Case #1 Introduction You are a junior financial analyst for the CPA firm, ACCT621 LLP. Your...

 

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Case #1 Introduction You are a junior financial analyst for the CPA firm, ACCT621 LLP. Your firm specializes in providing a wide variety of internal financial solutions for local small businesses. Today is your first, a Senior Manager has requested your support on the first dient engagement to provide financial reporting service for the year end. Client Background Lonsdale Bakery Inc. was established in 1995 when it first opened its doors in North Vancouver BC. Lonsdale Bakery has grown over the years with the addition of pastry style all the time, but the "Cheesy and Cloudy" remain the most popular items amongst the 150 varleties of breads and pastries. The business has been expended to distribute its products in local grocery chain and it is currently owned by the Rogers and Shaw families. Lonsdale's operates out of 10,000 sqft location and it has one entrance into the bakery and a baking facility at the back. Lonsdale pays $5,000 per month for the rental of the space. Rogers and Shaw were able to negotiate with the landlord and were not required to pay the first month's rent in advance. All of the rental payments are current and up to date. For the last two years, Lonsdale's has had a very reliable accountant prepare its year-end financial statements and everything has been correct. This year, Lonsdale's accountant retired, and Rogers did the best he could recording their own financial information. For the information he was not sure about, he kept all of the required supporting documentation. Rogers hired your firm to prepare their financial statements for the year. They supplied you with his unadjusted trial balance and the information in Exhibit I to assist you. Supplementary Information The amount currently sitting in prepaids arose due the insurance policy last year. Rogers didn't know how to correct it, so he left it. This year's insurance policy was purchased on November 1 for $9,000. The policy runs from November 1 to October 31 of each year. • Rogers has a note that their owed $900 in wages to his employees for the period ending December 31st • The loan was incurred when the bakery was opened. The loan carried an interest rate of 8%. The interest is payable two months after year end and the principal is due in 2019. • Lonsdale's will sometimes book special events with small organizations that are allowed to pay after the event has taken place. On December 29th, a small company had a gathering at the bakery. The company was billed $1,089 and has 30 days to pay it. Rogers has not yet recorded this in his financial records. • Lonsdale's deciared a dividend of $5,000 on December 30th. • Rogers didn't know how to record depreciation for the year and so left it for you to record. deprication for all assets is charged using a straight-line method by taking the cost of the asset and dividing it by its expected useful life. The assets have expected useful lives as follows: o Computer: 5 years O Bakery equipment: 10 years o Furniture and fixtures: 20 years The information shows that Henrietta's owes $400 for a telephone bill and $400 for electricity for December. These amounts have not been recorded yet Hennetta s PIne bakery Unadjusted Trial Balance December 31, 2015 Account Name Debit $35,000 5,600 21,000 62,500 3.400 30,000 Credit Cash Accounts Receivable Food Inventory Merchandise Inventory Prepaids Computers Accumulated Amortization -Computers Bakery Equipment Accumulated Amortization - Bakery Equipment Furniture and Fixtures 12,000 90,000 18,000 150,000 Accumulated Amortization - Furniture and Fixtures Accounts Payable Accrued Liabilities Interest Payable Dividend Payable Long-term Loan Common Shares 15,000 18,000 220,000 50,000 22,000 468,500 127,000 Retained Earnings Food Revenue Internet Revenue Merchandise Revenue Food Expense Internet Expense Electricity Expense Telephone Expense Interest Expense Salary Expense Insurance Expense Supplies Expense Depreciation Expense Rent Expense 103,000 240,000 54,000 65,000 20.000 200,000 9.000 8,000 60.000 1,053.500 Lost so0 Based on the information you have prepare the adjusting joumal entries, an adjusting trial 053,500 1,053,500 Based on the information you have prepare the adjusting journal entries, an adjusting trial balance, the statement of earnings (income statement), statement of financial position (balance sheet), and statement of retained earnings. Case #1 Introduction You are a junior financial analyst for the CPA firm, ACCT621 LLP. Your firm specializes in providing a wide variety of internal financial solutions for local small businesses. Today is your first, a Senior Manager has requested your support on the first dient engagement to provide financial reporting service for the year end. Client Background Lonsdale Bakery Inc. was established in 1995 when it first opened its doors in North Vancouver BC. Lonsdale Bakery has grown over the years with the addition of pastry style all the time, but the "Cheesy and Cloudy" remain the most popular items amongst the 150 varleties of breads and pastries. The business has been expended to distribute its products in local grocery chain and it is currently owned by the Rogers and Shaw families. Lonsdale's operates out of 10,000 sqft location and it has one entrance into the bakery and a baking facility at the back. Lonsdale pays $5,000 per month for the rental of the space. Rogers and Shaw were able to negotiate with the landlord and were not required to pay the first month's rent in advance. All of the rental payments are current and up to date. For the last two years, Lonsdale's has had a very reliable accountant prepare its year-end financial statements and everything has been correct. This year, Lonsdale's accountant retired, and Rogers did the best he could recording their own financial information. For the information he was not sure about, he kept all of the required supporting documentation. Rogers hired your firm to prepare their financial statements for the year. They supplied you with his unadjusted trial balance and the information in Exhibit I to assist you. Supplementary Information The amount currently sitting in prepaids arose due the insurance policy last year. Rogers didn't know how to correct it, so he left it. This year's insurance policy was purchased on November 1 for $9,000. The policy runs from November 1 to October 31 of each year. • Rogers has a note that their owed $900 in wages to his employees for the period ending December 31st • The loan was incurred when the bakery was opened. The loan carried an interest rate of 8%. The interest is payable two months after year end and the principal is due in 2019. • Lonsdale's will sometimes book special events with small organizations that are allowed to pay after the event has taken place. On December 29th, a small company had a gathering at the bakery. The company was billed $1,089 and has 30 days to pay it. Rogers has not yet recorded this in his financial records. • Lonsdale's deciared a dividend of $5,000 on December 30th. • Rogers didn't know how to record depreciation for the year and so left it for you to record. deprication for all assets is charged using a straight-line method by taking the cost of the asset and dividing it by its expected useful life. The assets have expected useful lives as follows: o Computer: 5 years O Bakery equipment: 10 years o Furniture and fixtures: 20 years The information shows that Henrietta's owes $400 for a telephone bill and $400 for electricity for December. These amounts have not been recorded yet Hennetta s PIne bakery Unadjusted Trial Balance December 31, 2015 Account Name Debit $35,000 5,600 21,000 62,500 3.400 30,000 Credit Cash Accounts Receivable Food Inventory Merchandise Inventory Prepaids Computers Accumulated Amortization -Computers Bakery Equipment Accumulated Amortization - Bakery Equipment Furniture and Fixtures 12,000 90,000 18,000 150,000 Accumulated Amortization - Furniture and Fixtures Accounts Payable Accrued Liabilities Interest Payable Dividend Payable Long-term Loan Common Shares 15,000 18,000 220,000 50,000 22,000 468,500 127,000 Retained Earnings Food Revenue Internet Revenue Merchandise Revenue Food Expense Internet Expense Electricity Expense Telephone Expense Interest Expense Salary Expense Insurance Expense Supplies Expense Depreciation Expense Rent Expense 103,000 240,000 54,000 65,000 20.000 200,000 9.000 8,000 60.000 1,053.500 Lost so0 Based on the information you have prepare the adjusting joumal entries, an adjusting trial 053,500 1,053,500 Based on the information you have prepare the adjusting journal entries, an adjusting trial balance, the statement of earnings (income statement), statement of financial position (balance sheet), and statement of retained earnings.