In November 2006 after having incorporated Cookie Creations Inc., Natalie begins operations. She has decided to not pursue the offer to supply cookies to Biscuits. Instead she will focus on offering cooking classes. The following events occur.
Nov. 8 Natalie cashes in her U.S. Savings Bonds and receives $520, which she deposits
in her personal bank account.
8 Natalie opens a bank account for Cookie Creations Inc.
8 Natalie purchases $500 of Cookie Creations' common stock.
11 Natalie designs a brochure and a poster to advertise the company and the services available.
11 The brochures and posters are printed, at a cost of $95. They will be distributed as the opportunity arises.
14 Cookie Creations purchases baking supplies, such as flour, sugar, butter, and chocolate chips, for $125.
15 Natalie starts to gather some baking equipment to take with her when teaching the cookie classes. She has an excellent top-of-the-line food processor and mixer that originally cost her $550. Natalie decides to start using it only in her new business. She estimates that the equipment is currently worth $300, and she transfers the equipment into the business in exchange for additional common stock.
16 The company needs more cash to sustain its operations. Natalie's grandmother lends the company $2,000 cash, in exchange for a two-year, 6% note payable. Interest and the principal are repayable at maturity.
17 Cookie Creations purchases more baking equipment for $900.
18 Natalie books her first class for November 29 for $100.
25 Natalie books a second class for December 5 for $125. She receives a $50 cash down payment, in advance.
29 Natalie teaches her first class, booked on November 18, and collects the $100 cash.
30 Natalie's brother develops a website for Cookie Creations Inc. that the company will use for advertising. He charges the company $600 for his work, payable at the end of December. (Because the website is expected to have a useful life of
two years before upgrades are needed, it should be treated as an asset.)
30 Cookie Creations purchases a one-year insurance policy for $1,200.
30 Natalie teaches a group of elementary school students how to make Santa Claus cookies. At the end of the class, Natalie leaves an invoice for $250 with the school principal. The principal says that he will pass it along to the business office and it will be paid some time in December.
30 Natalie receives a $50 invoice for use of her cell phone. She uses the cell phone exclusively for Cookie Creations Inc. business. The invoice is for services provided in November, and payment is due on December 15.
The solution provides the journal entries for transactions undertaken by Cookie Creations Inc, post the entries to the ledger and prepare a trial balance.