Quiz 2: Kaylee’s Sweets By Kaylee James ✓ Solved
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Quiz 2 Kaylee’s Sweets Kaylee James opened Kaylee’s Sweets
Kaylee James opened Kaylee’s Sweets on January 1, 2016. The shop specializes in a selection of gourmet chocolate candies and a line of gourmet ice cream. You have been hired as manager. Your duties include maintaining the store’s financial records. The following transactions occurred in January, the first month of operations.
- Received four shareholders’ contributions totaling $30,200 cash to form the corporation; issued 400 shares of $0.10 par value common stock.
- Paid three months’ rent for the store at $1,750 per month (two months are prepaid).
- Purchased and received candy for $6,000 on account, due in 60 days.
- Purchased supplies for $1,560 cash.
- Negotiated and signed a two-year $11,000 loan at the bank, receiving cash at the time.
- Used the money from the loan to purchase a computer for $2,750; used the balance for furniture and fixtures for the store.
- Placed a grand opening advertisement in the local paper for $400 cash; the ad ran in the current month.
- Made sales the first two weeks totaling $3,500; $2,675 was in cash and the rest on accounts receivable. The cost of the candy sold was $1,600.
- Made a $550 payment on accounts payable.
- Incurred and paid employee wages of $1,300.
- Collected accounts receivable of $600 from customers.
- Made a repair to one of the display cases for $400 cash.
- Made cash sales of $1,200 for the rest of the month. The cost of the candy sold was $600.
Required:
- Record journal entries for each of the transactions.
- Prepare an income statement at the end of the first month of operations ended January 31.
- Prepare a balance sheet as of January 31.
- Write a memo to Kaylee offering your opinion on the results of operations during the first month of business.
- After three years in business the following data was computed. Based on this information provide a report to Kaylee on the performance of the store.
Paper For Above Instructions
Journal Entries for Kaylee's Sweets
- a. Cash Contributions $30,200.00
Common Stock (400 x 0.10) $40.00
Additional Paid in Capital $30,160.00
- b. Prepaid Rent $5,250.00
Cash $5,250.00
- c. Inventory (Candy) $6,000.00
Accounts Payable $6,000.00
- d. Supplies $1,560.00
Cash $1,560.00
- e. Cash $11,000.00
Bank Loan $11,000.00
- f. Computer $2,750.00
Furniture & Fixtures $8,250.00
Cash $11,000.00
- g. Advertisement (Local Paper) $400.00
Cash $400.00
- h. Cash $2,675.00
Accounts Receivable $850.00
Sales Total $3,500.00
Candy Costs $1,600.00
Inventory of candy $1,600.00
- i. Accounts Payable $550.00
Cash $550.00
- j. Salaries & Wages $1,300.00
Cash $1,300.00
- k. Cash (from Customers) $600.00
Accounts Receivable $600.00
- l. Repairs $400.00
Cash $400.00
- m. Cash Sales $1,200.00
Sales $1,200.00
Goods Sold $600.00
Inventory of candy $600.00
Kaylee’s Sweets Income Statement - January 2016
Particulars Amount ($)
Sales $4,700.00
Cost of Goods Sold $2,200.00
Net Sales $2,500.00
Less: Expenses
- Rent $1,750.00
- Advertising Expenses $400.00
- Repairs $400.00
- Salaries & Wages $1,300.00
Total Expenses: $3,850.00
Net Profit: $-1,350.00
Kaylee’s Sweets Balance Sheet at January 31, 2016
Assets
- Cash $25,215.00
- Accounts Receivable $225.00
- Supplies $1,560.00
- Inventory $3,800.00
- Prepaid Rent $3,500.00
- Total Current Assets: $34,300.00
- Fixed Assets
- Computer $2,750.00
- Furniture and Fixtures $8,250.00
- Total Fixed Assets: $11,000.00
- Total Assets: $45,300.00
Liabilities
- Accounts Payable $5,450.00
- Bank Loan $11,000.00
- Total Liabilities: $16,450.00
Stock Holder’s Equity
- Common Stock $40.00
- Additional Paid in Capital $30,160.00
- Retained Earnings $-1,350.00
- Total Stock Holder’s Equity: $28,850.00
Memo to Kaylee on Results of Operations
Dear Kaylee,
Regarding the financial results of Kaylee's Sweets in its inaugural month, the operations have revealed a net loss of $1,350. This loss primarily stems from indirect expenses such as rent, utilities, employee wages, and other overhead costs. It is advisable to consider strategies for reducing these expenses, as doing so could significantly improve profitability in future months. It is essential to focus on enhancing sales and exploring cost-effective marketing techniques to draw more customers in.
Best regards,
The Manager
Performance Report after Three Years
After three years in operation, Kaylee's Sweets has demonstrated resilience and growth potential. The data reflects total assets increasing consistently from $52,500 to $66,000 while liabilities remained manageable. Total equity has shown positive growth as well, indicating that the business is becoming more self-sustaining. Sales revenue at $55,500 illustrates a strong market presence, and a net income of $4,000 indicates healthy profitability, which suggests that Kaylee’s Sweets is effectively managing its revenue and expenses over time. This performance indicates a solid foundation for future expansion and profitability.
References
- Desai, A., & Garrett, B. L. (2018). The state of the death penalty. Notre Dame Law Review, 94, 1255.
- Potera, C. (2017). ANA expands opposition to capital punishment. The American Journal of Nursing, 117(6), 13.
- Rachels, S., & Rachels, J. (2019). The elements of moral philosophy (9th ed.). McGraw-Hill Education.
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