Question

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. • Geoff has a note that he 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. 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. • Henrietta's declared a dividend of $5,000 on December 30th. 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 o Bakery equipment: 10 years o Furniture and fixtures: 20 years • The information shows that Henrietta's owes

Answer 1

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The first step is to prepare an adjusted Trial Balance as below: adjustment Adjusted Trial S Balance debi t credi t Account Name Debit Credit Debit Credit cash 35000 35000 108 9 accounts receivable 5600 6689 food inventory 21000 21000 merchandise inventory 62500 62500 750 340 750 0 340 0 prepaid 3400 7500 computers 30000 30000 accumulated amort- computers 600 o 12000 18000 bakery equipment 90000 90000 accumulated amort- bakery eqpmt 900 0 18000 27000 15000 0 15000 15000 0 furniture & fixtures accumulated amort- furniture 750 0 15000 22500 accounts payable 18000 18000 170 0 accrued liabilities 1700 interest payable 176 00 17600 dividend payable 500 0 5000

22000 0 22000 0 long term loan common shares 50000 50000 retained earnings 22000 22000 46850 0 108 9 46958 9 food revenue 12700 0 12700 0 internet revenue 10300 0 merchandise revenue 10300 0 24000 0 24000 0 food expense internet expense 54000 54000 electricity exp 65000 400 65400 telephone exp 20000 400 20400 176 00 interest exp 17600 20000 0 20090 0 salary exp 900 340 0 750 0 insurance exp 9000 4900 supplies exp 8000 8000 depreciation exp 225 00 22500 rent exp 60000 60000 dividend expense 500 0 5000 10535 00 90535 10535 00 587 89 587 89 11013 89 11013 89

INCOME STATEMENT Income: food revenue 4695 89 1270 00 internet revenue 1030 00 merchandise revenue 6995 89 Expenses: food expense 2400 00 5400 0 internet expense electricity exp 6540 0 2040 0 telephone exp 2009 00 salary exp insurance exp 4900 supplies exp 8000 depreciation exp 2250 0 6000 0 6761 00 rent exp 2348 9 Operating Income 1760 0 Interest expense

Net Income 5889 BALANCE SHEET ASSETS LIABILITIES Current liabilities: Current Assets: 3500 0 Cash Accounts payable 18000 accrued liabilities Accounts receivable 6689 1700 Food inventory 2100 0 interest payable 17600 Merchandise inventory 6250 0 dividend payable 4230 0 5000 1326 89 Long term liabilities: Prepaid 7500 2200 00 Fixed Assets: Long term loan 3000 0 Equity Computers Less accumulated depn 1800 0 1200 0 Common Shares 50000 9000 0 Retained earnings 7288 9 Bakery equipment 22889 2700 0 6300 6300 Less accumulated depn 1500 00 Furniture and fixtures 2250 0 1275 00 Less accumulated depn 3351 3351

89 89