Solution manual accounting principles 9e by kieso kimmel continuing cookies

CCC1

(a)

CONTINUING COOKIE CHRONICLE

Natalie has a choice between a sole proprietorship and a corporation. A
partnership is not an option since she is the sole owner of the business.
A proprietorship is the easiest to create and operate because there
are no formal procedures involved in creating the proprietorship.
However, if she operates the business as a proprietorship she will
personally have unlimited liability for the debts of the business.
Operating the business as a corporation would limit her liability to her
investment in the business. Natalie will in all likelihood require the
services of a lawyer to incorporate. Costs to incorporate as well as
additional ongoing costs to administrate and operate the business as a
corporation may be costly.
My recommendation is that Natalie choose the proprietorship form of
business organization. This is a very small business where the cost of
incorporating outweighs the benefits of incorporating at this point in
time. Furthermore, it will be easier to stop operating the business if
Natalie decides not to continue with it once she has finished college.

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Weygandt, Accounting Principles, 9/e, Continuing Cookie Chronicles

(For Instructor Use Only)

1-1

CCC1 (Continued)
(b) Yes, Natalie will need accounting information to help her operate her
business. She will need information on her cash balance on a daily or
weekly basis to help her determine if she can pay her bills. She will
need to know the cost of her services so she can establish her prices.
She will need to know revenue and expenses so she can report her net
income for personal income tax purposes, on an annual basis. If she
borrows money, she will need financial statements so lenders can
assess the liquidity, solvency, and profitability of the business. Natalie
would also find financial statements useful to better understand her
business and identify any financial issues as early as possible.
Monthly financial statements would be best because they are more
timely, but they are also more work to prepare.
(c)

Assets: Cash, Accounts Receivable, Supplies, Equipment, Prepaid
Insurance
Liabilities: Accounts Payable, Unearned Revenue, Notes Payable
Owner’s Equity: N. Koebel, Capital, N. Koebel, Drawings
Revenue: Teaching Revenue
Expenses: Advertising Expense, Supplies Expense, Travel Expense,
Telephone Expense, Insurance Expense

(d) Natalie should have a separate bank account. This will make it easier
to prepare financial statements for her business. The business is a
separate entity from Natalie and must be accounted for separately.

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Weygandt, Accounting Principles, 9/e, Continuing Cookie Chronicles

(For Instructor Use Only)

1-2


CCC2

(a)

Nov.

CONTINUING COOKIE CHRONICLE

GENERAL JOURNAL
Account Titles and Explanation

Debit

J1
Credit

8 No entry required for cashing U.S.
Savings Bonds—this is a personal
transaction.
8 Cash ....................................................................
N. Koebel, Capital......................................

500

11 Advertising Supplies .....................................
Cash...............................................................

165

13 Baking Supplies ..............................................
Cash...............................................................

125

14 Baking Equipment..........................................
N. Koebel, Capital......................................

300

16 Cash ....................................................................
Notes Payable.............................................

2,000

17 Baking Equipment..........................................
Cash...............................................................

900

20 Cash ....................................................................
Teaching Revenue ....................................

125

25 Cash ....................................................................
Unearned Revenue ...................................

30

30 Prepaid Insurance ..........................................
Cash...............................................................

1,320

Copyright © 2009 John Wiley & Sons, Inc.

500

165

125

300

2,000

900

125

30

Weygandt, Accounting Principles, 9/e, Continuing Cookie Chronicles

1,320

(For Instructor Use Only)

2-1


CCC2 (Continued)
(b)
Cash
Date
Nov.

Explanation
8
11
13
16
17
20
25
30

Date

J1
J1
J1
J1

J1
J1
J1
J1

Explanation

Nov. 11

Date

Explanation

Nov. 30

Date
Nov. 14
17

Copyright © 2009 John Wiley & Sons, Inc.

1,320

Credits

Balance

165
125
2,000

900
125
30

165

165

Credits

125

J1
J1

Balance
125

1,320

Baking Equipment
Ref.
Debits

Balance
500
335
210
2,210
1,310

1,435
1,465
145

Prepaid Insurance
Ref.
Debits
Credits
J1

Explanation

Credits

500

Baking Supplies
Ref.
Debits
J1

Explanation

Debits

Advertising Supplies
Ref.
Debits
J1

Nov. 13

Date

Ref.

Balance
1,320

Credits

300
900

Weygandt, Accounting Principles, 9/e, Continuing Cookie Chronicles

Balance
300
1,200

(For Instructor Use Only)

2-2


CCC2 (Continued)
(b) (Continued)

Date

Explanation

Nov. 25

Date
Nov. 16

Nov.

Notes Payable
Ref.
Debits
J1

Explanation
8
14

Date

Credits

Balance

30

30

Credits

Balance

2,000

2,000

Credits

Balance

500
300

500
800

Credits

Balance

125

125

J1

Explanation

Date

Unearned Revenue
Ref.
Debits

N. Koebel, Capital
Ref.
Debits
J1
J1

Explanation

Nov. 20

Copyright © 2009 John Wiley & Sons, Inc.

Teaching Revenue
Ref.
Debits
J1

Weygandt, Accounting Principles, 9/e, Continuing Cookie Chronicles

(For Instructor Use Only)

2-3


CCC2 (Continued)
(c)

COOKIE CREATIONS
Trial Balance
November 30, 2009
Cash .........................................................................................
Advertising Supplies ..........................................................
Baking Supplies ...................................................................
Prepaid Insurance ...............................................................
Baking Equipment...............................................................
Unearned Revenue..............................................................
Notes Payable.......................................................................
N. Koebel, Capital ................................................................
Teaching Revenue...............................................................

Debit
$ 145
165
125
1,320
1,200

Credit

$

$2,955

30
2,000
800
125

$2,955

Note to instructors: Because the notes payable is not due for 24 months, it
follows Unearned Revenue in the accounts and the trial balance.

Copyright © 2009 John Wiley & Sons, Inc.

Weygandt, Accounting Principles, 9/e, Continuing Cookie Chronicles

(For Instructor Use Only)

2-4


CCC3

CONTINUING COOKIE CHRONICLE

(a)
Date

GENERAL JOURNAL
Account Titles and Explanation

Debit

Nov. 30 Advertising Supplies Expense.........................
Advertising Supplies .....................................
($165 – $60)

105

30 Baking Supplies Expense..................................
Baking Supplies ..............................................

35

30 Depreciation Expense.........................................
Accumulated Depreciation—Baking
Equipment....................................................
[($300 + $900) ÷ 60 months]

20

30 Interest Expense...................................................
Interest Payable...............................................
($2,000 X .06 X 1/12 X .5)

5

30 Accounts Receivable ..........................................
Teaching Revenue ..........................................

300

30 Telephone Expense .............................................
Accounts Payable...........................................

45

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Weygandt, Accounting Principles, 9/e, Continuing Cookie Chronicles

J2
Credit

105

35

20

5

300

45

(For Instructor Use Only)

3-1


CCC3 (Continued)
(a) (Continued)

Date

Explanation

Cash
Ref.

Debit

Credit

Nov. 30 Balance

Date

Explanation

Nov. 30

Date

Nov. 30 Balance
30

Date

Explanation

Nov. 30 Balance
30

Date

145

Accounts Receivable
Ref.
Debit
J2

Explanation

Explanation

Credit

300

Advertising Supplies
Ref.
Debit

J2

Baking Supplies
Ref.
Debit

Credit

Balance

105

165
60

Credit

Balance

35

125
90

Credit

Balance

J2

Prepaid Insurance
Ref.
Debit

Balance
300

Nov. 30 Balance

Copyright © 2009 John Wiley & Sons, Inc.

Balance

1,320

Weygandt, Accounting Principles, 9/e, Continuing Cookie Chronicles

(For Instructor Use Only)

3-2


CCC3 (Continued)
(a) (Continued)

Date

Explanation

Baking Equipment
Ref.
Debit

Credit

Nov. 30 Balance

Date

Date

J2

Explanation

Nov. 30

Date

1,200

Accumulated Depreciation—Baking Equipment
Explanation
Ref.
Debit
Credit

Nov. 30

Accounts Payable
Ref.
Debit

Nov. 30

Copyright © 2009 John Wiley & Sons, Inc.

Interest Payable
Ref.
Debit

Balance

20

20

Credit

Balance

45

45

Credit

Balance

J2

Explanation

Balance

J2

Weygandt, Accounting Principles, 9/e, Continuing Cookie Chronicles

5

(For Instructor Use Only)

5

3-3


CCC3 (Continued)
(a) (Continued)

Date

Explanation

Unearned Revenue
Ref.
Debit

Credit

Nov. 30 Balance

Date

Explanation

30

Notes Payable
Ref.

Debit

Credit

Nov. 30 Balance

Date

Explanation

Explanation

Nov. 30 Balance
30

Date

Explanation

Nov. 30

Copyright © 2009 John Wiley & Sons, Inc.

Balance
2,000

N. Koebel, Capital
Ref.
Debit

Credit

Nov. 30 Balance

Date

Balance

Balance
800

Teaching Revenue
Ref.
Debit

J2

Telephone Expense
Ref.
Debit
J2

Credit

Balance

300

125
425

Credit

Balance

45

Weygandt, Accounting Principles, 9/e, Continuing Cookie Chronicles

45

(For Instructor Use Only)

3-4


CCC3 (Continued)
(a) (Continued)

Date

Advertising Supplies Expense
Explanation
Ref.
Debit

Nov. 30

Date

J2

Explanation

Nov. 30

Date

Explanation

Nov. 30

Date
Nov. 30

Copyright © 2009 John Wiley & Sons, Inc.

J2

Credit

Balance
35

Credit

20

Interest Expense
Ref.

Debit

Balance
105

35

Depreciation Expense
Ref.
Debit
J2

Explanation

105

Baking Supplies Expense
Ref.
Debit
J2

Credit

Balance
20

Credit

Balance

5

Weygandt, Accounting Principles, 9/e, Continuing Cookie Chronicles

5

(For Instructor Use Only)

3-5


CCC3 (Continued)
(b)
COOKIE CREATIONS
Adjusted Trial Balance
November 30, 2009
Account
Cash .............................................................................................
Accounts Receivable..............................................................
Advertising Supplies ..............................................................
Baking Supplies .......................................................................
Prepaid Insurance....................................................................
Baking Equipment ...................................................................
Accumulated Depreciation—Baking Equipment...........
Accounts Payable....................................................................
Interest Payable........................................................................
Unearned Revenue ..................................................................
Notes Payable ...........................................................................
N. Koebel, Capital ....................................................................
Teaching Revenue...................................................................

Telephone Expense.................................................................
Advertising Supplies Expense ............................................
Baking Supplies Expense .....................................................
Depreciation Expense ............................................................
Interest Expense ......................................................................
Totals ...........................................................................

Copyright © 2009 John Wiley & Sons, Inc.

Debit
$ 145
300
60
90
1,320
1,200

Credit

$

20
45
5
30
2,000
800
425

45

105
35
20
5
$3,325

Weygandt, Accounting Principles, 9/e, Continuing Cookie Chronicles

$3,325

(For Instructor Use Only)

3-6


CCC3 (Continued)
(c)
COOKIE CREATIONS
Income Statement
Month Ended November 30, 2009
Revenues
Teaching revenue.....................................................................
Expenses
Advertising supplies expense .............................................
Telephone expense .................................................................
Baking supplies expense ......................................................
Depreciation expense .............................................................
Interest expense .......................................................................
Net income .........................................................................................

$425
$105
45
35
20
5

210
$215

Yes, Cookie Creations has been profitable in November. It has a profit of
$215 which is almost equal to one half of the revenue earned in November.
[Note: Statement of Owner’s Equity is not required—shown for information
purposes only.]
COOKIE CREATIONS
Statement of Owner’s Equity
Month Ended November 30, 2009
N. Koebel, Capital, November 1, 2009 .......................................
Add: Investment ..............................................................................
Net income..............................................................................
N. Koebel, Capital, November 30, 2009.....................................

Copyright © 2009 John Wiley & Sons, Inc.

Weygandt, Accounting Principles, 9/e, Continuing Cookie Chronicles

$

0
800

215
$1,015

(For Instructor Use Only)

3-7


CCC3 (Continued)
(c) (Continued)
[Note: Balance Sheet is not required—shown for information purposes
only.]

COOKIE CREATIONS
Balance Sheet
November 30, 2009
Assets
Cash...............................................................................................
Accounts receivable ................................................................
Advertising supplies ................................................................
Baking supplies .........................................................................
Prepaid insurance.....................................................................
Baking equipment.....................................................................
Less: Accumulated depreciation........................................
Total assets ...........................................................................

$ 145
300
60
90

1,320
$1,200
20

1,180
$3,095

Liabilities and Owner’s Equity
Liabilities
Notes payable .......................................................................
Accounts payable ................................................................
Interest payable....................................................................
Unearned revenue ...............................................................
Total liabilities .................................................................
Owner’s equity
N. Koebel, Capital ................................................................
Total liabilities and owner’s equity...........................

Copyright © 2009 John Wiley & Sons, Inc.

Weygandt, Accounting Principles, 9/e, Continuing Cookie Chronicles

$2,000
45
5
30
2,075
1,015
$3,095

(For Instructor Use Only)

3-8


CCC4

CONTINUING COOKIE CHRONICLE

(a)
COOKIE CREATIONS
Income Statement
Two Months Ended December 31, 2009
Revenues
Teaching revenue ...............................................................
Expenses
Baking supplies expense.................................................
Salaries expense.................................................................
Advertising supplies expense........................................
Telephone expense ............................................................
Insurance expense .............................................................
Depreciation expense........................................................
Interest expense..................................................................
Total expenses ...............................................................
Net income .................................................................................

$4,515
$1,025
1,006
165

125
110
40
15
2,486
$2,029

COOKIE CREATIONS
Statement of Owner’s Equity
Two Months Ended December 31, 2009
N. Koebel, Capital, November 1...........................................
Add: Net income....................................................................
Less: Drawings ........................................................................
N. Koebel, Capital, December 31 ........................................

Copyright © 2009 John Wiley & Sons, Inc.

Weygandt, Accounting Principles, 9/e, Continuing Cookie Chronicles

$ 800
2,029
2,829
500
$2,329

(For Instructor Use Only)

4-1

CCC4 (Continued)
(a) (Continued)
COOKIE CREATIONS
Balance Sheet
December 31, 2009
Assets
Current assets
Cash .........................................................................................
Accounts receivable ...........................................................
Baking supplies....................................................................
Prepaid insurance ...............................................................
Total current assets.......................................................
Property, plant, and equipment
Baking equipment................................................................
Less: Accumulated depreciation...................................
Total assets ......................................................................

$1,180
875
350
1,210
3,615
$1,200
40

1,160
$4,775

Liabilities and Owner’s Equity
Current liabilities

Accounts payable .................................................................
Salaries payable....................................................................
Unearned revenue ................................................................
Total current liabilities...................................................
Long-term liabilities
Interest payable.....................................................................
Notes payable ........................................................................
Total long-term liabilities ..............................................
Total liabilities............................................................
Owner’s equity
N. Koebel, Capital .................................................................
Total liabilities and owner’s equity............................

Copyright © 2009 John Wiley & Sons, Inc.

Weygandt, Accounting Principles, 9/e, Continuing Cookie Chronicles

0$

75
56
300
431

15
2,000
2,015
2,446
2,329
$4,775

(For Instructor Use Only)

4-2


CCC4 (Continued)
(b)
Date

GENERAL JOURNAL
Account Titles and Explanation

2009
Dec. 31 Teaching Revenue ..................................
Income Summary ...............................

Debit

4,515
4,515

31 Income Summary ....................................
Salaries Expense................................
Telephone Expense...........................
Advertising Supplies Expense ......
Baking Supplies Expense ...............
Insurance Expense............................
Depreciation Expense ......................
Interest Expense ................................

2,486

31 Income Summary ....................................
N. Koebel, Capital ..............................

2,029

31 N. Koebel, Capital....................................
N. Koebel, Drawings..........................

500

Copyright © 2009 John Wiley & Sons, Inc.

J4
Credit

1,006
125
165
1,025
110
40
15

Weygandt, Accounting Principles, 9/e, Continuing Cookie Chronicles

2,029

500

(For Instructor Use Only)

4-3


CCC4 (Continued)
(c)
COOKIE CREATIONS
Post-Closing Trial Balance
December 31, 2009
Account
Cash......................................................................................
Accounts Receivable ......................................................
Baking Supplies................................................................
Prepaid Insurance ...........................................................
Baking Equipment ...........................................................
Accumulated Depreciation, Baking Equipment.....
Accounts Payable ............................................................
Salaries Payable ...............................................................
Unearned Revenue ..........................................................
Interest Payable ................................................................
Note Payable......................................................................
N. Koebel, Capital.............................................................

Debit
$1,180
875
350

1,210
1,200

$

$4,815

Copyright © 2009 John Wiley & Sons, Inc.

Credit

Weygandt, Accounting Principles, 9/e, Continuing Cookie Chronicles

40
75
56
300
15
2,000
2,329
$4,815

(For Instructor Use Only)

4-4


CCC5

CONTINUING COOKIE CHRONICLE

(a) Responses to Natalie’s questions
1. The mixers should be classified as inventory as they are for resale.
2. A perpetual inventory system will provide better control over
inventory. Because you are dealing with high-value items you should
use the perpetual system.
3. You still need to count inventory to ensure that your records are
accurate and that the inventory that is supposed to be on hand is
actually there. I suggest you should count the inventory once a
month.
(b)
Date

GENERAL JOURNAL
Account Titles and Explanation

Jan. 4

6

7

8

12

12

J1
Debit

Merchandise Inventory ......................................
Accounts Payable ..........................................

2,875

Merchandise Inventory ......................................
Cash....................................................................

100

Accounts Payable [($2,875 ÷ 5) + $20] .........
Merchandise Inventory.................................

595

Cash .........................................................................
Accounts Receivable ....................................

375

Accounts Receivable .........................................
Sales...................................................................

3,450

Cost of Goods Sold ($595 X 3) ........................
Merchandise Inventory.................................

1,785

Copyright © 2009 John Wiley & Sons, Inc.

Credit

2,875

100

595

375

3,450

Weygandt, Accounting Principles, 9/e, Continuing Cookie Chronicles

1,785

(For Instructor Use Only)

5-1


CCC5 (Continued)
(b) (Continued)
Jan. 14

14

17

18

20

20

28

28

30

31

31

Freight-Out...................................................
Cash..........................................................

75

Merchandise Inventory ............................
Accounts Payable ................................

2,300

Cash ...............................................................
N. Koebel, Capital.................................

1,000

Merchandise Inventory ............................
Cash..........................................................

80

Cash ...............................................................
Sales.........................................................

2,300

Cost of Goods Sold ($595 X 2) ..............
Merchandise Inventory.......................

1,190

Salaries Expense .......................................
Salaries Payable ........................................
Cash..........................................................

160
56

Cash ...............................................................
Accounts Receivable ..........................

3,450

Accounts Payable .....................................
Telephone Expense ..................................
Cash..........................................................

75
70

Accounts Payable
($2,875 – $595 + $2,300)......................
Cash..........................................................

75

2,300

1,000

80

2,300

1,190

216

3,450

145

4,580

N. Koebel, Drawings .................................
Cash..........................................................

Copyright © 2009 John Wiley & Sons, Inc.

Weygandt, Accounting Principles, 9/e, Continuing Cookie Chronicles

4,580
750
750

(For Instructor Use Only)

5-2


CCC5 (Continued)
(b) and (d)

Date

Explanation

Jan. 1 Balance
6
8
14
17
18

20
28
28
30
31
31

Date

Explanation

Jan. 1 Balance
8
12
28

Date

Explanation

Jan. 4
6
7
12
14
18
20

Copyright © 2009 John Wiley & Sons, Inc.

Cash
Ref.
J1
J1
J1
J1
J1
J1
J1
J1
J1
J1
J1

Debit

J1
J1
J1
J1
J1
J1
J1

145
4,580
750

Credit

Balance

375
75
1,000
80
2,300
216
3,450

3,450

875
500
3,950
500

Credit

Balance

375
3,450

Merchandise Inventory
Ref.
Debit

Balance
1,180

1,080
1,455
1,380
2,380
2,300
4,600
4,384
7,834
7,689
3,109
2,359

100

Accounts Receivable
Ref.
Debit
J1
J1
J1

Credit

2,875
100
595
1,785
2,300
80
1,190

Weygandt, Accounting Principles, 9/e, Continuing Cookie Chronicles

2,875
2,975
2,380
595
2,895
2,975
1,785

(For Instructor Use Only)

5-3


CCC5 (Continued)
(b) and (d) (Continued)
Date
Explanation
Jan. 1 Balance

Date

Explanation

Jan. 1 Balance
31 Adjusting entry

Date

Explanation
Jan. 1 Balance

Baking Supplies
Ref.
Debit

Credit

Balance
350

Prepaid Insurance
Ref.
Debit

Credit

Balance

110

1,210
1,100

J2

Baking Equipment
Ref.
Debit

Credit

Accumulated depreciation—Baking Equipment
Date
Explanation
Ref.
Debit
Credit
Jan. 1 Balance
31 Adjusting entry
J2
20

Date
Explanation
Jan. 1 Balance
4
7
14
30
31

Copyright © 2009 John Wiley & Sons, Inc.

Accounts Payable
Ref.
Debit
J1
J1

J1
J1
J1

Credit
2,875

595
2,300
75
4,580

Weygandt, Accounting Principles, 9/e, Continuing Cookie Chronicles

Balance
1,200

Balance
40
60

Balance
75
2,950
2,355
4,655
4,580
0

(For Instructor Use Only)

5-4


CCC5 (Continued)
(b) and (d) (Continued)

Date

Salaries Payable
Ref.
Debit

Explanation

Jan. 1 Balance
28

Date

J1

Credit

Jan. 1 Balance

Date

Interest Payable
Ref.

Debit

Explanation

Explanation

J2

Notes Payable
Ref.
Debit

Credit

Balance

10

15
25

Credit

Balance

Jan. 1 Balance
Date

Explanation

Jan. 1 Balance
17

Date

Explanation

Jan. 31

Copyright © 2009 John Wiley & Sons, Inc.

Balance
300

Jan. 1 Balance
31 Adjusting entry

Date

Balance
56
0

56

Unearned Revenue
Ref.
Debit

Explanation

Credit

2,000
N. Koebel, Capital
Ref.
Debit

J1

N. Koebel, Drawings
Ref.
Debit
J1

Credit

Balance

1,000

2,329
3,329

Credit

Balance

750

Weygandt, Accounting Principles, 9/e, Continuing Cookie Chronicles

750

(For Instructor Use Only)

5-5


CCC5 (Continued)
(b) and (d) (Continued)

Date

Sales
Ref.

Explanation

Jan. 12
20

Date

J1
J1
Cost of Goods Sold
Ref.
Debit

Explanation

Jan. 12
20

Date

J1
J1

Explanation

J1

Jan. 30

J1

Explanation

Jan. 31

Adjusting entry

Explanation

Jan. 31

Adjusting entry

J2

3,450
5,750

Credit

Balance
1,785
2,975

Credit

Balance
160

Credit

Balance
70

Credit

20

Insurance Expense
Ref.
Debit

Date

Copyright © 2009 John Wiley & Sons, Inc.

J2

3,450
2,300

70

Depreciation Expense
Ref.
Debit

Date

Balance

160

Telephone Expense
Ref.
Debit

Explanation

Credit

1,785
1,190

Salaries Expense
Ref.
Debit

Jan. 28

Date

Debit

Balance
20

Credit

110

Weygandt, Accounting Principles, 9/e, Continuing Cookie Chronicles

Balance
110

(For Instructor Use Only)

5-6


CCC5 (Continued)
(b) and (d) (Continued)

Date

Freight Out
Ref.
Debit

Explanation

Jan. 14

Date
Jan. 31

J1

Adjusting entry

Copyright © 2009 John Wiley & Sons, Inc.

75

Interest Expense
Ref.
Debit

Explanation

J2

Credit

Balance
75

Credit

10

Weygandt, Accounting Principles, 9/e, Continuing Cookie Chronicles

Balance
10

(For Instructor Use Only)

5-7