Kaylee’s Sweets

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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.

a. Received four shareholders’ contributions totaling $30,200 cash to form the corporation; issued 400 shares of $0.10 par value common stock.

b. Paid three months’ rent for the store at $1,750 per month (two months are prepaid).

c. Purchased and received candy for $5,000 on account, due in 60 days.

d. Purchased supplies for $1,660 cash.

e. Negotiated and signed a two-year $13,000 loan at the bank, receiving cash at the time.

f. Used the money from (e) to purchase a computer for $3,750; used the balance for furniture and fixtures for the store.

g. Placed a grand opening advertisement in the local paper for $500 cash; the ad ran in the current month.

h. 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 $1,800.

i. Made a $850 payment on accounts payable.

j. Incurred and paid employee wages of $1,500.

k. Collected accounts receivable of $600 from customers.

l. Made a repair to one of the display cases for $700 cash.

m. Made cash sales of $1,400 for the rest of the month. The cost of the candy sold was $500.

Required

1. Record journal entries for each of the transactions.

2. Prepare an income statement at the end of the first month of operations ended January 31.

3. Prepare a balance sheet as of January 31.

4. Write a memo to Kaylee offering your opinion on the results of operations during the first month of business.

5. 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.

Year

2016

2017

2018

Total Assets

$52,500

$58,500

$66,000

Total Liabilities

18,500

22,000

27,500

Total Equity

34,000

36,500

38,500

Sales Revenue

55,000

82,500

93,500

Net Income

4,400

11,000

22,000

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