Assignment
Assignment
The comptroller of ABC Incorporated has just won the lottery and was last seen
with a 1-way ticket to Hawaii headed towards Pearson International Airport. The
owners of ABC have found his unadjusted November 30, 2017 trial balance for
the 11 months then ended (attached), and have also provided you with some
additional information about ABC and the transactions which have occurred
during December 2017. Your job is to:
1. Create a list of all entries required to:
account for December 2017, and
enter any yearend adjusting entries required for fiscal 2017
(indicate with an ‘R’ if that entry needs to be reversed – you do not
need to do closing entries).
Show each journal entry and write 1 sentence which describes it, (i.e. ‘To
record December 2017 revenues’). Part-marks are available for incorrect
solutions if you show your calculations / describe your reasoning.
(Approximately 80% of available marks)
2. Create an adjusted December 31, 2017 trial balance, add new accounts as
needed.
(Approximately 20% of available marks)
ABC’s owners have given the following information:
a) During December 2017 inventory with a cost of $130,000 was sold on
account for $150,000 (assume a perpetual inventory system, not a
periodic one). Cash collections for the same period were $165,000.
b) In addition to the above (not included in the $150,000 of sales) was one
sale of inventory with a cost of $20,000 and a selling price of $30,000
where the credit manager predicted only a 10% chance of actually getting
paid but the transaction was carried out anyway – the terms of the sale
required payment in 60 days this amount has not yet been collected and
is not yet overdue as at December 31. (Part marks available if you explain
your reasoning.)
c) Upon review of the receivables at year end, management has indicted
that a specific customer has gone bankrupt and won’t be paying the
$15,000 that they owe. A further $25,000 of the remaining receivables
(not counting the sale described in b) will probably not be collected
either. (Normally ABC only reviews their outstanding receivables at year
end).
d) Inventory of $130,000 were purchased on account from suppliers. Later in
the month ABC made a payment to its inventory suppliers in the amount
of $100,000.
e) The owners declared and paid themselves a dividend of $2,000 in
December. For tax planning purposes the owners have declared a bonus
payable to themselves of $45,000. They aren’t planning to make the
actual payment until 2018.
f) Wages of $28,000 were paid on December 8, and
December 22. Wages will be paid again on January 5, 2018. (ABC
operates every day not just Monday-Friday, ignore the effects of any
statutory holidays during this period.)
g) An annual insurance policy was purchased for $36,000 on June 1, 2017
and was fully expensed at that time.
h) All depreciation is straight-line at the following rates (no capital purchases
were made during the year):
i) Vehicles – 5 years
ii) Equipment – 10 years
iii) Computer hardware – 3 years
ABC Incorporated - Unadjusted Trial Balance
11 Months ended November 30, 2017
Account Dr. Cr.
1020 Bank 110,000
1200 Accounts Receivable 80,000
1205 Allowance for Doubtful Accounts -
1300 Prepaid Expenses and Deposits 6,000
1410 Automobiles 40,000
1415 Acc.Dep. Automobiles 16,000
1425 Equipment 140,000
1426 Accum Amort Equipment 98,000
1430 Inventory 126,500
1440 Computer hardware 16,500
1441 Acc Amort Computer Hardware 5,500
2200 Accounts Payable 15,000
2205 Accrued Liabilities -
250,000
2520 Shareholders Advances 22,000
3350 Capital Stock 100
3560 Retained Earning 45,000
3810 Dividends 22,000
4020 General Revenue 1,545,000
4030 Interest Income 3,400
5000 Cost of goods sold 1,000,000
5020 Supplies 25,000
5025 Sub-Contracting 75,000
5040 Equipment Rentals/Maintenance/Rep 5,000
5050 Small Tool Purchases 10,000
5410 Wages 295,000
5610 Accounting & Legal 8,000
5650 Insurance 36,000
5700 Depreciation Expense -
5810 Management bonus -
5850 Bad Debts 5,000
2 ,000,000 2,000,000
2300 Long term debt (non-interest bearing)
