FADM 2021 Assignment #1 COOL BREEZE INC.

(CBI)

Cash
Account Balances 1 January, 2021 0

Part 1: Record Transactions

Cool Breeze owners invested Rs. 100,000 and CBI issued common stock in that
1 amount. 100,000
2 The restaurant raised Rs. 40,000 cash from a note payable. 40,000
On 2 Jan, CBI paid rent in advance for the first five months of 2021. Cash paid for
3 rent amounted to Rs. 15,000. (15,000)
4 CBI purchased food supplies (inventory) of Rs. 80,000 on account.
5 CBI bought restaurant equipment for Rs. 91,200 and paid cash. (91,200)
CBI received cash of Rs. 196,000 from customers for restaurant meals during the
6 month. 196,000
CBI earned revenue of Rs. 36,000 from catering activities performed during the
month for two large customers. To encourage future business from these
7 customers, CBI agreed the customers could pay within 45 days.
CBI received cash of Rs. 15,000 from sale of gift cards. All gift cards have unlimited
8 expiry. 15,000
9 CBI paid Rs. 40,000 cash as wages for the month. (40,000)

CBI paid Rs. 6,000 cash for advertising in the local newspaper. The agreement with
the newspaper is to run advertisements from 1 February through 31 March, 2021.
10 (6,000)
Utilities expenses for January were Rs. 500, which the company paid in cash at
11 month end. (500)
12 CBI collected Rs. 20,000 cash in January, from the two major credit customers. 20,000
13 CBI paid Rs. 50,000 cash for the food supplies purchased on credit. (50,000)
14 CBI paid Rs. 10,000 cash as a dividend to the common stockholders. (10,000)

Part 2: Record Accounting Adjustments

15 On 31 January, Rs. 7,000 worth of gift cards had not been redeemed.
By the end of January, employees had earned Rs. 6,400 in wages that will not be
16 paid until February.
A physical count of the food supplies revealed inventory of Rs. 2,000 on hand at
17 month end.
The restaurant equipment is expected to last eight years and have no salvage value
18 at the end of that time.
The Rs. 40,000 note requires that the principal and interest be paid after five years
and carries an annual rate of interest of 6%. Interest is to be paid in cash on the
19 anniversary date (1 January) each year.
Income taxes are payable at the rate of 35% on income before taxes. Taxes are due
20 at the end of the fiscal quarter.
Other accounting adjustments as required
Account Balances 31 January, 2021 158,300

Balance Sheet Equation

 Accounts Prepaid Equipment at Accumulated Accounts Unearned
Receivable Inventory Expenses cost Depreciation Payable Revenue
0 0 0 0 0 0 0

15,000
80,000 80,000
91,200

36,000

15,000

6,000

(20,000)
(50,000)

(8,000)

(78,000)

(950)

(3,000)
16,000 2,000 18,000 91,200 (950) 30,000 7,000

A= 284,550
Interest 6% Note Retained
Payable Wages Payable Taxes Payable Payable Common Stock earnings
0 0 0 0 0 0

100,000 -
40,000 -

-
-
-

196,000

36,000

-
(40,000)

(500)
-
-
(10,000)

-
8,000

6,400 (6,400)

(78,000)

(950)

200 (200)

38,833 (38,833)

(3,000)
200 6,400 38,833 40,000 100,000 62,117

L+E= 284,550
 Other
Cost of Goods Operating Depreciation Interest
Revenue Sold Wages Expense Expenses Expense Expense
0 0 0 0 0 0

196,000

36,000

40,000

500

8,000

6,400

78,000

950

200

3,000
240,000 78,000 46,400 3,500 950 200
Income Tax Net
Expense Income
0 0

-
-

-
-
-

196,000

36,000

-
(40,000)

(500)
-
-
-

8,000

(6,400)

(78,000)

(950)

(200)

38,833 (38,833)

(3,000)
38,833 72,117
 Cool Breeze Inc. Cool Breeze Inc.
Income statement Balance Sheet
For the month ending 31st January, 2021 31st January, 2021
Asset
Revenue 240,000 Cash
Cost of Goods Sold 78,000 Accounts Receivable
Gross Profit 162,000 Inventory
Wages Expense 46,400 Prepaid Expenses
Depreciation Expense 950 Total Current Assets
Other Operating Expense 3,500
Operating Income (EBIT) 111,150 Equipment, net
Interest Expense 200 Total Non-Current Assets
Income before taxes 110,950 Total Assets
Tax Expense 38,833
Net Income 72,117 Liabilities and Shareholders' Equity
Accounts Payable
Unearned Revenue
Interest Payable
Wages Payable
Taxes Payable
Current Liabilities
6% Note Payable
Total Liabilities

Common Stock
Retained earnings
Total Equity

Total Liabilities and Equity

 ze Inc.
Sheet
ry, 2021

158,300
16,000
2,000
18,000
194,300

90,250
90,250
284,550

30,000
7,000
200
6,400
38,833
82,433
40,000
122,433

100,000
62,117
162,117

284,550