In September of the current year, Kate incorporated Angel City Greetings after investigating dif- ferent organizational forms, and began the process of getting her business up and running.
The following events occurred during the month of September:
1. Kate deposited $10,000 that she had saved into a newly opened business checking account. She received common stock in exchange.
2. Kate designed a brochure that she will use to promote her greeting cards at local stationery stores.
3. Kate paid Fred Simmons $50 to critique her brochure before undertaking her final design and printing.
4. Kate purchased a new iMac computer tablet, specialized graphic arts software, and commer- cial printer for the company, paying $4,800 in cash. She decided to record all of these items under the same equipment account.
5. Kate purchased supplies such as paper and ink for $350 at the local stationery store. She opened a business account with the store and was granted 30 days credit on all purchases, including the one she just made.
6. Kate designed her first five cards and prepared to show them to potential customers.
7. The owner of the stationery store where Kate opened her account was impressed with Kate’s work and ordered 1,000 of each of the five card designs at a cost of $1 per card, or $5,000 total. Kate tells the customer that she will have them printed and delivered within the week.
8. Kate purchased additional supplies, on account, in the amount of $1,500.
9. Kate delivered the 5,000 cards. Because the owner knows that Kate is just starting out, he paid her immediately in cash. He informed her that if the cards sell well he will be ordering more, but would expect a 30-day credit period like the one he grants to his own business customers.
10. The cost to Kate for the order was $1,750 of the supplies she had purchased. (Hint: This cost should be recorded as an expense called Cost of Goods Sold.)
11. Kate paid her balance due for the supplies in full.
12. Kate decided that she should have special renters’ insurance to cover the business equipment she now owns. She purchased a one-year policy with coverage beginning on October 1, for $1,200, paying the entire amount in cash.
13. Kate determined that all of her equipment will have a useful life of 4 years (48 months), at which time it will not have any resale or scrap value. (Hint: Kate will expense 1/48th of the cost of the equipment each month to Depreciation Expense. This will increase Accumulated Depreciation.) 1
14. Kate paid herself a salary of $1,000 for the month.
REQUIRED
a. Prepare a horizontal worksheet using the format in Exhibit 2-3 with the following column headings: Cash; Accounts Receivable; Supplies Inventory; Prepaid Insurance; Equipment; Accumulated Depreciation; Accounts Payable; Notes Payable; Common Stock; Revenue; Expense; and Dividends.
b. Record the accounting transactions for the month of September. c
. Prepare a balance sheet for Kate’s Cards as of September 30.