BHMH2101 2019/20 ST Assignment | Total Marks: 50 marks Question 1 (25 marks Always Fit Company is engaged in providing group fitness classes in a studio. Customers are required to purchase yroup classes coupons in advance. Coupons are redeemed when customers attend fitness classes. Adjusting entries are performed on a monthly basis. Closing entries are performed annually on December 31. Below is the Company's unadjusted trial balance at the year ended December 31, 2018 Credit $ Debit $ 114,400 220,100 36,000 6,500 120,000 Always Fit Company Unadjusted Trial Balance December 31, 2018 Account Title Cash Accounts receivable Unexpired insurance Supplies Equipment Accumulated depreciation: Equipment Accounts payable Income taxes payable Unearned revenue 8% Notes payable Share capital (100,000 shares) Retained earnings Services revenue Wages expense Rent expense Insurance expense Depreciation expense Supplies expense Income taxes expense 21,200 24,000 9,100 21,000 42,000 200,000 77,000 304,000 50,000 91,000 12,000 18,000 3,000 27,300 $698,300 $698,300 Page 2 BHMH2101 2019/20 SI Assignment ! Information on adjusting entries: (1) The estimated useful life of equipment is live years and straight-line depreciation method is adopted, Depreciation expense had been updated to end of September 2018, (2) Accrued, but unrecorded and unpaid wages amounted to $7,000. (3) On November 1, 2018, the company borrowed $42,000 from its owner by signing 9-month note at 8% interest rate per annum. The monthly interests were paid by the company at ihe end of the next months. No entries had been made after recording the note, (4) Physical count shows supplies on hand were $6,000 on December 31, 2018. (5) On August 1, 2018, the company prepaid a 12-month insurance policy, which was effective on September 1, 2018. On December 31, 2018, the Company declared a cash dividend of $0.10 per share to be paid in the following year. (7) Group class coupons amounting $8,000 were redeemed in December, 2018. The Company cstimated that the income taxes expense for the cntirc ycar was $30,300, which to be paid next year. (9) Cnrecorded and unpaid fuel expenses of the owner's private vehicle amounted to $2,000 Required: (a) Prepare the necessary adjusting journal entries on December 31, 2018 so as to bring the financial records of Always Fit Company up-to-date. Workings are required, but explanations are NOT required. If no adjusting entries are required, state "No entry" and name the accounting principle applied. (9 marks) (b) Prepare the income statement of the Company for the year ended December 31, 2018, showing breakdown of items under the captions of Total Revenues, Total Expenses, Profit before Tax, Profit after Tax. (5 marks) (c) Prepare the statement of financial position as of December 31, 2018, showing breakdown of items under the captions of Total Assets, Total Liabilities, Total Shareholder's Equity and Total Liabilities & Shareholders' Equity, (11 marks) Page 3 BHMH2101 2019/20 ST Assignment | Total Marks: 50 marks Question 1 (25 marks Always Fit Company is engaged in providing group fitness classes in a studio. Customers are required to purchase yroup classes coupons in advance. Coupons are redeemed when customers attend fitness classes. Adjusting entries are performed on a monthly basis. Closing entries are performed annually on December 31. Below is the Company's unadjusted trial balance at the year ended December 31, 2018 Credit $ Debit $ 114,400 220,100 36,000 6,500 120,000 Always Fit Company Unadjusted Trial Balance December 31, 2018 Account Title Cash Accounts receivable Unexpired insurance Supplies Equipment Accumulated depreciation: Equipment Accounts payable Income taxes payable Unearned revenue 8% Notes payable Share capital (100,000 shares) Retained earnings Services revenue Wages expense Rent expense Insurance expense Depreciation expense Supplies expense Income taxes expense 21,200 24,000 9,100 21,000 42,000 200,000 77,000 304,000 50,000 91,000 12,000 18,000 3,000 27,300 $698,300 $698,300 Page 2 BHMH2101 2019/20 SI Assignment ! Information on adjusting entries: (1) The estimated useful life of equipment is live years and straight-line depreciation method is adopted, Depreciation expense had been updated to end of September 2018, (2) Accrued, but unrecorded and unpaid wages amounted to $7,000. (3) On November 1, 2018, the company borrowed $42,000 from its owner by signing 9-month note at 8% interest rate per annum. The monthly interests were paid by the company at ihe end of the next months. No entries had been made after recording the note, (4) Physical count shows supplies on hand were $6,000 on December 31, 2018. (5) On August 1, 2018, the company prepaid a 12-month insurance policy, which was effective on September 1, 2018. On December 31, 2018, the Company declared a cash dividend of $0.10 per share to be paid in the following year. (7) Group class coupons amounting $8,000 were redeemed in December, 2018. The Company cstimated that the income taxes expense for the cntirc ycar was $30,300, which to be paid next year. (9) Cnrecorded and unpaid fuel expenses of the owner's private vehicle amounted to $2,000 Required: (a) Prepare the necessary adjusting journal entries on December 31, 2018 so as to bring the financial records of Always Fit Company up-to-date. Workings are required, but explanations are NOT required. If no adjusting entries are required, state "No entry" and name the accounting principle applied. (9 marks) (b) Prepare the income statement of the Company for the year ended December 31, 2018, showing breakdown of items under the captions of Total Revenues, Total Expenses, Profit before Tax, Profit after Tax. (5 marks) (c) Prepare the statement of financial position as of December 31, 2018, showing breakdown of items under the captions of Total Assets, Total Liabilities, Total Shareholder's Equity and Total Liabilities & Shareholders' Equity, (11 marks) Page 3