Orville T. Jaden, a self-proclaimed aficionado of all things relating to the sandwich, opened TJ’s Sandwich Shop in Springville, USA on March 1, 2014. The shop specializes in a variety of gourmet sandwiches and a line of gourmet potato chips. Congratulations! You have been hired as the manager. Your duties include maintaining the store's financial records. The following transactions occurred in March 2014, the first month of operations.
A. Received four shareholders' contributions totaling $50,000 cash to form the corporation; issued 400 shares of $1 par value common stock.
B. Paid three months' rent for the store at $2,000 per month (recorded as prepaid rent).
C. Purchased and received deli meats and cheese for $5,000 on account, due in 60 days.
D. Purchased supplies for $1,000 cash.
E. Negotiated and signed a two-year $15,000 loan at the bank, receiving cash at the time.
F. Used the money from (e) to purchase a computer for $2,500 (for recordkeeping and inventory tracking); used the balance for furniture and fixtures for the store.
G. Placed a grand opening advertisement in the local paper for $400 cash; the ad ran in the current month.
H. Made sales during the grand opening week totaling $3,000; $2,000 was in cash and the rest on accounts receivable. The cost of the deli meats and cheese sold was $1,000.
I. Made a $600 payment on accounts payable.
J. Incurred and paid employee wages of $1,900.
K. Collected accounts receivable of $800 from customers.
L. Made a repair to one of the display cases for $300 cash.
M. Made cash sales of $3,000 during the rest of the month. The cost of the deli meat and cheese sold was $1,000.
Using the Excel templates provided, the following are required:
1. Set up appropriate T-accounts for Cash, Accounts Receivable, Supplies, Inventory, Prepaid Expenses, Equipment, Furniture and Fixtures, Accounts Payable, Notes Payable, Common Stock, Additional Paid-in Capital, Sales Revenue, Cost of Goods Sold (expense), Advertising Expense, Wage Expense, and Repair Expense. All accounts begin with zero balances.
2. Record in the T-accounts the effects of each transaction for TJ’s Sandwich Shop in March, referencing each transaction in the accounts with the transaction letter. Show the ending balances in the T-accounts. Note that transactions (h) and (m) require two types of entries, one for revenue recognition and one for the expense.
3. Prepare an income statement at the end of the month ended March 31, 2014. Be sure to update the heading and format to the Income Statement template.
4. Either in Word or as a text box in Excel, write a short memo to Orville offering your opinion on the results of operations during the first month of business.