The accountant for Chewie Crusts Ltd., a bakery specializing in pizza crusts for the fast-food trade, is working on the year-end accounting for the company. For each item below, decide what (if anything) needs to be done and prepare any journal entry needed to implement your decision. Use whatever account titles you like, but be clear where on the statements the accounts would be located and write clear explanations for your entries. This is the company's first year of existence.
a. The company paid $1,120 for cleaning and office supplies, all of which have been expensed. The accountant discovered that another $114 is owing but not recorded and that supplies costing $382 are still on hand and usable at the end of the year.
b. The company's sales are all on credit because its customers are restaurants, stores. and institutions, such as hospitals. All cash collections have been recorded as sales revenue. The accountant added up the customers' bills still not collected and got a total of $11,621.
c. All purchases of flour and other raw materials have been expensed, and there is no significant inventory of finished products at the end of the year because each night's production is shipped in the morning to ensure maximum freshness. However. usable raw materials costing $6,210 are on hand at the end of the year.
d. Purchases of small tools and parts (still on hand) totalling $238 were charged to expenses during the year.
e. The accountant found an unpaid Invoice for 3900 for advertising services on behalf of the company. The advertising campaign had been planned and advertising contracts signed before the year-end, but the campaign took place just after the year-end.
f. The president of the company directed that $2,316 originally included in repairs and maintenance expense be capitalized to recognize the creation of valuable equipment and fixtures. This is unusual for the company, but the repairs were so good that the useful life of the assets involved had been extended by several years more than originally expected.
g. All payments on the company's building mortgage had been made on time. Since the last payment, $187 of mortgage interest (the accountant's estimate) had accumulated, but the next regular payment was not due for ten days.