K & J BAKERY INC. Business Background As she sat in her Accounting I class, bore
ID: 2585438 • Letter: K
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K & J BAKERY INC. Business Background As she sat in her Accounting I class, bored while listening to the lecture on journal entries, Keisha Jones could not imagine being an accountant in the future. As a young girl, she remembered sitting in the kitchen while her mom and aunts baked those delicious Jamaican black cakes. She remembered that the cakes sold very quickly especially at Christmas time and that people were traveling from as far away as Florida to buy them. Her mom learned to bake from her mother, and she wrote down the cake recipes in case Keisha or one of her siblings decided to follow in her footsteps. However, Keisha chose to follow in her dad’s path and so she enrolled in college with plans to become an accountant. Her two older sisters where already studying to be a lawyer and dentist. Keisha had an epiphany as she sat in class, she would leave school at the end of the semester to open up a bakery specializing in Jamaican black cakes. Keisha anticipated that most of her business would be based on special order, customized cakes. She anticipated selling cakes for family weekend gatherings, birthday, wedding celebrations, and holiday gatherings. She wanted to have a few cakes available in a store to appeal to the drop in customer. In December 20X0, Keisha followed her plans; she dropped out of college, created a business plan, and incorporated as the K & J Bakery Inc. (K&J). The J is in honor of her mom, Jezebel who passed away earlier in the year. Keisha planned to open her business on January 1, 20X1. She would use the $50,000 inheritance from her mom as startup capital and receive a minimal salary of $500 per month for the first year of business. Uncle David, a marketing executive with a national bank, agreed to provide her with marketing support pro-bono. Keisha found the perfect location for her business. A take-out restaurant on the busy intersection of Jamaica and Hillside Avenues in Queens, NY, became available after a bitter divorce between the owners. The landlord was impressed with Keisha’s vision and agreed to pay for all renovations and charge her $650 per month for rent.
Keisha spent the month of December talking to various suppliers in order to determine her cost structure. She added cost data to the information in Table 1. K&J Bakery Inc. opened for business on January 1, 20X1 as planned. During the month of January, the business purchased and used 200 pounds of flour, 200 pounds of sugar, 67 dozen eggs and had 5 bad eggs to dispose of during the month, 20 baking soda boxes, 200 pounds of butter, 100 pounds of raisons, 50 bottles of run, and the other ingredients (one box of each for a total of four) all from one supplier on account. Manufacturing overhead is applied to production at $4 per cake. Keisha purchased the oven using the startup capital and paid all salaries. Her nieces worked 300 hours in total for the month. January was a very good month for the bakery since it baked 200 cakes and sold all for cash. The average selling price was $50 per cake. All manufacturing overhead is closed out at month end. The supplier was paid at month end. Required: Document K&J Bakery Inc January transactions using journal entries (round all calculations to 2 decimal places). All other costs such as utilities, must be accounted for in the journal entries (assume such transactions where applicable, are paid in cash).
TABLE 1: COST INFORMATION Standard per Cake Cost $6,000 (depreciated over 5 n/a years on a SL basis No salvage value S0 (provided by the landlord SO (paid for b $24 per 8 pounds ba $2 per dozen $15 per 25 pounds ba $6 per 14 $6.50 per 4 pounds $8 per 2 Item and Ingredients Conventional oven Refrigerator Bakin Baking flour licenses in nd box Baking soda Butter Raisins Others (currants, diced date, nutmeg, molasses) Cash Register nds $30 for all 4 boxes per month $12 per month (rental for 2 ¼ qtr of bottle Rum (alcohol Utilities (includes gas, electric S50 per month and water Mobile phone (business) Salary- Keisha Salary nieces S12 per bottle S50 per month $500 per month $8 per hour 1 person 1.5 hours per cake Salary-aunt Accountant Estimated MOH $100 per month $100 per month S4.00 per cakeExplanation / Answer
Date/S.N. Account title & Explanation Debit Credit Amount in $ Amount in $ 804 Cash 50000 Capital 50000 To record the introduction of capital into business per cake Items UOM Quanity Price Total Raw Material Inventory 2329 floor Pound 200 24/8 3 600 Accounts Payable 2329 5 eggs Dozen 67 2 2 134 To record the purchase of Raw material Baking soda boxes 20 6 6 120 sugar Pound 200 15/25 0.6 120 Direct Wages 2400 butter Pound 200 6.5/4 1.625 325 Cash 2400 raisons Pound 100 8/2 4 400 To record the salary of nieces rum bottles 50 12 12 600 other 4 boxes 1 30 30 30 Salary 200 Total 2329 Cash 200 Direct Labor 300 8 2400 To record the salary of her aunt & accountant Utilities 50 Note : 200 cakes requires 800 eggs Cash 50 she bought 67 dozens so 67*12= 804 Rent 650 Bad eggs 5 Cash 650 Total eggs used in the production 799 To record the Utilities & Rent for the month 1 egg is missing Depreication 100 Accumulated deprecation 100 To record the depreciation for the month Telephone/Mobile expenses 50 Cash 50 To record the mobile expenses for the month Cash register 12 Cash 12 To record the charges Work in process Inventory 5529 Raw Material 2329 Direct Wages 2400 Manufacturing Overhead 800 To record the production of 200 cakes Finished goods/Cost of goods sold 5529 Work in Process Inventory 5529 To record the cost of goods sold Manufacuring overhead 800 Depreciation 100 Utilties 50 Rent 650 Accounts payable 2329 Cash 2329 To record the payment to supplier Cash 10000 Revenue from sales 10000 To record the sales Drawing 500 Cash 500 To record the salary drawn by Keisha
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