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question archive One of Natalie’s friends, Curtis Lesperance, runs a coffee shop where he sells specialty coffees and prepares and sells muffins and cookies

One of Natalie’s friends, Curtis Lesperance, runs a coffee shop where he sells specialty coffees and prepares and sells muffins and cookies

Subject:AccountingPrice:2.87 Bought7

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One of Natalie’s friends, Curtis Lesperance, runs a coffee shop where he sells specialty coffees and prepares and sells muffins and cookies. He is eager to buy one of Natalie’s fine European mixers, which would enable him to make larger batches of muffins and cookies. However, Curtis cannot afford to pay for the mixer for at least 30 days. He asks Natalie if she would be willing to sell him the mixer on credit.

Natalie comes to you for advice. She asks you to address the questions below.

  1. Curtis has given me a set of his most recent financial statements. What calculations should I do with the data from these statements, and what questions should I ask him after I have analyzed the statements? How will this information help me decide if I should extend credit to Curtis?
  2. Is there an alternative other than extending credit to Curtis for 30 days?
  3. I am thinking seriously about being able to have my customers use credit cards. What are some of the advantages and disadvantages of letting my customers pay by credit card?

The following transactions occurred in June through August 2020.

June 1: After much thought, Natalie sells a mixer to Curtis on credit, terms n/30, for $1,150 (cost of mixer $620).

June 30: Curtis calls Natalie. He is unable to pay the amount outstanding for another month, so he signs a 1-month, 8.35% note receivable.

July 31: Curtis calls Natalie. He indicates that he is unable to pay today but hopes to have a check for her at the end of the week. Natalie prepares the journal entry to record the dishonor of the note. She assumes she will be paid within a week.

Aug. 7: Natalie receives a check from Curtis in payment of his balance owed.

Instructions:

Prepare journal entries for the transactions that occurred in June, July, and August.

Round to the nearest dollar. Note that the company uses a perpetual inventory system.

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