Subject Code : ACCT1005
Country : Canada
Assignment Task

 

This assessment is centred on the topic “Final Accounts” & speaks to the following objectives:

Course Objectives:
1) Given a set of transactions of a service entity, prepare the requisite adjusting journal entries
2) Using the adjusted journal entries, demonstrate the preparation of an adjusted trial balance
3) Use the adjusted trial balance to demonstrate the preparation of an income statement for a service entity
4) Use the adjusted trial balance to demonstrate the preparation of a statement of owner’s equity for a service entity
5) Use the adjusted trial balance to demonstrate the preparation of a balance sheet for a service entity
6) Use the information from the statements generated to calculate basic liquidity and profitability ratios for the business

Question 1
Lazro Perez opened his cleaning service “Krissas Furniture & Auto-Detailing Services”, specializing in the cleaning of automobiles. The end-of-year unadjusted trial balance and adjustment data were as follows on June 30, 2020, the end of the entity’s fiscal year.

KRISSAS FURNITURE & AUTO-DETAILING SERVICES
Unadjusted Trial Balance
As at June 30, 2020
 Dr $ Cr $
Cash 175,500
Revenue Receivable 98,000
Office Supplies 29,000
Prepaid Insurance 84,000
Prepaid Rent 63,000
Cleaning Equipment 650,000
Accumulated Depreciation: Cleaning Equipment 195,000
Furniture & Fixtures 228,000
Accumulated Depreciation: Furniture & Fixtures
Accounts Payable 86,250
Salaries Payable
Interest Payable 28,125
Unearned Service Revenue 54,750
Long-Term Loan 300,000
Lazro Perez, Capital 471,500
Lazro Perez, Withdrawals 58,000
Service Revenue 748,000
Rent Expense 105,000
Salaries Expense 209,000
Telephone Expense 12,000
Office Supplies Expense
Insurance Expense
Depreciation Expense – Cleaning Equipment
Depreciation Expense – Furniture & Fixtures
Utilities Expense 144,000
Interest Expense 28,125
Total 1,883,625 1,883,625

Additional data at June 30, 2020:
a) Office Supplies costing $4,000, purchased on account on June 29, 2020, was neither recorded nor posted. On June 30, 2020, office supplies on hand amounted to $9,000.
b) Rent was paid on May 1, 2020, for the 6-months to October 30, 2020.
c) The Cleaning Equipment are being depreciated over eight (8) years on the fixed instalment method of depreciation, down to a residue of $130,000.
d) Furniture & Fixtures costing $228,000 with an expected life of five (5) years and expected residual value of $48,000 was acquired on September 30, 2019. The asset is being depreciated on the straight-line method of depreciation.
e) A premium of $84,000 for a one-year insurance policy was paid on February 1, 2020
f) Salaries earned by employees but not paid amounted to $8,000 on June 30, 2020.

Other Data:
$75,000 of the Long-Term Loan is due for payment on September 1, 2020.

Required:
i) Using the additional data given, prepare the necessary year-end adjusting journal entries for Krissas Furniture & Auto-Detailing Services on June 30, 2020. [Narrations are not required]
ii) Use the adjusting entries in (i) above to complete the adjustments and adjusted trial balance columns in the Partial Work Sheet provided, (identifying each adjustment by letter).
iii) Using the data from the adjusted trial balance prepared in part (ii) above, prepare an income statement and a statement of owner’s equity for the year ended June 30, 2020, and a classified balance sheet as at that date. [List expenses in decreasing order of their amount, starting with the largest]
iv) Use the data generated in the financial statements prepared to compute Krissas Furniture & Auto-Detailing Services’ current ratio, debt ratio, net income percentage and return on owner’s equity on June 30, 2020. Explain what the current ratio measures and whether it is usually preferable to have a higher ratio.

 

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  • Posted on : December 29th, 2019

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