Chapter 3

(Note: This is a continuation of the Santé Smoothie Saga from Chapters 1 and 2. Use the information from the
previous chapters and follow the instructions below using the ledger accounts you have already prepared.)
It is the end of April and Natalie has been in touch with her mother. Her mother is curious to know if Natalie has
been profitable and if Natalie requires another loan to help finance
her business. Natalie too would like to know if she has been profitable during her first month of operation.
Natalie realizes that, in order to determine Santé Smoothies’ income, she must first make adjustments. Natalie
puts together the following additional
information:
1. Account reveals that $105 of supplies remain at the end of April.
2. Natalie was invited to deliver smoothies to a summer barbecue at her local community
centre. At the end of the day, she left an invoice for $175 with the facility manager.
Natalie had not had time to record this invoice in her accounting records.
3. Because there were so many guests expected to attend the barbecue in item 2, she
asked a friend to help with making the smoothies and promised to pay her $12 an hour.
The payment to her friend was made on May 4, 2017, for four hours of work.
4. Natalie estimates that all of her equipment will have a useful life of three years or 36
months. (Assume Natalie decides to record a full month’s worth of depreciation,
regardless of when the equipment was acquired by the business.)
5. Recall that Natalie’s mother is charging 3% interest on the note payable extended on
April 15. The loan plus interest is to be repaid in 12 months. (Calculate interest to the
nearest half month.)

Instructions
Using the information that you have gathered through Chapter 2, and based on the new information above, do
and answer the following.

a) Prepare and post the adjusting journal entries. Round all amounts to the nearest dollar.

Apr 30 Account Amount

Account Amount

Apr 30 Account Amount

Account Amount

Apr 30 Account Amount

Account Amount

Apr 30 Account Amount

Account Amount
Apr 30 Account Amount
Account Amount

Cash
Date Amount
Date Amount Date Amount
Date Amount Date Amount

Bal. Formula

Accounts Receivable
Date Amount
Date Amount

Bal. Formula

Supplies
Date Amount Date Amount

Bal. Formula

Equipment
Date Amount

Bal. Formula

Accumulated Depreciation - Equipment

Date Amount

Bal. Formula
Accounts Payable
Date Amount

Bal. Formula

Salaries Payable
Date Amount

Bal. Formula

Interest Payable
Date Amount

Bal. Formula

Unearned Revenue
Date Amount

Bal. Formula

Notes Payable
Date Amount

Bal. Formula

N. Koebel, Capital
Date Amount
Date Amount
 Bal. Formula

Revenue
Date Amount
Date Amount

Bal. Formula

Advertising Expense
Date Amount

Bal. Formula

Salaries Expense
Date Amount

Bal. Formula

Depreciation Expense
Date Amount

Bal. Formula

Telephone Expense
Date Amount

Bal. Formula

Supplies Expense
 Date Amount

Bal. Formula

Interest Expense
Date Amount

Bal. Formula

b) Prepare an adjusted trial balance.

Santé Smoothies
Adjusted Trial Balance
April 30, 2021

Debit Credit
Account Title Amount
Account Title Amount
Account Title Amount
Account Title Amount
Account Title Amount
Account Title Amount
Account Title Amount
Account Title Amount
Account Title Amount
Account Title Amount
Account Title Amount
Account Title Amount
Account Title Amount
Account Title Amount
Account Title Amount
 Account Title Amount
Account Title Amount
Account Title Amount
Total Formula Formula

c) Prepare an income statement for the month ended April 30, 2017.

Santé Smoothies
Income Statement
Month Ended April 30, 2021

Revenues
Account Title Amount
Expenses
Account Title Amount
Account Title Amount
Account Title Amount
Account Title Amount
Account Title Amount
Account Title Amount Formula
Loss Formula

d) Was Santé Smoothies profitable during the first month of operations? Why is it better for
Santé Smoothies to measure profitability after the adjusting journal entries have been
prepared and posted instead of before?

e) How much cash is available to Natalie to operate her business? Why is the amount of
cash different than the amount of profit that Santé Smoothies has earned? What is the
most likely reason why Natalie may need to borrow additional money from her mother?