Claudia Pederzolli is enrolled in a co- op program in accounting that provides an opportunity for alternating study and work terms. For her second work term, Claudia was offered a position at the local branch of a CPA firm. After three weeks on the job, she was asked to assist her supervisor in preparing the financial statements of Sakura Ltd., a long- time client of the CPA firm. Claudia was provided with the following unadjusted trial balance for Sakura Ltd. as at December 31, 2014, as well as additional information to prepare the required financial statements:
Additional information is as follows:
a. The company lent $ 60,000 to an employee on October 1, 2014, and recorded the note receivable. According to the terms of the note, interest at an annual rate of = percent will be paid when the note matures on March 15, 2016.
b. The company borrowed $ 30,000 on December 1, 2014, and signed a note, payable at December 31, 2015. Interest on the note is 4 percent per year and is payable at the beginning of each month, starting January 1, 2015.
c. A portion of the building was rented to Senecal Inc. on November 1, 2014, for three months for a total amount of $ 6,000. Sakura received the amount in cash from Senecal on that date and recorded it as deferred rent revenue.
d. Depreciation on the property, plant, and equipment was estimated at $ 15,625 for 2014.
e. Dividends of $ 0.60 per share were declared in December 2014, payable January 15, 2015.
f. Sakura Ld. is subject to an income tax rate of 30 percent. The company will pay income taxes on March 15, 2015. Journal entries related to these events have not been recorded yet.
Assume the role of Claudia Pederzolli and answer the following requirements:
1. Prepare the adjusting journal entries as at December 31, 2014, for items (a) through (f) above. Create new accounts, if necessary. (Hint: Complete (2) before making the adjusting entry related to item (f).)
2. Show the effects (direction and amount) of the adjusting entries on net earnings and cash.
3. Prepare a multiple- step statement of earnings for the year ended December 31, 2014. Sakura Ltd. did not issue or repurchase any shares during 2014.
4. Prepare a classified statement of financial position as at December 31, 2014.
5. Prepare the closing entries at December 31, 2014.
6. Compute the net profit margin ratio and the return on equity for 2014, and explain the meaning of each ratio.

  • CreatedAugust 04, 2015
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