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The Cellular Shop |
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Welcome to the Cell Shop Exercise
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| Part I. |
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Introduction to the Cell Shop Exercise
Cell
Shop is an interactive exercise designed to illustrate the development
of an income statement and balance sheet. We will start the story with
a store owner George Jones and an accountant Denise Kittle who will help
George organize his company so that we can evaluate how well George has
done.
The Cellular Shop sells portable phones at the retail level to
customers at a local shopping mall. The store opened on May 1, 2000 with an investment of
capital by the owner George Jones. George knew little about accounting so he hired Denise
Kittle to prepare monthly financial statements George felt that keeping close eye on his
financial status would improve his management of the store's operations. George supplied
Denise with the following basic journal entries without explanation: |
| Cellular Shop Journal Entries May 1 to May 31, 2000 |
| 1. |
May |
Cash |
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245,000 |
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Bank Loan (12%) |
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150,000 |
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Proprietor Capital |
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95,000 |
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| 2. |
May |
Rent Expense |
2,500 |
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Cash |
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2,500 |
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| 3. |
May |
Inventory (1300 phones) |
65,000 |
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Accts Payable |
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65,000 |
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| 4. |
May |
Furniture (10 year life) |
18,000 |
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Cash |
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18,000 |
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| 5. |
May |
Advertising Expense |
3,500 |
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Cash |
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3,500 |
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| 6. |
May |
Employee Wages Expense |
1,250 |
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Cash |
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1,250 |
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| 7. |
May |
Office Supplies |
400 |
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Cash |
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400 |
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| 8. |
May |
Utilities Expense |
625 |
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Cash |
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625 |
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Please examine the four Balance Sheets below and select the correct
representation of the journal entries presented above. |
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| Cellular Shop Balance Sheet May 31, 2000 |
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