Question

Nina Prada, a connoisseur of fine chocolate, opened Nina’s Chocolates Inc. in Valley town on March 1, 2014. The shop specializes in a selection of gourmet chocolates 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 March 2014, the first month of operations:
a. Received contributions of $ 30,000 in total from four shareholders to form the corporation.
b. Paid store rent for three months at $ 1,600 per month (recorded as prepayment).
c. Purchased supplies for $ 800 cash.
d. Purchased chocolates on account for $ 10,000, due in 60 days.
e. Issued additional shares to new investors for $ 20,000 cash.
f. Used the money from (e) to purchase a computer for $ 4,000 (for recordkeeping and inventory tracking). The rest was used to buy furniture and fixtures for the store.
g. Placed a grand- opening advertisement in the local paper for $ 850 cash.
h. Sold chocolates for $ 3,600; $ 3,050 was in cash and the rest on accounts. The cost of the chocolates sold was $ 2,000.
i. Made a $ 1,000 payment on trade payables.
j. Incurred and paid employee wages of $ 2,520.
k. Collected trade receivables of $ 100 from customers.
l. Made a repair on one of the display cases for $ 268 cash.
m. Made cash sales of $ 5,200 during the rest of the month. The cost of the goods sold was $ 2,800.
Required
1. Set up appropriate T- accounts for cash, trade receivables, supplies, merchandise inventory, prepaid rent, equipment, furniture and fixtures, trade payables, notes payable, interest payable, contributed capital, sales revenue, cost of sales, advertising expense, wages expense, repair expense, and interest expense. All accounts begin with zero balances.
2. Record in the T- accounts the effects of each transaction for Nina’s Chocolates Inc. in March, referencing each transaction in the accounts with the transaction letter. Show the ending balances in the T- accounts.
3. Prepare a statement of earnings for March 2014.
4. Write a short memo to Nina offering your opinion on the results of operations during the first month of business.
5. After three years in business, you are being evaluated for a salary increase. One measure is how efficiently you managed the assets of the business. The following data are available:
Compute the total asset turnover ratio and the return on assets for 2015 and 2016, and evaluate the results. Do you think your salary should be increased? Why? The company is subject to an income tax rate of 30 percent.


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  • CreatedAugust 04, 2015
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