You've been given the trial balance for Big Bear Brewery, as of July 31. Today's date is September 3rd. A numbered company, 275492 BC Ltd. is thinking about purchasing Big Bear Brewery so the owner would like to know how well the company is doing. Using the Trial Balance given (Appendix 1), the owner, Brad Bear, would like you to put together a Multistep income statement and Balance sheet for the year ended July 31. He has included some notes that should be adjusted before completing the Income Statement and Balance Sheet (Appendix 2). Additionally, as his internal accountant, he wants you to comment if his company is doing well or not by comparing some industry ratios to the company ratios (Appendix 3). Required: • In good form, complete the needed journal entries (appendix 2). If no journal entry is required, write down "no entry needed". July 31 will be assumed for all dates (suggested time to spend on this, 15 minutes) • "Post" the journal entries to get an Adjusted Trial Balance (Appendix 1) (suggested time to spend on this, 5 minutes)

 • Using the Adjusted Trial Balance, Make a Multi-step income statement and Balance Sheet in good form (suggested time to spend on this, 40 minutes)

 • Compare one or two of the industry averages (appendix 3) to the company's ratios. Briefly comment if the company is doing better or worse than the industry averages, and what the ratio tells us. (suggested time to spend on this, 15 minutes) Appendix 1 Big Bear Brewery Trial Balance As at July 31 Account name DR CR Cash 161,910 Accounts receivable 32,000 Accounts Payable 15,254 Yeast Inventory 5,000 Wheat Inventory 15,000 Can Inventory 6,000 Bottling equipment 95,000 Accumulated Amortization - Bottling equipment 19,000 Fermenting Tank Equipment 350,000 Accumulated Amortization - Fermenting equipment 16,250 GoodWill 120,000 Trademarks 25,000 Long-term loan payable 100,000 Current portion of Long-term loan payable 25,000 Note Receivable 60,000 Other Receivables 65,000 Note Payable 50,000 Income Tax Payable 97,146 Income Tax Expense 97,146 Salaries Payable 45,000 Interest Revenue 29,144 Beer sales Revenue 1,580,488 COGS - Beer cans 650,000 Amortization Expense Salary Expense 325,000 Rent expense - Prepaid rent expense 96,000 Insurance Expense Prepaid Insurance Expense 24,000 Utilities Expense 50,000 Office Supplies Inventory 5,000 Retained Earnings 114,724 Common Shares 50 Office Supplies Expense Accounting Expense 5,000 Unearned Revenue 95,000 2,187,056 2,187,056 Appendix 2 Other notes about the year-end.

1) A deposit was made July 15th by a local hockey team for $95,000 for custom-made beer. On July 31 Big Bear had fulfilled 50% of the contract. 

2) Discussions are underway to unionize the staff at the brewery. If it goes through it will increase the Salary expense by $15,000 

3) No adjustment for Amortization or Depreciation has been done for the year-end. Information is as follows: Bottling Equipment, purchased last year, so this is year #2 (the company used a full year Amortization in both years) Purchase price 95,000 Residual value 15,000 Depreciation method double-declining Life 10 years Fermenting Tank Equipment Purchase price 350,000 Residual value 25,000 Depreciation method straight-line Life 20 years Goodwill Purchase price 120,000 Residual value - Depreciation method straight-line Life 15 years 

4) Incorrectly included in the ending can inventory are $2,000 worth of cans that can't be used 

5) Rent is paid in advance for the entire year. January 1st, the company paid $96,000 to the rental company for 12 months of rent More on next page 

6) Insurance is paid June 1 for the next 12 months and was allocated to the pre-paid insurance account when purchased 

7) A count of Office Supplies Inventory at July 31 showed $2,000 of supplies on hand

8) Interest revenue is from a loan to Brad Bear's brother and is not a regular line of business for the company. Appendix 3 - Industry Average ratio's Industry Average Gross Profit Margin 50% Profit margin 15% Current Ratio 1.35 COGS % 50% Return on Assets 1.40 Working capital 75,000

Answer rating: 100% (QA)

Journal Entries 1 No entry needed 2 Unionization Expense 15000 Salary Expense 15000 3 No entry needed 4 Can Inventory 2000 COGSBeer Cans 2000 5 Prepaid Rent Expense 96000 Cash 96000 6 Prepaid Insuranc... View the full answer