Accounting Essay

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203 Value = 10 points Exercise - Let’s start a business – A Latte Cart            NAME: ______________ June 1, 2012: Get business license, open a bank account for $50,000, source of money = $10,000 savings, $40,000 loan from Grandparents, payable in 5 years, no interest. June 2, 2012: Buy $500 of inventory, ON CREDIT June 2, 2012: Buy an commercial grade espresso machine, $12,775, FOR CASH, useful life – 5 years. June 2, 2012: Buy an industrial strength coffee grinder, $2,190, ON ACCOUNT, useful life - 3 years. June 2, 2012: Arrange to rent a cart - $3,000/month, open 20 days/mo, payable at the END of the month June 2, 2012: Arrange to rent space - $2,000/month, open 20 days/mo., payable at the END of the month June 2, 2012: Hire an employee--$8/hour, 10 hours/day Selling Price = $1.50 each. Calculate Sales: $1.50 x quantity sold Calculate Cost of Sales (Variable costs, change with Sales Volume): Materials: 2¢ per cup, 1¢ per lid, 11¢ per coffee shot, 10¢ for milk = 24¢/cup Cost of Sales: 24¢ x quantity sold PREPARE AN INCOME STATEMENT FOR ONE DAY FOR THIS BUSINESS!  Assume you recognize only 1 day of rent owed to the rental companies and 1 day of depreciation (straight-line)  Assume you had one day of business, average sales volume of 60 lattes/hour.  Be certain to record any accrued liabilities.  Do it again, assume you had only one day of business, but this time assume average sales volume of 30 lattes/hour Company Name: Statement Name: Period of Statement: ESPRESSO ELENA’S LATTE CART Income Statement For day ended: June 3, 2012 AVG: 60/HR 30/HR prep. by: _________ date: __________ 1) 2) SALES EXPENSES a) Variable Costs: Material b) Fixed Costs: Labor Cart Rental Site Rental Depreciation TOTAL COSTS $________ ________ $________ $_______ ________ ________ ________ ________ $________ $________ ________ ________

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