Question

You have been approached by your friend, also a TRU student, to explore business opportunities in
tourism industry. The adventure guided tours are becoming increasingly popular in the province of
British Columbia and your business plan will be based on organizing guided tours exploring Thompson
Okanagan region.

• After reviewing your notes from Financial Accounting course which you both took (and loved….)
you decided that the best way to form a business will be to set up a corporation, registered in the
province of British Columbia under the name “Hiking Is Fun, Inc” and selected September 30 to be
your business year end (this means that the first fiscal year will only have 6 months).
• After some research you concluded that since your total annual revenues will most likely not
exceed $ 30,000 threshold your business falls in Small supplier category and you do not need to
register for GST.
• On April 2, 2016 both you and your buddy, Alex Friend, contributed $ 5,000 each (total $
10,000) into the business venture (in exchange for common shares) and opened a business bank
account at RBC.
• Also, on April 2, 2016 you completed the necessary paperwork to set up (incorporate) the
business and paid $ 500 cash to the Minister of Finance of BC (record as Legal fees expense.).
• On June 1, 2016 you negotiated a loan for $ 15,000 to buy a passenger van (cash will be
available when you purchase the vehicle). The loan is to be repaid in full on May 31, 2018. The
annual interest of 5% is payable annually (May 31 each year).
• After some shopping around, you found a suitable van which you purchased for $ 18,000 on June
2, 2016. You used $ 15,000 loan and $ 3,000 cash to pay for this fixed asset. The vehicle is
expected to have a useful life of 10 years and no salvage value.
• Your business is taking off. In June you provided guided services to a group of German
tourists, earning $ 2,000 service revenues (paid in cash). Use June 30 date to record this event.
• Following is the summary of all other expenses incurred by your business (use June 30 as the
date to record these transactions):
Fuel Expenses (cash)   
$ 300
Vehicle Insurance (paid on June 1, for 12 months period) 2,400
Office supplies *   
600
Office expenses
450
*(purchased on account at Staples on June 30, payment is due in 30 days from the date of purchase,
the supplies are expected to be used over the next 12 months)

J. Noskova (Winter 2019)
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ACCT 1000 Homework – Part 1
Hiking is Fun Inc.
Required:

Use Term project – Part 1 submission booklet for all items listed below:

1. Journalize all transactions.
2. Set up the accounts (T-accounts) required to record the business events listed above.
3. Post the transactions in T accounts set up in Step 2.
4. Calculate the account balances as at June 30, 2016.
5. Prepare Trial balance as at June 30, 2016.
6. Prepare Income Statement and Statement of Changes in Equity for the first quarter, ended June
30, 2016.
7. Prepare Statement of Financial Position (classified) dated June 30, 2016.
8. List three forms of business organizations.
9. What are the two types of corporations? Explain the difference between them.
10. Why did you decided to set up a corporation? Provide at least three reasons

Answer 1