MC5 MATCHA CREATIONS

Because Mei-ling has had such a successful first few months, she is
considering other opportunities to develop her business. One opportunity is
the sale of fine European mixers. The owner of Kzinski Supply Co. has
approached Mei-ling to become the exclusive distributor of these fine mixers
in her state. The current cost of a mixer is approximately NT$575, and Mei-
ling would sell each one for NT$1,150. Mei-ling comes to you for advice on
how to account for these mixers.
Mei-ling asks you the following questions.
1. “Would you consider these mixers to be inventory or should they be
classified as supplies or equipment?”
2. “I’ve learned a little about keeping track of inventory using both the
perpetual and the periodic systems of accounting for inventory.
Which system do you think is better? Which one would you
recommend for the type of inventory that I want to sell?”
3. “How often do I need to count inventory if I maintain it using the
perpetual system? Do I need to count inventory at all?”

In the end, Mei-ling decides to use the perpetual inventory system. The
following transactions happen during the month of January.
Jan. 4 Bought five deluxe mixers on account from Kzinski Supply
Co. for NT$2,875, FOB shipping point, terms n/30.
6 Paid NT$100 freight on the January 4 purchase.
7 Returned one of the mixers to Kzinski because it was
damaged during shipping. Kzinski issues Matcha Creations
credit for the cost of mixer plus NT$20 for the cost of freight
that was paid on January 6 for one mixer.
8 Collected NT$375 of the accounts receivable from December
2017.
12 Three deluxe mixers are sold on account for NT$3,450, FOB
______________________________________________________________________________
Copyright © 2016 John Wiley & Sons, Inc. Weygandt Financial Accounting IFRS 3e Matcha Creations

(For Instructor Use Only)

 destination, terms n/30. (Cost of goods sold is NT$595 per
mixer.)
14 Paid the NT$75 of delivery charges for the three mixers that
were sold on January 12.
14 Bought four deluxe mixers on account from Kzinski Supply
Co. for NT$2,300, FOB shipping point, terms n/30.

______________________________________________________________________________
Copyright © 2016 John Wiley & Sons, Inc. Weygandt Financial Accounting IFRS 3e Matcha Creations

(For Instructor Use Only)

MC5 (Continued)

Jan. 17 Mei-ling is concerned that there is not enough cash available

to pay for all of the mixers purchased. She invests an
additional NT$1,000 cash in Matcha Creations in exchange for
ordinary shares.
18 Paid NT$80 freight on the January 14 purchase.
20 Sold two deluxe mixers for NT$2,300 cash. (Cost of goods
sold is NT$595 per mixer.)
28 Mei-ling issued a check to her assistant for all the help the
assistant has given her during the month. Her assistant
worked 20 hours in January and is also paid the NT $56
owed at December 31, 2017. (Mei-ling’s assistant earns NT$8
an hour.)
28 Collected the amounts due from customers for the January 12
transaction.
30 Paid a N T $145 utility bill (NT$75 for the December 2017
accounts payable and N T $70 for the month of January).
31 Paid Kzinski all amounts due.
31 Cash dividends of NT$750 are paid.

As of January 31, the following adjusting entry data is available.

1. A count of baking supplies reveals that none were used in January.
2. Another month’s worth of depreciation needs to be recorded on the
NT$1,200 of baking equipment bought in November. (Recall that the
baking equipment has a useful life of 5 years or 60 months and no
salvage value.)
3. An additional month’s worth of interest on her grandmother’s
NT$2,000 loan needs to be accrued. (The interest rate is 6%.)
4. During the month, NT$110 of insurance has expired.

______________________________________________________________________________
Copyright © 2016 John Wiley & Sons, Inc. Weygandt Financial Accounting IFRS 3e Matcha Creations

(For Instructor Use Only)

 5. An analysis of the unearned service revenue account reveals that
Mei-ling has not had time to teach any of these lessons this month
because she has been so busy selling mixers. As a result, there is
no change to the unearned service revenue account. Mei-ling hopes
to complete the remaining lessons in February.
6. An inventory count of mixers at the end of January reveals that Mei-
ling has three mixers remaining.

______________________________________________________________________________
Copyright © 2016 John Wiley & Sons, Inc. Weygandt Financial Accounting IFRS 3e Matcha Creations

(For Instructor Use Only)

MC5 (Continued)

The post-closing trial balance from December 31, 2017 is shown below.

MATCHA CREATIONS
Post-Closing Trial Balance
December 31, 2017

Account Debit Credit

Cash ......................................................................... NT$1,180
Accounts Receivable .............................................. 875
Supplies................................................................... 350
Prepaid Insurance .................................................. 1,210
Equipment ............................................................... 1,200
Accumulated Depreciation- Equipment ................ NT$ 40
Accounts Payable ................................................... 75
Salaries Payable ..................................................... 56
Unearned Service Revenue .................................... 300
Interest Payable ...................................................... 15
Note Payable ........................................................... 2,000
Share Capital—Ordinary ........................................ 800
Retained Earnings .................................................. 1,529
NT$4,815 NT$4,815

______________________________________________________________________________
Copyright © 2016 John Wiley & Sons, Inc. Weygandt Financial Accounting IFRS 3e Matcha Creations

(For Instructor Use Only)

Instructions
Using the information from previous chapters and the new information above,
do the following.
(a) Answer Mei-ling’s questions.
(b) Prepare and post the January 2018 transactions.
(c) Prepare a trial balance.
(d) Prepare and post the adjusting journal entries required.
(e) Prepare an adjusted trial balance.
(f) Prepare a multiple-step income statement for the month ended January
31, 2018.

ANSWER

a) 1. “Would you consider these mixers to be inventory or should they be classified as supplies or
equipment?”

: should be inventory

2. “I’ve learned a little about keeping track of inventory using both the perpetual and the
periodic systems of accounting for inventory. Which system do you think is better? Which one
would you recommend for the type of inventory that I want to sell?

I think more better choose the perpetual system. Recommend for the type of inventory finished
goods

3. “How often do I need to count inventory if I maintain it using the perpetual system? Do I need
to count inventory at all?”

The perpetual systems offer companies inventory records that updated in real time. Puerchasing
and palnning canrely on the inventory records to make decisions regarding material purchases
and work scheduling, the business is not required to shutdown at the end of each month
tophysically count the inventory.
______________________________________________________________________________
Copyright © 2016 John Wiley & Sons, Inc. Weygandt Financial Accounting IFRS 3e Matcha Creations

(For Instructor Use Only)

 b)

Jan 4 inventory 2875

Account Payable 2875

Jan 6 inventory 100

Cash 100

Jan 7 Cash 575

Inventory 575

Cash 20

Inventory 20

Jan 8 Cash 375

Account Receivable 375

Jan 12 Account Receivable 3450

Sales Revenue 3450

COGS 1785

Inventory 1785

Jan 14 Freight out 75

Cash 75

______________________________________________________________________________
Copyright © 2016 John Wiley & Sons, Inc. Weygandt Financial Accounting IFRS 3e Matcha Creations

(For Instructor Use Only)

 Jan 14 Inventory 2300

Account Payable 2300

Jan 17 Cash 1000

Share capital- Ordinary 1000

Jan 18 Inventory 80

Cash 80

Jan 20 Cash 2300

Sales Revenue 2300

COGS 1190

Inventory 1190

Jan 28 Salaries and Wages Expense 160

Salaries and Wages Payable 160

Jan 28 Cash 3450

Account Receivable 3450

Jan 30 Account Payable 75

Utilities Expense 70

Cash 145

Jan 31 Account Payable 5175

______________________________________________________________________________
Copyright © 2016 John Wiley & Sons, Inc. Weygandt Financial Accounting IFRS 3e Matcha Creations

(For Instructor Use Only)

 Cash(2875+2300) 5175

Jan 31 Dividend 750

Cash 750

Adjusting entries

1. No entry

2. Depreciation Expense 20

Accumulated Depr- equipment 20

3. Interest expense 10

Interest Payable 10

4. Insurance Expense 110

Prepaid Insurance 110

5. No entry

6. No entry

Matcha Creation

January 31, 2018

______________________________________________________________________________
Copyright © 2016 John Wiley & Sons, Inc. Weygandt Financial Accounting IFRS 3e Matcha Creations

(For Instructor Use Only)

 Unadjusted Adjusted income

Trial Balance adjustment Trial Balance statement

Debit Credit Debit Credit Debit Credit Debit Credit

Cash 2463 2463

Accounts Receivable 500 500

Supplies 350 350

Inventory 1785 1785

Prepaid Insurance 1210 110 1100

Equipment 1200 1200

Accumulated Depreciation-Equipment 40 20 60

Accounts Payable 0 0

Salaries and Wages Payable 104 104

Retained earnings 1529 1529

Interest Payable 15 10 25

Notes payable 2000 2000

Unearned Service revenue 300 300

Share Capital—Ordinary 1800 1800

Dividends 750 750

Sales Revenue 5750 5750 5750

COGS 2975 2975 2975

Freight out 75 75 75

Salaries and Wages Expense 160 160 160

Utilities Expense 70 70 70

Depreciation Expense 20 20 20

Insurance Expense 110 110 110

Interest Expense 10 10 10

Totals 11538 11538 11568 11568 3420 5750

Add: Net Income 2330

Totals 5750 5750

______________________________________________________________________________
Copyright © 2016 John Wiley & Sons, Inc. Weygandt Financial Accounting IFRS 3e Matcha Creations

(For Instructor Use Only)