Financial Accounting

JosianeIsimbi_22A_ACC2209_Midtermcorrection.xlsx

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Marks Summary

ACC2209 - Midterm Exam Version C
Marks Summary
FOR INSTRUCTOR USE ONLY
Question	Requirements	Points
Question 1	Financial statement users and GAAP	0
Question 2	Record May transactions	12
Question 3	Record May adjusting entries	9
Question 4	Post entries to T-accounts	6
Question 5	Record closing entries	1
Question 6	Prepare adjusted trial balance at May 31, 2020	2
Question 7	Prepare income statement	6
Question 8	Prepare statement of retained earnings	2
Question 9	Prepare classified balance sheet	5
Total Points:		43

Q1

	Question 1			0
A.	Identify 3 main users of the financial statements of London Tour Company, and the GAAP most appropriate for each user
		User	GAAP
		Management of the LTC	Because GAAP standards give openness and consistency, they allow management to make smart, evidence-based choices
		Suppliers	It keeps corporations accountable for their financial reporting, boosting confidence.
		Customers	it reduces risk and frauds
		Andrew Zhang	ASPE
		Bank	ASPE
		CRA	Income Tax Act
B.	Based on the users / GAAP identified above, make an overall recommendation to Andrew regarding the continued use of ASPE
Ans.	Accounting Standards for Private Enterprises, on the other hand, should be used by management (ASPE). A considerable number of international organizations (e.g., those having operations in Germany, France, and Switzerland) had a strong effect on the development of the International Financial Reporting Standards (IFRS). IFRS was created to handle the challenging conditions encountered by multinational and public firms because of its historical foundation in big and complex organizations. The implementation of many standards may be prohibitively expensive and time consuming for small businesses. IFRS, for example, may recommend that an actuary do an annual value of a certain asset category. The United States (US) hasn't implemented IFRS despite its widespread acceptance across the world.
	What is your recommendation for Andrew, and for LTC?
	Main user is bank. No plans for expansion. Save time and money by continuing to use ASPE

Q2

Question 2						12
Based on the information provided, prepare the journal entries for transactions that occurred in May 2020
Instead of a date, number your entries as T1, T2, T3, etc.
Date	Description	Debit	Credit
Operating Expenses:-
		$	$
T1	Salaries and Wages	3,600		Wages expense
	Cash		3,600	P
T2	Supplies	800		P
	Account Payable		800	P
T3	Rent Expense	1,000		Office rent expense
	Cash		1,000	P
T4	Prepaid Rent	800		P
	Cash		800	P
T5	Salaries and Wages	5,000		Salaries expense
	Cash		5,000	P
Operating Revenue:-
T6	Cash	1,200
	Service Revenue		1,200		Cash	21,500
					Accounts receivable	3,000
T7	Account Receivable	12,000			Sales revenue		24,500
	Service Revenue		12,000
T8	Cash	9,000
	Account Receivable		9,000
T9	Cash	7,500		P
	Unearned Revenue		7,500	P
T10	Cash	6,630		P
	Account Receivable		6,630	P
Capital Assets:-
T11	Equipment New	16,000		P
	Accumulated Depreciation	4,000		P
	Cash		10,000	P
	Gain on Disposal of Equipment		2,000	P
	Equipment Old		8,000	P
T12	Trade in Value		6,000
	Equipment (Old)	8,000			Bus	40,000
	Less: Accumulated Depriciation	4,000			Cash		10,000
	Carrying Value		4,000		Note payable		30,000
	Gain on Disposal of Equipment		2,000
	missing additional entries
	Accounts payable	6,400
	Cash		6,400

Q3

Question 3					9
Based on the information provided, prepare the adjusing entries at May 31, 2020
Instead of a date, number your entries as A1, A2, A3, etc.
Date	Description	Debit	Credit
Operating Expenses:-
		$	$
A1	Salaries & Wages	400		Wages expense
	Wages Payable		400	P
A2	Insurance Expense	150		P
	Prepaid Insurance		150	P
A3	Utility Expense	50		55	Basic = $50
	Utility Expense Payable		50		Overage = $0.05 x 100 minutes = $5.00
A4	Account Payable	6,400		this is a transaction, record in Q2
	Cash		6,400
A5	Supplies Expense	4,840		P
	Supplies		4,840
A6	Salaries & Wages	5,000		this is a transaction, record in Q2
	Cash		5,000
Operating Revenue:-
A7	Unearned Service Revenue	1,900		P
	Sales Revenue		1,900	P
Capital Assets:-
Furniture
A8	Depriciation Expense	67		P
	Accumulated Depriciation		67	Accumulated Depreciation - Furniture
Interest
A9	Interest Expense	100		P
	Accrued Interest Payable		100	Interest payable
Vehicle
A10	Vehicle	40,000		this is a transaction, record in Q2
	Cash		10,000
	Notes Payable		30,000
Vehicle
A11	Depriciation Expense	583		600	Rate = (40,000 - 5,000) / 175,000	$ 0.20	per km
	Accumulated Depriciation- Vehicle		583
Equipment
A12	Depriciation Expense	250		P
	Accumulated Depriciation- Equipment		250
	missing additional entry
	Income tax expense	3,701
	Income tax payable		3,701

Q4

	Question 3				6
	Post all entries from Question 2 and 3 to the T-accounts listed below.
	Make sure you calculate the ending balance in each account				All of your T-accounts are missing OPENING BALANCES
	Assets
	Cash		Accounts receivable			Supplies					Prepaid Insurance			Prepaid rent	Gain on Disposal of Equipment			Equipment Old
	1,200	3,600	12,000	9,000		800	4,840					150		800		2,000			8,000
	9,000	1,000		6,630
	7,500	800
	6,630	6,400
		5,000
		10,000
		10,000
	24,330	36,800	12,000	15,630
		12,470		3,630			4,040					150		800		2,000			8,000
	Furniture		Acc. Depn - Furniture			Equipment-New				Acc. Depn - Equipment				Vehicle		Acc. Depn - Vehicle
				67		16,000						4,000		40,000				583
												250
				67		16,000						4,250		40,000				583
	Liabilities
	Accounts payable		Wages payable			Unearned revenue					Note payable			Interest payable			Accrued Interest Payable			Utility Expense Payable
	6,400	800		400								30,000						100		50
	5,600			400								30,000						100		50
	Equity
Capital (common) shares			Retained earnings
	Revenue
	Sales Revenue		Gain on Trade		Service Revenue			Unreaned Service Revenue
		1,900				1,200		1,900	7,500
						12,000
		1,900				13,200			5,600
	Expenses
	Salaries and Wages Expense		Insurance expense			Office rent Expense					Salaries expense		Supplies expense
	3,600		150			1,000							4,840
	400
	5,000
	9,000		150			1,000							4,840
	Utility Expense (telephone)		Depreciation expense			Interest expense					Income tax expense
	50		67			100
			583
			250
	50		900			100

Q5

Question 5					1
Based on the ending balances in your trial balance, prepare closing entries
Instead of a date, number your entries as C1, C2, C3, etc.
You are NOT required to post the closing entries to the T-accounts
Date	Description	Debit	Credit
C1	Cash	5,730				Sales revenue	26,400
	Suspense Account		5,730	Where did you get this from?		Gain on Trade	2,000
						Income Summary		28,400
C2	Income summary	16,040
	Utility Expense		50			Income Summary	19,763
	Interest expense		100			Wages expense		4,000
	Insurance expense		150			Insurance expense		150
	Salaries & Wages		9,000			Office rent expense		1,000
	Supplies expense		4,840			Salaries expense		5,000
	Rent Expense		1,000			Supplies expense		4,840
	Depreciation expense		900			Telephone expense		55
						Depreciation expense		917
C3	Income Summary	10,520				Interest expense		100
	Retained Earning		10,520			Income tax expense		3,701
C4	Revenue	22,600				Income Summary	8,637
	Income Sumamry		22,600			Retained earnings		8,637

Q6

Question 6			2
Prepare an adjusted trial balance (pre-closing) at May 31, 2020
			All of these should be ending balances coming DIRECTLY from your T-accounts in Q4
London Tour Company
Trial Balance
At May 31, 2020
Account	Debit	Credit
	$	$		Cash	17,030
Cash	5,730	- 0		Accounts receivable	3,000
Accounts receivable	3,000	- 0		Supplies	1,200
Supplies	1,200	- 0		Prepaid insurance	600
Prepaid insurance	600	- 0		Prepaid rent	800
Prepaid rent	800	- 0		Furniture	5,000
Furniture	5,000	- 0		Accumulated depreciation - furniture		1,067
Accumulated depreciation - furniture	- 0	1,067		Equipment	16,000
Equipment	16,000	- 0		Accumulated depreciation - equipment		250
Accumulated depreciation - equipment	- 0	250		Bus	40,000
Vehicle	40,000	- 0		Accumulated depreciation - bus		600
Accumulated depreciation - Vehicle	- 0	583		Accounts payable		855
Utility Expense Payable	- 0	50		Wages payable		400
Accrued Interest Payable	- 0	100		Unearned revenue		7,500
Accounts payable	- 0	800		Note payable		30,000
Wages payable	- 0	400		Interest payable		100
Unearned Service revenue	- 0	7,500		Income taxes payable		3,701
Capital Shares A. Zhang	- 0	20,000		Capital (common) shares		20,000
Note payable	- 0	30,000		Retained Earnings		10,520
Services Revenue	- 0	15,100		Sales revenue		26,400
Utility Expense	50	- 0		Gain on Trade		2,000
Interest expense	100	- 0		Wages expense	4,000
Retained Earnings	- 0	10,520		Insurance expense	150
Gain on Disposal of Old Equipment	- 0	2,000		Office rent expense	1,000
Insurance expense	150	- 0		Salaries expense	5,000
Salaries & Wages	9,000	- 0		Supplies expense	4,840
Supplies expense	4,840	- 0		Telephone expense	55
Rent Expense	1,000	- 0		Depreciation expense	917
Depreciation expense	900	- 0		Interest expense	100
Total	88,370	88,370		Income tax expense	3,701
				TOTALS	103,393	103,393

Q7

Question 7				6
Prepare the May income statement
London Tour Company
Income Statement			P
For the Month Ended May 30,2020
	$	$
Service Revenue		15,100	26,400
Less: Operating Expenses
Salaries & Wages	9,000		4,000	Wages expense
Utility Expense	50		55	Telephone expense
Rent Expense	1,000		P
Insurance Expense	150		P		5,000	Salaries expense
Depriciation Expense	900		917
Supplies Expense	4,840		P
Total Operating Expense		15,940
Loss from Operation		$ (840.00)	10,438
Add (Less) Other Income and Expenses
Interest Expense	$ (100.00)		P
Gain on disposal of Old Equipment	2,000	1,900	P
Net Income		$ 1,060.00	12,338	Profit before income taxes
			3,701	Income tax expense
			8,637	Profit

Q8

Question 8			2
Prepare the May statement of retained earnings
London Tour Company
Statement of Changes in Equity		Statement of Retaied Earnings
For the Month Ended May 30,2020
Capital Share A.Zhang-April 30,2020	$ 20,000	do not report on Statement of Retained Earnings
Add: Additions in May, 2020	- 0
Capital Share A.Zhang-April 30,2020	$ 20,000
Retained Earnings
Retained Earnings, April 30,2020	10,520	P
Add: Net Income for May, 2020	1,060	8,637
Retained Earnings May 20, 2020	11,580	19,157
Owner's Equity May 30, 2020	$ 31,580

Q9

Question 9					5
Prepare the balance sheet at May 31
London Tour Company
Balance Sheet
As of May 30, 2020				as of May 31, 2020
	$	$	$
Assets
Current Assets:
Cash			5,730	17,030
Accounts Receivable			3,000	P
Supplies			1,200	P
Prepaid Insurance			600	P
Prepaid Rent			800	P
Property, Plant & Equipement
Furnitue	5,000
Less: accumulated Depreciation -Furniture	1,067	3,933		P
Equipment	16,000
Less: accumulated Depreciation -Equipment	250	15,750		P
Vehicle	40,000
Less: accumulated Depreciation -Vehicle	583	39,417	59,100	600	Accumulated depreciation - Bus
Total Assets			70,430	81,713
Current Liabilities:
Account Payable			800	855
Utility Expense Payable			50
Accrued Interest Payable			100	P
Wages Payable			400	P	3,701	Income taxes payable
Unearned Service Revenue			7,500	P
Total Current Liabilities			8,850
Long Term Liabilities
Notes Payable			30,000	P
Total Liabilities			38,850
Owner's Equity				Shareholders' Equity (corporation)
Capital Share, A.Zhang		20,000		Capital (common) shares (DO NOT INCLUDE OWNERS NAME)
Retained Earnings		11,580		19,157
Total Owner's Equity			31,580
Total Liabilities and Owner's Equity			70,430	81,713