Question

The following information is given for Aphria Farming Services Inc. for the year ended December 31, 2018. The account balances (all of which had their normal balance of debit or credit) at the beginning of 2018 (January 1, 2018) were as follows:

Cash $ 2,200

Accounts Payable $ 23,700

Accounts Receivable $ 4,400

Income Tax Payable $ 15,100

Prepaid Supplies (Feed and Straw) $ 27,800

Interest Payable $ 2,700

Land (cost) $ 167,000

Wages Payable $ 14,200

Buildings (cost) $ 115,000

Notes Payable (due in 2022) $ 60,000

Accumulated Depreciation (Buildings ) $ 36,000

Common Shares $ 150,000

Equipment $ 57,000

Retained Earnings, 12/31/2017 $ 55,200

Accumulated Depreciation (Equipment) $ 16,500

During the year ended December 31, 2018, the following transactions occurred:

a. Aphria provided farming services to customers, all on credit, for $210,300. Aphria rented stables to customers for $20,500 paid in cash. Aphria rented its grounds to individual riders, groups, and show organizations for $41,800 paid in cash.

b. There remains $15,600 of accounts receivable to be collected at December 31, 2018.

c. Feed in the amount of $62,900 was purchased from suppliers on credit and debited to the prepaid supplies account.

d. Straw was purchased for $7,400 cash and debited to the prepaid supplies account.

e. Wages payable at the beginning of 2018 were paid early in 2018. Wages were earned by employees and paid during 2018 in the amount of $112,000.

f. The income tax payable at the beginning of 2018 was paid early in 2018.

g. Payments of $73,000 were made to creditors for supplies previously purchased on credit.

h. One year’s interest at 9% was paid on the notes payable on July 1, 2018.

i. During 2018, Jon Aphria, a principal shareholder, purchased a used car for his wife, Jennifer. The car cost $7,000, and Jon used his personal credit to purchase it.

j. Property taxes were paid by cheque on the land and buildings in the amount of $17,000.

k. Dividends were declared and paid by cheque in the amount of $7,200.

Year End (December 31, 2018) Data

The following data is available for preparation of adjusting journal entries at December 31, 2018:

. Supplies (feed and straw) in the amount of $30,400 remained unused at year-end.

. Annual depreciation on the buildings is $6,000.

. Annual depreciation on the equipment is $5,500.

. Wages of $4,000 were unrecorded and unpaid at year-end.

. Interest for six months at 9% per year on the note is unpaid and unrecorded at year-end.

. Income taxes of $16,500 were unpaid and unrecorded at year-end.

Required:

1.Post the beginning balances at January 1, 2018 to T accounts. Prepare required journal entries for all transactions a to k and post the journal entries to the relevant T accounts. Add any new T accounts you need.

2.Prepare all required adjusting journal entries at December 31, 2018 and post the adjusting journal entries to the T accounts. Add any new T accounts you need..
3. Prepare, in proper financial statement format, a single step statement of earnings for the year ended December 31, 2018..

4. Prepare, in proper financial statement format, a statement of retained earnings for the year ended December 31, 2018.

5. Prepare, in proper financial statement format, a classified statement of financial position as at December 31, 2018.

Answer 1

Requirement 1: Prepare journal entries and T-accounts as follows

Requirement 2: Prepare the following adjusting entries

Requirement 4: Prepare the following income statement

AF Services Inc.
Income Statement
For the Year Ended December 31, 2018
Revenues		$272,600
Operating Expenses:
Wage expenses	$116,000
Supplies expenses	$67,700
Property tax expenses	$17,000
Depreciation expense	$11,500
Interest expense	$5,400
Income tax expense	$16,500
Total operating expenses		$234,100
Net income		$38,500

Requirement 5: Prepare the following statement of retained earnings

AF Services Inc.
Statement of Retained Earnings
For the Year Ended December 31, 2018
Retained earnings, Beginning balance		$55,200
Add: Net income		$38,500
		$93,700
Less: Dividends paid		$7,200
Retained earnings, Ending balance		$86,500

Requirement 5: Prepare the following balance sheet

AF Services Inc.
Statement of Financial Position
December 31, 2018
Assets
Current assets
Cash		$12,300
Accounts receivable		$15,600
Prepaid supplies		$30,400
Total current assets			$58,300
Non-current assets
Property, Plant and Equipment:
Land		$167,000
Buildings	$115,000
Less: Accumulated depreciation	($42,000)	$73,000
Equipment	$57,000
Less: Accumulated depreciation	($22,000)	$35,000
Total non-current assets			$275,000
Total assets			$333,300
Liabilities
Current liabilities:
Accounts payable	$13,600
Wages payable	$4,000
Interest payable	$2,700
Income tax payable	$16,500
Total current liabilities		$36,800
Non-current liabilities:
Notes payable		$60,000
Total liabilities			$96,800
Stockholders Equity
Common stock		$150,000
Retained earnings		$86,500
Total stockholders equity			$236,500
Total liabilities and stockholders equity			$333,300