Inflatable Fun For All $($IFFA$)$ is your own business. You own two inflatable bouncy castles. Kids love them!

You keep them in a rented garage and drive your own truck to parks and neighbourhood special events. You use your own cell phone to take reservations for private parties and events..

Your first summer month's transactions are listed below.

May $1$ You set up a bank account and acquire a business credit card.

The bank will charge you a fee of $$12$ at the end of each month.

May $2$ You borrow $$4,000$ from the bank.

May $3$ You deposit $$3,000$ of your own money into the business bank

account.

May $4$ You rent a garage for the next six months for $$400$ per month,

paying the full amount now.

May $5$ You register your business name for $$60$ with Service Ontario,

using the business credit card.

May $6$ You purchase, using your business credit card, supplies for

$$500$ plus HST$.$

May $7$ You purchase, using your business credit card, two portable generators

for $$1,500$ each from Softie Supply. HST is included.

May $8$ You buy a one$-$year liability insurance policy for $$2,400,$ plus $8\%$ tax,

paying cash.

May $10$ You purchase for $$200$ cash, plus HST$,150$ colour flyers to advertise

your business. You haven't used any yet.

May $11$ You pay a student $$60$ cash to distribute half of your flyers.

May $12$ You gave a quotation to a prospecive block party organizer, to see if he liked it

and would recommend you. You would normally have asked for a $$100$ deposit,

but as you are just starting out, you didn't do that this time.

May $15$ Two more customers hire you to set up at their events. You will charge

them each $$500,$ and they each give you a deposit of $$100.$

May $27$ Business is blowing up$!$ You have so far collected $$2,000$ in cash from

happy party$-$goers.

May $28$ You now have only $$150$ worth of supplies left.

May $31$ One month's rent on your garage has expired.

May $31$ You received your cell phone bill for the month. Of the $$80,$

three$-$quarters $($i$.$e$.75\%)$ was business calls. You will pay it next month.

May $31$ One month of your insurance policy has expired.

May $31$ The bank takes its monthly charge from your account,

plus an additional $$16$ for interest on your loan.

May $31$ One of your May $15$ customers held his event today. He will

pay you his balance next week. The other customer's party is next weekend.

May $31$ You pay four$-$fifths $($i$.$e$.80\%)$ of the

How will IFFA record the May $31$ rent expiry? $(1$ mark$)$

a$.$ increase Cash and decrease Rent Expense, $$400$

b$.$ increase both Accounts Payable and Rent Expense, $$400$

c$.$ decrease Prepaid Rent and increase Rent Expense, $$400$

d$.$ decrease Prepaid Rent and increase Rent Expense, $$2,400$

How will IFFA record the May $31$ cell phone transaction? $(1$ mark$)$

a$.$ decrease Cash $$60,$ increase Accounts Payable $$20,$ and increase Phone Expense $$80$

b$.$ increase both Accounts Payable and Phone Expense, $$60$

c$.$ decrease Cash and increase Phone Expense, $$60$

d$.$ increase both Accounts Payable and Phone Expense, $$20$

e$.$ decrease Cash and increase Phone Expense, $$20$

How will IFFA record the use of the insurance on May $31?(1$ mark$)$

a$.$ decrease Prepaid Insurance $$216$ and increase Insurance Expense $$216$

b$.$ decrease Prepaid Insurance $$200$ and increase Insurance Expense $$200$

c$.$ decrease Prepaid Insurance $$2,400$ and increase Insurance Expense $$2,400$

d$.$ decrease Prepaid Insurance $$2,592$ and increase Insurance Expense $$2,592$

e$.$ no entry is required.

How will IFFA record the bank transaction on May $31?(3$ marks$)$

a$.$ decrease Cash $$28,$ decrease Bank Loan Payable $$12,$ increase Interest Expense $$16$

b$.$ decrease Cash $$28,$ increase Bank Fees Expense $$12,$ increase Interest Expense $$16$

c$.$ decrease Cash $$28,$ increase Interest Expense $$12,$ decrease Bank Fees Expense $$16$

d$.$ decrease Cash $$28,$ decrease Bank Loan Payable $$16,$ increase Bank Fees Expense $$12$

e$.$ decrease cash $$28,$ decrease Bank Loan Payable $$16,$ decrease Retained Earnings $$12$

f$.$ decrease Cas

How will IFFA record the party on May $31?(1$ mark$)$

a$.$ no entry is required until the balance is paid

b$.$ increase both Cash and Deferred Revenue, $$400$

c$.$ increase both Cash and Service Revenue, $$400$

d$.$ increase both Accounts Receivable and Deferred Revenue, $$400$

e$.$ increase both Accounts Receivable and Service Revenue, $$400$

f$.$ Increase Accounts Receivable $$400,$ increase Service Revenue $$500,$ and decrease Deferred Revenue $$100.$