the days worked in the prior week.
Oct - 01 Susan buys store equipment (registers, fixtures, etc.) for $10,000. You will classify this as Equipment. The ANNUAL depreciation will be $2,000.
Oct - 03 Susan orders 50 Speedy slow cookers from Wonder Cook. The cost is $60.00 per cooker for a total cost of $3,000. Wonder's terms are 2/10, net/30, FOB shipping point.
Oct - 01 Susan orders 50 Slow slow cookers from Simple Cooks. The cost is $25.00 per cooker for a total cost of $1,250. Simple's terms are 1/10, net/30, FOB destination.
Oct - 05 Susan receives 50 Speedy slow cookers from Wonder Cook. The invoice is for the 50 cookers received totaling $3,000.
Oct - 01 The responsible party receives and pays the $100 shipping invoice from Wee Ship Shippers for the 50 Speedy slow cookers.
Oct - 06 Susan receives the 50 Slow slow cookers from Simple Cooks. The Invoice is for $1,250.
Oct - 06 The responsible party receives and pays the $100 shipping invoice from Wee Ship Shippers for the 50 Slow slow cookers
Oct - 10 Susan pays her daughter for 40 hours of work (Oct 3 - 7).
Oct - 10 Susan opens the store.
Oct - 14 During the week, Susan sells 40 Speedy slow cookers and 30 Slow slow cookers for cash.
Oct - 14 Susan pays the amount outstanding to Wonder Cook.
Oct - 14 Susan orders 50 Speedy slow cookers from Wonder Cook. The cost is now $55.00 per cooker for a total cost of $2,750. Wonder's terms are 2/10, net/30, FOB shipping point.
Oct - 14 Susan orders 30 Slow slow cookers from Simple Cooks. The cost is $30.00 per cooker for a total cost of $900. Simple's terms are 1/10, net/30, FOB destination.
Oct-17 Customers return 2 Slow slow cookers because they cooked too slow. They are given a cash refund and the 2 Slow slow cookers are sent back to Simple Cooks.
Oct-17 Susan pays her daughter for 40 hours of work (Oct 10 - 14).
Oct-17 Susan pays the amount outstanding to Simple Cooks.
Oct-19 Susan receives the 50 Speedy slow cookers from Wonder Cook and the invoice for $2,750.
Oct-19 The responsible party receives and pays the $100 shipping invoice from Wee Ship Shippers for the 50 Speedy slow cookers
Oct-20 Susan receives the 30 Slow slow cookers from Simple Cooks. The Invoice is for $900.
Oct-20 The responsible party receives and pays the $60 shipping invoice from Wee Ship Shippers for the 30 Slow slow cookers
Oct-21 During the week, Susan sells 40 Speedy slow cookers and 40 Slow slow cookers for cash.
Oct-21 Susan found 5 defective Speedy slow cookers before they were sold and returned them to Wonder Cook.
Oct-21 Susan orders 25 Speedy slow cookers from Wonder Cook. The cost is now $65 per cooker for a total cost of $1,625. Wonder's terms are 2/10, net/30, FOB shipping point.
Oct-21 Susan orders 22 Slow slow cookers from Simple Cooks. The cost is $35.00 per cooker for a total cost of $770. Simple's terms are 1/10, net/30, FOB destination.
Oct-24 Susan pays her daughter for 40 hours of work (Oct 17 - 21).
Oct-24 Susan pays the amount outstanding to Wonder Cook.
Oct-25 Susan receives the 25 Speedy slow cookers from Wonder Cook and the invoice for $1,625.
Oct-25 The responsible party receives and pays the $50 shipping invoice from Wee Ship Shippers for the 25 Speedy slow cookers
Oct-26 Susan receives the 22 Slow slow cookers from Simple Cooks. The Invoice is for $770.
Oct-26 The responsible party receives and pays the $44 shipping invoice from Wee Ship Shippers for the 22 Slow slow cookers
Oct-28 During the week, Susan sells 40 Speedy slow cookers and 30 Slow slow cookers for cash.
Oct-28 Susan orders 40 Speedy slow cookers from Wonder Cook. The cost is $60.00 per cooker for a total cost of $2,400. Wonder's terms are 2/10, net/30, FOB shipping point.
Oct-28 Susan orders 30 Slow slow cookers from Simple Cooks. The cost is $32.00 per cooker for a total cost of $3,200. Simple's terms are 1/10, net/30, FOB destination.
Oct-31 Susan pays the amount outstanding to Wonder Cook.
Oct-31 Susan pays her daughter for 40 hours of work (Oct 24 - 28).
Oct-31 Susan receives a $3,000 utility bill for October but does not pay the bill. Oct-31 Susan withdraws $8,000 from business to go party for a couple of days.
Case requirements:
As the accountant, use your training and judgment to analyze the events above.
1. If you determine that the event is s transaction that should be recorded, record it on the "Journal Entries sheet". If you determine that it is not a transaction, DO NOT RECORD ANYTHING. (You may want to use T-accounts to keep tract of the transactions.)
2. Review all transactions to make the necessary adjusting entries. Do not forget that Susan's daughter has worked October 31st BUT WILL NOT BE PAID until November 6th.
3. Record all adjusting entries on the "Adjusting Entries" sheet.
4. Prepare the "Worksheet".
5. Prepare the Income Statement for On The Go.
6. Prepare the Statement of Owner's Equity for On The Go.
7. Prepare the Balance Sheet for On The Go.
8. Make the necessary closing entries.
9. Prepare the Post Balance Sheet for On The Go.