Question

On August 31, 2014, World Travel Consulting showed the following adjusted account balances in alphabetical order:
Accounts payable ................................................................................................ $ 2,800
Accounts receivable............................................................................................ 22,500
Accumulated depreciation, building.................................................................... 37,000
Accumulated depreciation, equipment ................................................................ 13,000
Building.............................................................................................................. 271,000
Cash ................................................................................................................... 15,000
Charles World, capital......................................................................................... ?
Equipment .......................................................................................................... 38,000
GST receivable .................................................................................................... 840
Interest payable................................................................................................... 1,400
Land ................................................................................................................... 145,000
Long-term mortgage payable .............................................................................. 111,860
Notes payable, due December 1, 2015 ............................................................... 26,000
Notes payable, due March 1, 2015 ..................................................................... 17,000
Office supplies..................................................................................................... 1,800
Office supplies expense ....................................................................................... 14,000
Other operating expenses (including depreciation) ............................................. 101,000
Prepaid expenses ................................................................................................ 8,500
Salaries expense.................................................................................................. 126,000
Salaries payable ................................................................................................... 8,200
Sales ................................................................................................................... 631,500

Required
1. Prepare the liability section of the balance sheet at August 31, 2014.
2. Charles World, the owner, is planning on expanding the business and has applied for a $2,000,000 bank loan. John Douglas, the Chartered Accountant and Certified Fraud Examiner featured in the chapter opening vignette, was contracted by the bank to review the financial statements of World Travel Consulting. John discovered that included in sales were the following:
Advance air ticket sales ........................................................................................ $106,000
Accommodation prepayments ............................................................................ 49,000
Unearned bus tour revenue ................................................................................. 41,800

He also noted the following excerpt from the amortization schedule of the long-term mortgage payable:
Year............Principal Balance at August 31
2013................................................................................... $146,320
2014................................................................................... 111,860
2015................................................................................... 70,040
2016................................................................................... 41,820

Prepare a corrected balance sheet at August 31, 2014.
Analysis Component: Using your answers from Parts 1 and 2, discuss the implications of John’s findings on the financial statements.



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  • CreatedJanuary 08, 2015
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