Assignment Task
Question 1.
The following account balances relate to the Desjardins Company’s December 31, 2017 year-end financial statements:
| Retained earnings, Jan. 1, Year 7 | $ 26,000 | Cash | 56,000 | |
| Income tax expense | 24,000 | Consulting revenue | 250,000 | |
| Note payable | 55,000 | Repairs expense | 10,000 | |
| Utilities expense | 15,000 | Supplies expense | 14,000 | |
| Supplies | 4,000 | Salaries expense | 100,000 | |
| Accumulated depreciation, equipment | 5,000 | Interest expense | 6,000 | |
| Equipment | 65,000 | Dividends – Common | 25,000 | |
| Common shares, Jan, 1, Year 7 | 1,000 | Accounts receivable | 18,000 | |
| Accounts payable | 3,000 | Depreciation expense | 3,000 | |
Notes:
- There were no common shares issued or repurchased during the year.
- The current portion of the Bank Loan payable was $4,000.
All accounts have a normal balance.
Required:
a.) Prepare an income statement for the year ended December 31, 2017.
b.) Prepare a statement of changes in equity for the year ended December 31, 2017.
c.) Prepare a Balance Sheet as at December 31, 2017. (6 marks) d.) Compute the company’s debt ratio.
Question 2
The following transactions occurred for Mary’s Consulting in the company’s first month – January, 2018 – record journal entries for each transaction.
January 1 Mary deposited $2,000 in to the company’s bank account in exchange she received 100 common shares in the company.
January 5 The company purchased $500 of office furniture on account. Payment is due on February 5. January 8 The company did consulting work for a client. Billed $3,000. Received half of the money, with the other half due in one week.
January 10 Paid employee’s wages of $200.
January 13 Collected the amount due from January 8.
January 15 Paid the bill from January 5.
Question 3
Fred’s Security has the following transactions and items requiring December 31, 2017 adjustments. Prepare journal entries as necessary.
a.) i.) The company purchased a 12-month insurance policy for $2,000 cash on March 1, 2017.
ii.) A December 31 adjustment is required.
b.) i.) The company entered into a contract to provide security work for a client. The client paid Fred’s security $10,000 on October 1, 2017. The company was required to provide security service for 12 months, from October 1, 2017 – November 30, 2018.
ii.) A December 31 adjustment is required (assume the company provided security service as promised up to December 31).
c.) The company pays salaries of $8,000 every week on Sunday, based on a 7-day workweek. Assume salaries are earned at the same rate each day. This year, December 31 falls on a Thursday. Record the necessary adjustment.
d.) i.) The company purchased a car for $15,000 cash on February 1, 2017. The car is expected to have a 10-year useful life and no residual value. The company’s accountant wishes to use straight line depreciation.
ii.) A December 31 adjustment is required.
Question 4
The July 31, 2018 adjusted trial balance of Anderson Company is found below:
| Cash | $ 1,000 | |
| Accounts receivable | 1,500 | |
| Supplies | 500 | |
| Notes receivable | 600 | |
| Equipment | 32,000 | |
| Accumulated depreciation, equipment | $ 14,000 | |
| Land | 58,000 |
| Accounts payable | 500 | |
| Notes payable | 1,000 | |
| Mortgage payable | 30,000 | |
| Common shares | 100 | |
| Retained earnings | 32,000 | |
| Dividends | 2,000 | |
| Repairs revenue | 55,000 | |
| Wages expense | 20,000 | |
| Supplies expense | 1,000 | |
| Depreciation expense | 3,000 | |
| Maintenance expense | 5,000 | |
| Interest expense | 2,000 | |
| Income tax expense | 6,000 | |
| Totals | $132,600 | $132,600 |
Required: Prepare closing entries for the company.
Question 5
Smith Inc.
Bank Reconciliation
July 31, 2017
| Balance per bank | $3,359 | Balance per book | $2,550 | |
| Add: deposit in transit | 817 | NSF cheque J Brown | (300) | |
| Deduct: Outstanding cheques # | Collected note receivable | 408* | ||
| 232 | $1,061 | Bank fees | (18) | |
| 234 | 240 | Bookkeeper error | (9) | |
| 195 | 195 | |||
| 49 | 49 | (1,545) | ||
| Balance | $2,631 | Balance | $ 2,631 |
(*) The collection included the original note of $380 and interest of $28. (**) The bookkeeper made an error recording a payment on account. They recorded the cheque, a payment on account for $1,590, the actual amount of the cheque was $1,599.
Required: Based on the completed Bank Reconciliation above, please record any required journal entries.
Question 6
Smith Company shows the following information on December 31, 2017, the company’s fiscal year-end: Account Debit Credit
Accounts receivable $17,000
Allowance for doubtful accounts 400
Sales ($5,000 of cash sales) $75,000
The company’s accountant generated the following aging schedule of accounts receivable:
Number of Days Outstanding Amount Receivable Estimated Uncollectible
0-30 days $10,000 1%
31-60 days 4,000 5%
61-90 days 2,000 10%
Over 90 days 1,000 25%
Required:
a.) Prepare the adjustment to allowance for doubtful accounts based on the information above.
b.) Show how accounts receivable, net would be disclosed on the balance sheet.
c.) What is the most likely cause of the allowance for doubtful accounts being in a debit balance?
d.) On February 15, 2018, the company writes off a $300 account receivable from Marco Inc. Record the journal entry.
Question 7
Aberdeen Auto Mart uses a perpetual inventory system and reports the following transactions for the month of May for one of its products:
Date Explanation Units Cost/Price
August 1 Beginning inventory 40 $25.00
August 4 Purchase 20 28.00
August 15 Sale 50 60.00
August 21 Purchase 20 29.00
August 26 Purchase 70 30.00
August 31 Sale 40 60.00
Required:
a.) Prepare an inventory record using the weighted average method.
b.) Prepare journal entry/entries for August 31 sale
Question 8
On June 30, 2017, ABC Company purchased a piece of equipment for $25,000. The equipment was expected to be useful for 5 years after which time it would be sold for $5,000. The company’s accountant wishes to use double-declining balance depreciation. The company’s fiscal year end is December 31.
Required:
Compute depreciation expense for each year of the asset’s life (2017, 2018, 2019, 2020, 2021, 2022). – No Journal Entries needed.
Question 9
On October 1, 2017, XYZ Company buys a new truck for $60,000 cash. The truck has an estimated useful life of 10 years and an estimated residual value of $10,000. The company’s accountant wishes to use straight line depreciation. On July 1, 2019 the company sells the truck for $54,000 cash.
Required: Record all journal entries for the life of the truck.
Question 10
On August 31, Year 7, DEF Company issues a $1,000,000 10-year 5% bond. The market rate of interest is 5.5%. The bond quote is 96.1932. The company’s fiscal year end is July 31. The bond pays interest semi-annually on February 28, and August 31 each year.
Required:
a.) Prepare a bond amortization table as outlined below for the first 2 years of the bond.
b.) Record the journal entry for the issuance of the bond (August 31, Year 7)
c.) Record the journal entry for the first semi-annual payment. (February 28, Year 8)
d.) Record the journal entry for the year end adjustment. (July 31, Year 8)
e.) Record the journal entry for the second semi-annual payment. (August 31, Year 8)
Bond amortization table