Campus Calendars Accounting Activity An enterprising student at a local college

Question

Campus Calendars Accounting Activity An enterprising student at a local college started a business making and selling a calendar which features pictures of famous students and landmark buildings around campus. The first printing was a sell out in less than a month and new orders continue to be received. The founder of this sole proprietorship business, Campus Calendars, is Molly Brown. She has asked for your help to determine if Campus Calendars is a profitable venture. Molly wasn't certain exactly what information you would need, so she provided you with the following items from her on-line checking account. All events occurred during the month of September. Checks Written Camera Rental Printing to Famous Students 300 to Molly for repair 50 Pizza Repay ParentsS 500 Total Checks $ 60 S 400 $ 250 From Molly Loan from Parents 500 Calendar Sales $1,000 Total Deposits $1,750 $ 140 $1,450 You also made the following notes from your conversations with Molly On September 1, Molly started the checking account with $250 of her personal savings and a $500 loan from her parents. The famous students who posed for the calendar agreed to a flat payment of $30 each. Some students appeared in more than one month. Molly bought pizza for the "crew" after some of the photo sessions and planning meetings, which total to $140. Molly's car broke down during the month, so she used $50 from the business checking account to get the car fixed. A local copy shop printed the color calendars for $4.00 each based on a minimum order of 100 calendars. When the first printing was a success, Molly paid back her parents in order to demonstrate the profitability of the business. . .

Explanation / Answer

Question (a)

As at 1 September, no transaction had commenced. Molly had just invested $250 which is shown as capital and borrowed $500 from her parents which is shown as a Loan. Accordingly, the following is the balance sheet as on 1st September.

Question (b)

From the checking account, we can find the expenses and incomes. Sale of Calenders is the only income that the Company received. From the Checks written, we can identify 4 different expenses. The Loan repayment is a balance sheet item since cash is used to repay a loan(both balance sheet items). The repair to Car is a personal expense incurred by Molly and hence it is receivable back from molly. Hence the same is shown as an asset.

Question (c)

The pizza represents a genuine business income incurred in the course of the photoshoots. It was not personal in nature, rather a benefit provided to the "crew". The Repair to the car is however personal in nature. There is no direct connection between the business and the car. The repair is an expenses incurred by Molly on a personal basis and hence it is not a business expense. Accourdingly it has been shown as an expense receivable from Molly.

Balance Sheet as on September 1 Assets Cash                 750 Total Assets                 750 Liability Loan from Parents                 500 Equity Capital                 250 Total Liability and Quity                 750

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