Project #41505 - Acct - Journal Entries / Financial Statements

 

 

Part A

Continuing Cookie Chronicle

Continuing Cookie Chronicle

(Note: This is a continuation of the Cookie Chronicle from Chapters 1 through 7.)

CCC8 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.

The following transactions occurred in June through August.

June.   1  After much thought, Natalie sells a mixer to Curtis on credit, terms n/30, for $1,100 (cost of mixer $600).

  2  Natalie meets with the bank manager and arranges to get access to a credit card account. The terms of credit card transactions are 3% of the sales transactions and a monthly equipment rental charge of $75.

30   Natalie teaches 13 classes in June. Seven classes were paid for in cash, $1,050; the other six classes were paid for by credit card, $900.

30   Natalie receives and reconciles her bank statement. She makes sure that the bank has correctly processed the monthly $75 charge for the rental of the credit card equipment and the 3% fee on the credit card transactions.

30   Curtis calls Natalie. He is unable to pay the amount outstanding for another month, so he signs a one-month, 6% note receivable.

July. 15   Natalie sells a mixer to a friend of Curtis's. The friend pays $1,100 for the mixer by credit card (cost of mixer $600).

30   Natalie teaches 16 classes in July. Eight classes are paid for in cash, $1,200; eight classes are paid for by credit card, $1,200.

31   Natalie reconciles her bank statement and makes sure the bank has recorded the correct amounts for the rental of the credit card equipment and the credit card sales.

31   Curtis calls Natalie. He cannot pay today but hopes to have a check for her at the end of the week. Natalie prepares the appropriate journal entry.

Aug. 10   Curtis calls again and promises to pay at the end of August, including interest for 2 months.

31   Natalie receives a check from Curtis in payment of his balance plus interest outstanding.

Instructions

 (b)Prepare journal entries for the transactions that occurred in June, July, and August. The company uses a perpetual inventory system.

 

Part B

Financial Statement and accompanying notes

http://www.sec.gov/Archives/edgar/data/98677/000110465912014416/a11-31190_2ex13.htm

 

(a)    Calculate the accounts receivable turnover and average collection period for 2011 (use “Net Product Sales.” Assume all sales were credit sales.)

(b)   Did Tootsie Roll  have any potentially significant credit risks in 2011? (Hint: Review Note 1 under Revenue recognition and Note 9 to the financial statements.)

(c)    What conclusions can you draw from the information in parts (a) and (b)?

 

 

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Due By (Pacific Time) 10/01/2014 12:00 am
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