Emma’s Bakery Limited

Emma’s Bakery Limited

This assignment has one task with five questions. All questions must be answered. This assignment is worth 7.5%.

This assignment is due at 12.00 pm (midday) on Thursday, 29 January 2015, at the Assignment Drop In and Pick Up Centre on Level 0 of the OGGB.

Scenario

Emma formed a company called Emma’s Bakery on 1 November 2014. It operates out of two premises in Parnell and the CBD, and makes cakes for special events. The incomplete trial balance of Emma’s Bakery Limited for the month of November 2014 follows:

Cash

Accounts Receivable Inventory Prepaid Insurance Prepaid Rent Prepaid Advertising Motor Vehicle Equipment Computer Accumulated Depreciation - Motor Vehicle Accumulated Depreciation - Computer Note Payable

Accounts Payable Interest Payable Wages Payable Unearned Revenue Loan from ANZ Capital

Revenues Training Expense

Depreciation Expense Electricity Expense Insurance Expense Interest Expense

Rent Expense Maintenance Expense Wages Expense

6,825

3,496 4,700 2? 10,000 2,000 16,000 7,000 6,000

Emma’s Bakery Limited Trial Balance As at 30 November 2014

DR CR

[pic 1]

?

? 6,000 630 75 600 4,400 9,000 31,200 11,981

[pic 2] [pic 3]

900 200 290

??

?

? 400 1,800

??

Transactions that occurred in December 2014 are as follows:

• 1 Dec: Emma’s employee, Cindy, crashed the motor vehicle and Emma received $4,500 from the sale of the crashed motor vehicle. The motor vehicle is depreciated using the straight-line method. The motor vehicle was new when it was bought on 1 November and has a useful life of 8 years and a scrap value of $4,000.  
• 2 Dec: Purchased $7,300 inventory. $3,000 was on credit and the rest was paid in cash.  
• 3 Dec: Made cash sales of $5,900.  
• 5 Dec: Received cash of $2,500 from Accounts Receivable.  
• 6 Dec: Paid $600 that was owed to employees at the end of November.  
• 8 Dec: Paid the electricity bill of $290 recorded under the Accounts Payable account for November.  
• 9 Dec: Made sales of $8,600 on credit.  
• 11 Dec: Paid for the inventory purchased on credit in November which cost $330.  
• 13 Dec: Paid for the inventory purchased on credit on 2 Dec.  
• 15 Dec: $4,500 was received from Accounts Receivable, comprising $4,455 in cash and $45 in Sales discount. (You may wish to create a Sales discount account.)  
• 19 Dec: Made a cash sale of $6,200.  
• 20 Dec: Paid off the Note Payable in full.  
• 23 Dec: Maintained equipment and paid $300 in cash.  
• 27 Dec: Received a customer order of $2,400 to make wedding cakes in January. A $1,200 deposit was paid in cash.  
• 28 Dec: Emma’s Bakery paid a $1,000 dividend.  
• 29 Dec: Received, but did not pay, an electricity bill for December for $340. Record the following adjusting entries at 31 December:  

• Depreciation on the computer using the straight-line method. The computer was bought on 1 November and has a useful life of 6 years and a residual value of $600.  
• Depreciation on the equipment which was bought at end of November, using the straight- line method. The equipment has a useful life of 8 years and a scrap value of $760.  
• Owed the employees $1,800 for work carried out in December, which will be paid to employees in January, 2015.  
• Half of the prepaid advertising was used in December.  
• Of the $4,400 Unearned Revenue in November to make wedding cakes, half was earned  in December and can be recognised as revenue in December.  
• Half of all inventory was sold and needs to be expensed.  
• The insurance expense for December. (Insurance for the business for 12 months to 31 October 2015 at a cost of $2400, which was paid for in cash.)  
• The rent expense for December. (Emma paid the rent for months of November to April, $12,000.)  
• The interest expense for December. (The loan of $9,000 from ANZ in the trial balance above was borrowed at 1 November 2014 at an annual interest rate of 10%.)  
• Net the Sales discount of $45 off against Revenue.  
• Income tax expense for Emma’s Bakery is $1,435 which will be paid in January.  

Page 2 of 3

Problem: Emma’s Bakery Business

Required

• 1  Based on the information given, complete the trial balance as at 30 November 2014 and show your calculations.  
• 2  Record the transactions on page 2 for December 2014 as journal entries and adjusting journal entries. Narrations explaining the journal entries are not required, but you may include them if you wish.  
• 3  Prepare (a) the General Ledger T accounts for December 2014 and (b) the trial balance as at 31 December 2014. The General Ledger T accounts should follow the following sequence: Asset accounts first, followed by Liability accounts, followed by Equity accounts (Capital, Revenue, Expenses). When you prepare the General Ledger T accounts, please ensure you bring the “Balance c/d” numbers from the November T accounts as the starting point for the December T accounts.  
• 4  Prepare the Income statement for Emma’s Bakery for the two months ending 31 December 2014 (i.e., November and December). Please show EBIT and NPBT.  
• 5  Prepare the Balance Sheet as at 31 December 2014.