Bruno is a creative flower arrangement specialist that has worked for years in a high- end florist

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Question:

Bruno is a creative flower arrangement specialist that has worked for years in a high- end florist shop in Rosedale neighborhood in Toronto. The commute to his place of work takes more than 2 hours each way after he moved with his partner to a larger, spacious house in the area of Bracebridge. Now he has decided to open his own florist shop located within walking distance from where he lives. His goal includes making an after tax net profit of at least $2,500 per month which would be similar to the net salary minus transportation costs he was receiving in thehigh-endflorist shop in Yonge St. and Lawn Ave W.

Bruno researched similar operations, conducted a market survey and developed a business plan. He determined his business could meet his profitability goal if he were to attend the needs of at least 2 very wealthy individuals. He also determined that for various tax and liability reasons the business should be incorporated. Bruno felt quite comfortable running his companys website that was designed by his friend Marco for $400 and it is up and running by June 1st. The $1,000 paid to Marco included $(use the last 3 digits of your student number here) for domain registration of www.gorgeoustulipcottage.com but does not include upgrades that will have to be made in ten months, so the useful life of the web site content is 10 months.

He decided to call his companyGorgeous Tulip. Armed with the business plan and survey results, he visited the Metro Bank and confirmed he would be able to secure a line of credit for $5,000 at 24% per year. He did the paperwork himself and had it all completed and the Business Number registered by the start of business, June 1st, 2016. He paid a total of $500 in fees and other concepts related with setting up his company.

Bruno recorded all cash transactions in a journal. His entries for June 1st2016 through June 30th2016 are shown on the next page. He used information from this journal, together with his knowledge of the business, and other information presented below, to prepare the financial statements. In terms of setting up his accounting system, Bruno decided on the following records: Chart of Accounts, General Journal used for all adjusting and oddball entries, a Cash journal that combines the Sales and Disbursements Journals. Bruno observed the following conventions when preparing the statements: Adjusting entries were made at the end of the month only, June 30th; amounts receivable and payable are only accrued at June 30th, and his capitalization policy was to expense items that cost less than $100.

Gorgeous Tulip Inc.
Cash Journal June 1stto June 30th, 2016
Date	Chq#	Payee	Amount	Balance	Description
June 1st		Brunos contribution	1.900	$1.900	Brunos initial contribution
		Bruno and partner	100	$1.800	Rent - garage
		Bruno and partner	100	$1.700	Utilities
		Bruno and partner	100	$1.600	Rent car
	1	Marco	1000	$600	Web site design
		Metro bank	2.500	$3.100	Use of line of credit
		Business Number Org.	500	$2.600	Set up his own company
	2	Flowers Bulk Market	50	$2.550	Purchase of fresh flowers
	3	Florist Paradise	2000	$550	Purchase of dry supplies
June 4th		Bruno	15	$565	Revenue flowers
June 5th		Bruno	140	$705	Revenue simple arrangement
June 6th		Bruno	15	$720	Revenue flowers
June 7th		Bruno	130	$850	Revenue complex arrangement
June 8th	4	Flowers Bulk Mart	500	$350	Purchase of fresh flowers
		Bruno	100	$450	Revenue flowers and arrangements
June 9th		Bruno	300	$750	Revenue flowers and arrangements
June 10th		Bruno	360	$1.110	Revenue flowers and arrangements
June 11th		Bruno	140	$1.250	Revenue flowers and arrangements
June 12th		Bruno	25	$1.275	Revenue flowers and arrangements
June 15th	5	Flowers Bulk Mart	500	$775	Purchase of fresh flowers
		Bruno	320	$1.095	Revenue flowers and arrangements
June 16th		Bruno	440	$1.535	Revenue flowers and arrangements
June 17th		Bruno	40	$1.575	Revenue flowers and arrangements
June 18th		Bruno	340	$1.915	Revenue flowers and arrangements
June 19th		Bruno	530	$2.445	Revenue flowers and arrangements
June 22th	6	Flowers Bulk Mart	500	$1.945	Purchase of fresh flowers
		Bruno	400	$2.345	Revenue flowers and arrangements
June 23th		Bruno	100	$2.445	Revenue flowers and arrangements
June 24th		Bruno	400	$2.845	Revenue flowers and arrangements
June 25th		Bruno	600	$3.445	Revenue flowers and arrangements
June 26th		Bruno	200	$3.645	Revenue flowers and arrangements
June 29th	7	Flowers Bulk Mart	500	$3.145	Purchase of fresh flowers
June 30th		Bruno	505	$3.650	Revenue flowers and arrangements
		Bruno	TBD	????	Dividends
End of month cash that must be available				$5,145minus the dividends paid on June 30th

Other information (which may or may not be relevant to your bookkeeping activities)The following information is provided in a narrative format. Some of it may not be needed to complete the required. A skill set accountants must develop is being able to differentiate information that is relevant and requires recognition in the financial statements from that which does not.

1.Bank Loan:Brunos business used a portion from the approved line of credit on June 1st. By June 30ththe amount owed was still outstanding.

2.Bruno is the owner:On June 1stGorgeous Tulip issues 10 shares to Bruno in exchange for $1,900.

3.Rent:Bruno is using a detached garage of her house as the basis of her operations. As rent he pays himself and his partner a symbolic amount of $100 per month. Another $100 are paid in concept of the business share of utilities including the telephone land line.

4.Furniture and hand tools:Bruno did not purchase any new furniture or equipment as all the elements he has for his hobby as a florist at home are now used in his business.

5.Car:Bruno has a Jeep under his name that he uses to bring in materials and to make deliveries. He pays a symbolic rent for using it of $100 per month, gas included.

6.Supplies:Brunos supplies are of two kinds: dry and wet. Dry supplies such as dirt, pots, ribbons and other decorative elements can stay in his inventory for long periods of time. Wet supplies are flowers and other living ornaments, they can stay in inventory only for a couple of days; therefore, he has decided to treat them as expenses when purchased.

7.Revenue:minor floral arrangements are paid in cash, but those more elaborated and expensive are normally paid by credit or debit card. The table below shows the number of floral arrangements made each week per type of work done (ignore credit card fees and HST).

Week		Flowers	Simple	Complex	Cash	Credit/Debit
			arrangements	arrangements	receipts	cards receipts
June 1	7	2	1	1	$100	$200

June 8 14		7	6	2	$220	$705

June 15	21	10	16	2	$370	$1.300
June 22	28	8	14	3	$200	$1.500
June 29	30	11	2	1	$55	$450
Total		38	39	9	$ 945	$ 4.155

8.Accounts Receivables:At June 30th, Gorgeous Tulip was owed $1,500 by Mr. Bill Gates, a very wealthy person that has just moved in to a large and secluded cottage in the area. He knows Mr. Gates will pay him when he hands in the summary for the floral arrangements done and delivered in the month of June.

9.Dividends:Bruno projected that dividends can be paid to him by June 30th. Dividends declared and paid on Bruno's 10 shares are not shown in the cash journal but they were effectively paid on June 30thright before midnight. No other amounts were paid or owed to Bruno. Note: make the amount of dividends paid per share equal to the triple of the last 2 digits of your student number.

10.Errors:Bruno has a difference between his cash journal and the money he has at hand. He remembered that on June 12thhe paid that amount for a delivery that he was unable to make. Note: make the difference between the two amounts equal to the double of the last 2 digits of your student number.

11.Dry supplies at hand:On June 30thBruno estimated that he still has dry supplies in stock for an amount equivalent to the last 3 digits of your student number.

12.Income tax:Bruno estimated that the income tax accrued for the first month is $200.

13.Line of credit:Bruno is highly interested in paying back the line of credit, so he plans to take directly to the bank the collection of $1,500 from Mr. Gates.

14.Accountants fees:Marco, who is also an accountant, has advised Bruno to set aside some money so he can pay him for his accounting services for the year. Marco normally charges $600 per year to provide full accounting services to small businesses; those services include the annual income tax and HST preparation among others.

REQUIRED: Prepare the accounting records for Gorgeous Tulip Inc.

Note: this task is based on the analysis of very extensive narrative and detailed project documents. Please check the password protected course website for announcements of any errors, omissions and clarifications to the term project description or project documents.

1.Set up the Chart of Accounts

2.Prepare the bank reconciliation at June 30th, 2016

3.Prepare the General Journal for the month of June 2016

4.Post all transactions to theT-accounts

5.Prepare a trial balance at June 30, 2016

6.Prepare the Financial Statements in good form for June 2016 including footnotes for a Summary of Significant Accounting Policies and for contingency disclosures that are exclusive of the transactions of this case (do not include general notes).

7.Special instructions:

Each General Journal entry should have an explanation under.

Every place where the word Bruno appears in items 1, 2, 3 and 4 of the required substitute with your own first name.

8.Based on all the information provided in this project, prepare a memo to Bruno where you as a professional accountant evaluate his business. Specifically address his concerns:

a)How much can be paid in dividends by June 30th?

b)How much dividends he expects to collect per share per month (during 12 months) to achieve the $2,300 monthly that Bruno set as target?

c)What is the target net income to achieve item b) if only working the 7 months of the cottage county season per year?

d)With the data of the financial statements that you have completed, did Bruno achieved his target as set in item c)?

e)Make two clear suggestions of how the business can be improved so he can achieve and surpass the target.

Important Note:

Regarding bank reconciliation: If you find sufficient information from the term project, use it to complete the bank reconciliation; Otherwise, provide an explanation as to what types of information is missing to prevent you from preparing the bank reconciliation.

Regarding the transactions related to Marco: In the term project, it is stated that the design cost of the website for Marco is $400, while a total payment of $1,000 was made to him that includes the design cost and domain registration cost. You need your student ID information to determine the amount of domain registration cost. It is possible that this amount can be smaller or larger than $600. It is your judgment to decide what to do with the remaining or owing balance.