Part 1 - Case: Sally's Ice Cream Parlour
Sally Barnes a third year Accounting student finished her exams early from York University this year and went back home to Huntsville Ontario to look for a summer job. If Sally doesn't find a job in town she would have to work in the families Ice Cream factory, and outlet store. Barnes Ice Cream uses milk from Jersey cows which is the best for making ice cream from local farmers to manufacture fresh custom Ice Cream for Restaurants and specialty stores in Southern Ontario.
Going back and living at home was so comforting and nice since Huntsville during the summer is a hot bed of all types of activities. She started walking down Main Street with her resume in hand looking and applying for a summer job. The town of Huntsville has over 20,000 plus residence and another 25,000 from the surrounding cottages. It is busy for three seasons a year with something going on every Friday, Saturday and Sunday. A lot has changed with the "Huntsville Festival of the Arts" running daily for the entire months of July and August to Labour Day week end. "Concerts in the Park and on the Docks" every Wednesday at noon and night, starting in May until the end of August, and her favorite growing up as child was Thursday Night movies in the Park all summer long.
Sally walked into the corner Drug Store located on Main Street beside the Swing
Bridge and the Park were all of the Summer activities happen, where she had her first Part time job when she was a high school student. Dr. Bob Wilder owns the drug store which has been in the family for over 80 years. In the early 1950's Bob's grandfather built a fully functional Ice Cream Parlor in the front half of the store with a counter and six ice cream parlor type stools. Dr. Wilder was talking to Ted Lee the local handyman about redesigning the store and wanted to make the Ice Cream Parlor smaller since it was seasonal, taking too much of his time managing the staff at the Ice Cream stand, handling different operational issues and taking up too much of the floor space in the store year round.
It was perfect timing when Sally walked into the Drug Store. Sally overheard the conversation between Dr. Wilder and Ted about the redesigning of the Ice Cream parlor and the problems he had making it work.
Sally was thinking out loud and said this sounded like a Business Case from her ADMS2500 course. She could purchase the Ice Cream, cups, spoons, cones, and other material from the family business, rent the floor space at the drug store, hire her own staff, and have different hours then the Drug Store so the business can be open for business when the activities in town are on.
She approached both Dr. Wilder and Ted to bring up her idea. After hearing the details, Ted suggested that this can be done by placing a movable wall between the Drug Store and the Ice Cream Parlor section of the store, placing wheels on the Ice Cream freezers for scooping Ice Cream, by adding another door to the front of the store, and then placing the movable wall between the two doors and the wall where the Ice Cream Parlor is. Ted said that this design would allow one to go into either store when the other is notopen, also by placing the wheels on the freezers then can be moved to the wall to sale Ice Products in the winter since Ice Cream Parlor would be open from the May 1st to October 31st.
Sally called her mother about this business venture who congratulated her on a great idea. Mrs. Barnes suggested to Sally that the family Ice Cream business could supply Ice Cream products in the freezer under consignment for November to April since the freezers can move against the wall.
The next day Sally met with Dr. Wilder to work out the details. The meeting was very productive and they agreed to the following:
? Dr. Wilder would pay for the design work, the movable wall, plumbing, doors, wheels on the freezer that is owned by Dr. Wilder, installation of signs to the store, and any other for the new Ice Cream Parlor.
? Sally will pay the first and last months of rent on May 1st and then on the first day of each month for that month to Dr. Wilder. The rent included the front of the store where the Ice Cream Parlour is and a small supply room for storage and to place another freezer for extra Ice Cream.
? A fee of 4% of monthly gross sales will be paid to Dr. Wilder for the cleaning of the Ice Cream Parlor area, electricity, water, internet, use of the Ice Cream freezers owned by the Drugstore, and garbage removal. This is to be paid on the first day of the month on last month's sales.
? All other expenses for the Parlor will be paid by Sally.
Sally did the following:
April 22-29, 2016
Ordered three signs from Huntsville Sign Company for the business, one to be placed over the counter that has the price list, a sandwich board sign will be placed outside when the store is open for business, the other to be placed on the outside of the building, these signs will be used all year round since Ice Cream will be sold in the Drug store on consignment from November to April. Purchase price of all signs $1,200, however the owner of Huntsville Sign Company was her uncle and sold it to her for less. The signs will last three years before needing replacement. To be paid in full upon delivery.
Conducted interviews and hire students that will make $15.00 per hour, an assistant manager will make $19.00 an hour to work when Sally is not working. Since the students will be working less than 20 hours per week withhold taxes and other source deductions do not apply. The Ice Cream Parlour will be open seven days a week from May 1st to October 30th, payroll wage cost will be $475.00 per day from May 1st to September 6th. After September 6th the Ice Cream Palour will require only one person to operate and two people on the weekends. All students hired will start working May 1st. The employer will be paying 14% in benefits for each employee of their gross wage. These Benefits are payable 45 days after date on pay cheque. The employees first pay cheque will be dated May 14th for the first week of work (7 days) and every two weeks after that.
Sally made arrangements with her parents for the purchase of supplies and ice cream. Since she is family, her father would give her next morning delivery before the Parlour opens, the deliveries will be paid in full 10 days after received. Her father suggested that for inventory keeping that all of the Ice Cream related inventory items can be kept together as one amount (the value of all the Ice Cream, Cones, spoons, and syrup be one lump sum). Barnes Ice Cream does this for the Factory store and makes inventory record keeping easier.
Prepare journal entries and "T" Accounts in ACCRUAL and CASH Basis for this case. Students are asked to round numbers to fit 2 decimal places in all questions.