Arnold Davis decides to incorporate a business operating a pizza parlor and opens Pop’s Pizza Company near a local college campus. The company uses accrual accounting and issues monthly financial statements.
Part I (10 points)
To attract stockholders, Pop’s Pizza Company develops a marketing campaign that offers students a discount for purchasing stock in the company. Management believes that since the company serves mainly college students, students will purchase more pizza from Pop’s Pizza Parlor if they have an ownership interest in the business. Many students purchasing stock in the company have student loans and work to pay college tuition. You are hired to advise Pop’s Pizza Company on whether it is appropriate to offer discounted shares of stock to students with college loans. Use the problem-solving model to answer the following question. Should Pop’s Pizza Company offer discounted shares of stock to students with college loans?
Part II (25 points, 2 points per entry and 5 points for using an Excel spreadsheet)
During January 2018, Pop’s Pizza Company’s records reveal the following events. Use an Excel spreadsheet to record these events using tabular analysis. Show how each event affects the balance sheet equation. If there is no effect on the balance sheet equation, state “No entry needed.”
Jan. 1Purchased equipment for $4,000 paying $2,000 in cash and signed a 2%, 8-month note for the balance.
Jan. 5 Ordered $1,000 of kitchen supplies.
Jan. 8Advertised in the campus newspaper and received a bill from the newspaper for $50.
Jan. 10Received $100 cash for a pizza order. The ordered pizza will be delivered on February 1.
Jan. 12Received $1,500 in cash from customers for pizza sales.
Jan. 15Paid $200 cash to student workers for January salaries.
Jan. 20Billed the Blugold Football Team $300 for delivered pizzas.
Jan. 25Paid $100 cash to the radio station for advertising that was previously billed on January 10.
Jan. 30Paid cash dividends of $1,200.
Jan. 31Purchased a $2,000 pizza oven on account.
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