Annie and Jocasta decide to go into business together providing gourmet catering services to the rich and famous. Their intention is that by doing this they themselves will become rich and famous so that they can get someone to provide gourmet catering services for them. In the first month of business, they have the following transactions: (i) Annie has $15,000 of savings. Jocasta gets a personal loan of $15,000 from her grandmother. They put this $30,000 into a part- nership bank account to start off the business. (ii) They leased kitchen premises in a lock-up store near where they live for $2,000 per month. The two-year rental agreement calls for payment of first and last month's rent in advance. (iii) They bought a small delivery van for $5,000. (iv) They spent $10,000 equipping the food preparation and cooking area and buying serving dishes. (v) At this point, the bank balance is reduced to $11,000. (vi) They arranged with their bank to get a credit card in the name of the partnership with a limit of $25,000. To do this, they both have to sign a personal guarantee. (vii) During their first month of business, they spent $15,000 on food ingredients, van fuel, and sundry expenses, all of which were charged to the credit card. All of these items were used up in the normal course of business in the month. (viii) Customers paid a total of $10,000 for food provided. A further $15,000 was owed by customers who had received food but had not yet paid for it. (ix) One corporate customer paid them a $2,000 deposit for catering a reception in the next month. (x) By the end of the first month, they had not yet paid the credit card balance, but they intended to pay it down to zero early next month. (xi) At the end of the first month, they estimated that there was about $1,500 owed by them for utilities and water.
Annie and Jocasta decide to go into business together providing gourmet catering services to the rich and famous. Their intention is that by doing this they themselves will become rich and famous so that they can get someone to provide gourmet catering services for them. In the first month of business, they have the following transactions: (i) Annie has $15,000 of savings. Jocasta gets a personal loan of $15,000 from her grandmother. They put this $30,000 into a part- nership bank account to start off the business. (ii) They leased kitchen premises in a lock-up store near where they live for $2,000 per month. The two-year rental agreement calls for payment of first and last month's rent in advance. (iii) They bought a small delivery van for $5,000. (iv) They spent $10,000 equipping the food preparation and cooking area and buying serving dishes. (v) At this point, the bank balance is reduced to $11,000. (vi) They arranged with their bank to get a credit card in the name of the partnership with a limit of $25,000. To do this, they both have to sign a personal guarantee. (vii) During their first month of business, they spent $15,000 on food ingredients, van fuel, and sundry expenses, all of which were charged to the credit card. All of these items were used up in the normal course of business in the month. (viii) Customers paid a total of $10,000 for food provided. A further $15,000 was owed by customers who had received food but had not yet paid for it. (ix) One corporate customer paid them a $2,000 deposit for catering a reception in the next month. (x) By the end of the first month, they had not yet paid the credit card balance, but they intended to pay it down to zero early next month. (xi) At the end of the first month, they estimated that there was about $1,500 owed by them for utilities and water.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Annie and Jocasta decide to go into business together providing gourmet
catering services to the rich and famous. Their intention is that by doing
this they themselves will become rich and famous so that they can get
someone to provide gourmet catering services for them.
In the first month of business, they have the following transactions:
(i) Annie has $15,000 of savings. Jocasta gets a personal loan of
$15,000 from her grandmother. They put this $30,000 into a part-
nership bank account to start off the business.
(ii) They leased kitchen premises in a lock-up store near where they
live for $2,000 per month. The two-year rental agreement calls for
payment of first and last month's rent in advance.
They bought a small delivery van for $5,000.
(iii)
(iv) They spent $10,000 equipping the food preparation and cooking
area and buying serving dishes.
(v) At this point, the bank balance is reduced to $11,000.
(vi)
They arranged with their bank to get a credit card in the name of
the partnership with a limit of $25,000. To do this, they both have to
sign a personal guarantee.
(vii) During their first month of business, they spent $15,000 on food
ingredients, van fuel, and sundry expenses, all of which were
charged to the credit card. All of these items were used up in the
normal course of business in the month.
(viii) Customers paid a total of $10,000 for food provided. A further
$15,000 was owed by customers who had received food but had not
yet paid for it.
(ix) One corporate customer paid them a $2,000 deposit for catering a
reception in the next month.
(x) By the end of the first month, they had not yet paid the credit card
balance, but they intended to pay it down to zero early next month.
(xi) At the end of the first month, they estimated that there was about
$1,500 owed by them for utilities and water.
Transcribed Image Text:Financi
(xii) At the end of the first month, they each took $2,000 out of the bank
account as a personal withdrawal.
(xiii) Their best estimate of depreciation on the van and the catering
equipment was $500 for the month.
would be recorded in the partnership's accounting records. Indicate the
Use the accounting equation to show how each of the above transactions
effect of each one on assets, liabilities, and equity.
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