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Account Case Analysis 2
Account Case Analysis 2
Supplementary Information
The amount currently sitting in prepaids arose due the insurance policy last year. Geoff
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.
Prepaid Insurance monthly consumption: 9,000/12 = 750
Dec Prepaid Insurance 9,000
31
Insurance Expense 1,500
Cash 9,000
Prepaid Insurance 1,500
To account for new Prepaid
Insurance and 2 month
consumption
Geoff has a note that he owed $900 in wages to his employees for the period ending
December 31st.
Dec Salary Expense 900
31
Salary Payable 900
To account for salaries owed
Henrietta’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. Geoff
has not yet recorded this in his financial records.
Dec Accounts Receivable 1,089
31
Service Revenue 1,089
To account for services
provided on account on Dec 29
Geoff didn’t know how to record amortization for the year and so left it for you to record.
Amortization 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
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.
Dec Telephone Expense 400
31
Electricity Expense 400
Accounts Payable 800
Cash $35,000
Prepaids 3,400
Computers 30,000
Accrued Liabilities -
Interest Payable
Dividend Payable -
Interest Expense 0
Depreciation Expense -
1,053,500 1,053,500
3 Inventories 83,500
4 Prepaids 7,500
5
Statement of Retained
6 132,689 Earnings
Non-Current Assets XHenrietta’s Pine Bakery
Statement of Retained Earnings
7 Property, plant, and equipment, net 202,500 For the year ended December 31, 2015
8
9 Beginning retained earnings 17,000
1 Net income 23,489
0 202,500
Cash dividends -5,000
1 Ending retained earnings 35,489
1 Total Assets 335,189
Current Liabilities
1
3 Short-term borrowing $
1
4 Accounts payable and accrued liabilities 19,700
1
5 Income and other taxes payable
1
6 Dividends payable 5,000
1
7 24,700
Non-Current Liabilities
1
8 Long-term debt 220,000
1
9 Other long-term liabilities
2
0 220,000
2
1 Total Liabilities 244,700
Shareholder's Equity
2
2 Share capital 50,000
2
3 Retained Earnings 40,489
2
4
2
5 90,489
Closing Entries
Dec Food Revenue 468,500
31
Internet Revenue 127,000
Merchandise Revenue 103,000
Service Revenue 1,089
Retained Earnings
699,589
Dec Retained Earnings 676,100
31
Food Expense
240,000
Internet Expense
54,000
Electricity Expense
65,400
Telephone Expense
20,400
Salary Expense
200,900
Insurance Expense 4,900
Supplies Expense 8,000
Depreciation Expense
22,500
Rent Expense
60,000
Dec Retained Earnings 5,000
31
Dividends 5,000
Post-Closing Trial Balance
XHenrietta’s Pine Bakery
Closing Trial Balance
As at December 31, 2015
Account Name Debit Credit
Cash 30000
Accounts Receivable 6689
Food Inventory 21000
Merchandise Inventory 62500
Prepaids 7500
Computers 30000
Accumulated Amortization – Computers 18000
Bakery Equipment 90000
Accumulated Amortization – Bakery
Equipment 27000
15000
Furniture and Fixtures 0
Accumulated Amortization – Furniture and
Fixtures 22500
Salary Payable 900
Accounts Payable 18800
Accrued Liabilities -
Interest Payable
Dividend Payable 5000
22000
Long-term Loan 0
Common Shares 50000
Retained Earnings 35489
39768 39768
9 9