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MC5 Matcha Creations: (For Instructor Use Only)

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Reza eka Putra
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225 views

MC5 Matcha Creations: (For Instructor Use Only)

Uploaded by

Reza eka Putra
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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MC5 MATCHA CREATIONS

Because Mei-ling has had such a successful first few months, she is
considering other opportunities to develop her business. One opportunity is
the sale of fine European mixers. The owner of Kzinski Supply Co. has
approached Mei-ling to become the exclusive distributor of these fine mixers
in her state. The current cost of a mixer is approximately NT$575, and Mei-
ling would sell each one for NT$1,150. Mei-ling comes to you for advice on
how to account for these mixers.
Mei-ling asks you the following questions.
1. “Would you consider these mixers to be inventory or should they be
classified as supplies or equipment?”
2. “I’ve learned a little about keeping track of inventory using both the
perpetual and the periodic systems of accounting for inventory.
Which system do you think is better? Which one would you
recommend for the type of inventory that I want to sell?”
3. “How often do I need to count inventory if I maintain it using the
perpetual system? Do I need to count inventory at all?”

In the end, Mei-ling decides to use the perpetual inventory system. The
following transactions happen during the month of January.
Jan. 4 Bought five deluxe mixers on account from Kzinski Supply
Co. for NT$2,875, FOB shipping point, terms n/30.
6 Paid NT$100 freight on the January 4 purchase.
7 Returned one of the mixers to Kzinski because it was
damaged during shipping. Kzinski issues Matcha Creations
credit for the cost of mixer plus NT$20 for the cost of freight
that was paid on January 6 for one mixer.
8 Collected NT$375 of the accounts receivable from December
2017.
12 Three deluxe mixers are sold on account for NT$3,450, FOB
destination, terms n/30. (Cost of goods sold is NT$595 per
mixer.)
14 Paid the NT$75 of delivery charges for the three mixers that
were sold on January 12.
14 Bought four deluxe mixers on account from Kzinski Supply
Co. for NT$2,300, FOB shipping point, terms n/30.

______________________________________________________________________________
Copyright © 2016 John Wiley & Sons, Inc.    Weygandt Financial Accounting IFRS 3e Matcha Creations
(For Instructor Use Only)
MC5 (Continued)

Jan. 17 Mei-ling is concerned that there is not enough cash available


to pay for all of the mixers purchased. She invests an
additional NT$1,000 cash in Matcha Creations in exchange for
ordinary shares.
18 Paid NT$80 freight on the January 14 purchase.
20 Sold two deluxe mixers for NT$2,300 cash. (Cost of goods
sold is NT$595 per mixer.)
28 Mei-ling issued a check to her assistant for all the help the
assistant has given her during the month. Her assistant
worked 20 hours in January and is also paid the NT $56
owed at December 31, 2017. (Mei-ling’s assistant earns NT$8
an hour.)
28 Collected the amounts due from customers for the January 12
transaction.
30 Paid a N T $145 utility bill (NT$75 for the December 2017
accounts payable and N T $70 for the month of January).
31 Paid Kzinski all amounts due.
31 Cash dividends of NT$750 are paid.

As of January 31, the following adjusting entry data is available.


1. A count of baking supplies reveals that none were used in January.
2. Another month’s worth of depreciation needs to be recorded on the
NT$1,200 of baking equipment bought in November. (Recall that the
baking equipment has a useful life of 5 years or 60 months and no
salvage value.)
3. An additional month’s worth of interest on her grandmother’s
NT$2,000 loan needs to be accrued. (The interest rate is 6%.)
4. During the month, NT$110 of insurance has expired.
5. An analysis of the unearned service revenue account reveals that
Mei-ling has not had time to teach any of these lessons this month
because she has been so busy selling mixers. As a result, there is
no change to the unearned service revenue account. Mei-ling hopes
to complete the remaining lessons in February.
6. An inventory count of mixers at the end of January reveals that Mei-
ling has three mixers remaining.

______________________________________________________________________________
Copyright © 2016 John Wiley & Sons, Inc.    Weygandt Financial Accounting IFRS 3e Matcha Creations
(For Instructor Use Only)
MC5 (Continued)

The post-closing trial balance from December 31, 2017 is shown below.

MATCHA CREATIONS
Post-Closing Trial Balance
December 31, 2017

Account   Debit     Credit  


Cash.......................................................................... NT$1,180
Accounts Receivable............................................... 875
Supplies.................................................................... 350
Prepaid Insurance ................................................... 1,210
Equipment ............................................................... 1,200
Accumulated Depreciation- Equipment................. NT$ 40
Accounts Payable.................................................... 75
Salaries Payable...................................................... 56
Unearned Service Revenue..................................... 300
Interest Payable....................................................... 15
Note Payable............................................................ 2,000
Share Capital—Ordinary......................................... 800
Retained Earnings................................................... 1,529
NT$4,815 NT$4,815

Instructions
Using the information from previous chapters and the new information above,
do the following.
(a) Answer Mei-ling’s questions.
(b) Prepare and post the January 2018 transactions.
(c) Prepare a trial balance.
(d) Prepare and post the adjusting journal entries required.
(e) Prepare an adjusted trial balance.
(f) Prepare a multiple-step income statement for the month ended January
31, 2018.

______________________________________________________________________________
Copyright © 2016 John Wiley & Sons, Inc.    Weygandt Financial Accounting IFRS 3e Matcha Creations
(For Instructor Use Only)

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