| KENDALL SCHOOL OF BUSINESS Don't use plagiarized sources. Get Your Custom Essay on comprehensive accounting project 496630 For $10/Page 0nly |
| ACC272 B1 – Fall 2013 |
| Comprehensive Accounting Project |
| Four students from Kendall Hospitality program, decide to start a business and open an icecream shop in the month of June. |
| The students names are: Victoria, Matt, Jean & Tracy. |
| They form a company (partnership) and name it “Chicago Summers”. They decide to use the same name for the ice cream shop. |
| The students divide the duties – Matt and Victoria will make the purchases needed to produce the Ice Creams. They will hire |
| two helpers to be at the ice cream shop during business hours, prepare and sell the ice cream. Jean will supervise the employees |
| She also will be in charge of counting the materials at the end of each business day and communicate to Victoria and Matt how |
| much more they need to purchase. Tracy is in charge of keeping the accounting records of the company as well as preparing the financial |
| statements for each month |
| Here are the transactions Chicago Summers company incurs during the month of June & July 2010: |
| June Transactions |
| Setting up the shop |
| 6/1 | Each of the students/owners invests $15,000 of cash in the Chicago Summer Company. |
| The students open a business checking account with City Bank and deposit their initial investments. |
| 6/1 | They sign a 2-year lease to rent a space on Michigan Avenue for the Chicago Summers Ice cream shop. |
| Monthly rent of the space is $2000, payable on the first day of each month. |
| 6/2 | They purchase Ice cream Equipments, on account for 12,600, payable in three equal installments, in the next three months |
| The first installment is due for payment in July 2nd. It is estimated that the equipment has a life of 7 years with no |
| salvage value. |
| 6/2 | They purchase Furniture for the Ice Cream Shop on account for 10,000 on account, payable in 45 days. |
| It is estimated that the furniture will be used for 5 years, with no salvage value. |
| 6/2 | They purchase a laptop for $1200 on account to be used exclusively in keeping track of the accounting records. |
| Payment for the computer is due in 45 days. Estimated life of the laptop is 3 years with no salvage value. |
| 6/2 | They purchase a QuickBooks software, to be used in Accounting, for $1500 on account – payable in 45 days. |
| It is estimated that the software will be used for 10 years. |
| 6/5 | They call a technician to install the Ice Cream equipment. Estimated bill of the technician is $700. At the end of the |
| month, the company has not yet received the bill, however, the technician completed in full his installation work. |
| 6/5 | They hire two employees. Total salary cost for the two employees is $1500 a month, payable at the end of |
| the month. |
| Starting the Operations |
| 6/5 | Victoria & Matt are in charge of purchasing the key materials to make the ice cream. At the beginning of the month |
| they purchase the following: |
| Description | Quantity in LB | Price | Total Cost |
| Milk | 200 | $ 1.25 | $ 250.00 |
| Sugar | 200 | $ 0.75 | $ 150.00 |
| Vanilla | 1 | $ 500.00 | $ 500.00 |
| Cacao | 200 | $ 3.00 | $ 600.00 |
| Butter | 200 | $ 2.00 | $ 400.00 | ######## |
| 6/5 | They incur freight costs of $50, which they pay in full |
| 6/15 | Victoria and Matt purchase additional materials. Because of market changes, they realize that prices for their key |
| ingredients have gone up. |
| Description | Quantity in LB | Price | Total Cost |
| Milk | 200 | $ 1.35 | $ 270.00 |
| Sugar | 200 | $ 0.90 | $ 180.00 |
| Butter | 100 | $ 2.20 | $ 220.00 | $ 670.00 |
| 6/30 | Throughout the month, the Chicago Summers ice cream shop is able to generate a total of $6,000 in cash sales. |
| Inventory |
| 6/30 | Jean is in charge of keeping track of key material quantities. She knows that most of the materials purchased |
| during the month have been used in making ice cream. However some quantities still are left unused. These will be |
| used in the next month’s production of ice cream. At the end of the month, Jean performs a physical count of the |
| materials left. Below is the result of the count. |
| Description | Quantity in LB |
| Milk | 50 |
| Sugar | 70 |
| Vanilla | 0.5 |
| Cacao | 50 |
| Butter | 90 |
| June’s financial statement |
| 6/30 | Tracy is in charge of keeping the accounting records. She records all the economic events presented above by doing the following: |
| Preparing the journal entries, |
| Posting the appropriate journal entries in the T accounts |
| Preparing the Trial balance for the month of June |
| Completing the Balance Sheet and Income Statement for the month of June |
| July Transactions |
| 7/1 | The company paid the monthly rent |
| ‘7/1 | Paid on account for an ad in the local radio station for $700 |
| 7/2 | Paid the first installment due for the purchase of the Ice Cream Equipment (total $4200) |
| 7/5 | Purchased the following inventory items: |
| Description | Quantity in LB | Price | Total Cost |
| Milk | 200 | $ 1.30 | $ 260.00 |
| Sugar | 200 | $ 0.90 | $ 180.00 |
| Cacao | 100 | $ 2.80 | $ 280.00 |
| Butter | 100 | $ 1.90 | $ 190.00 | $ 910.00 |
| 7/5 | Incurred $50 of freight cost, which they paid in cash |
| All the inventory left over from June and purchased July was fully utilized in making the ice creams in July |
| 7/15 | Paid in full the Furniture purchased on account in June. |
| 7/15 | Paid in full the cost of the laptop |
| 7/15 | Paid in full the cost of the QuickBooks software |
| 7/30 | Paid the salaries of the two employees |
| 7/30 | Collected $7,000 in cash sales |
| Instructions |
| I June Financial Statements |
| Assume you are doing Tracy’s job: |
| Analyze each of June’s transactions and prepare the journal entries |
| Calculate the depreciation and amortization expenses for the month of June for the tangible and intangible assets |
| Calculate Cost of Goods Sold assuming the company uses a periodic inventory system and FIFO for cost method |
| Post the appropriate journal entries in T accounts |
| Prepare a trial balance |
| Prepare the Balance Sheet and Income Statement for the month of June. |
| II July Financial Statements |
| Repeat the steps above for July: |
| Analyze each of July’s transactions and prepare the journal entries |
| Calculate the depreciation and amortization expenses for the month of July for the tangible and intangible assets |
| Calculate Cost of Goods Sold assuming the company uses a periodic inventory system and FIFO for cost method |
| Post the appropriate journal entries in T accounts |
| Prepare a trial balance |
| Prepare the Balance Sheet and Income Statement for the month of July |
| III Analysis of Accounting Records |
| Prepare a horizontal analysis by comparing June and July balance sheets |
| Calculate the following ratios: |
| 1 | Current ratio (Liquidity) |
| 2 | Return on Assets (Profitability) |
| 3 | Debt to Total Assets ratio (Solvency) |
| Assume you are reviewing the Financial Statements and the analysis together with Victoria, Matt and Jean |
| What are some of the conclusions? What should the company do to stay in business? |