Question

Puppy Walk Inc. is a dog walking service and retailer of dog supplies and food operating out of Vancouver. The founder, Doggy Higgins is the president and owns 100% of the common shares. The company’s yearend is December 31. The inhouse bookkeeper had a car accident and is unfortunately not able to prepare the 2019 financial statements. It is now January 2020 and you have been asked to make any required adjusting journal entries and prepare the 2019 financial statements. The unadjusted trial balance for Puppy Walk is contained in the appendix: The following information has been made available for you to make any required adjusting entries. 1. The following invoices were received in January 2020 and were not accrued in 2019. Legal fees $1,200 Janitorial services $1,200 Air conditioner repairs $400 New photocopier $3,200 2. You noticed a purchase order placed by Puppy Walk was placed for a new warehouse forklift in November 2019 that will be delivered in April of 2020. At time the order was placed a $4,000 deposit was provided and it was charged to the equipment account. 3. 15% of the bank loan will be paid in 2020. The remainder will be paid over the following four years. No payments on the principal of the loan were made in 2019. 4. The interest rate on the bank loan is 7% per annuum paid quarterly. There was no payment made for the last quarter of the year 5. Depreciation on the current equipment is $21,000. 6. The now photocopier was delivered and operating November 30, 2019 and has a life of 4 years with a residual value of $400. Copyright Steve Gibson 2020 . 7. The insurance was purchased August 31, 2019 and covered two years from that date. 8. A physical review of some inventory in the warehouse that was purchased for $7,000 is now obsolete and worthless. (chapter 7 of textbook) 9. During 2019 an old photocopier that had an original cost of $3,000 and accumulated depreciation of $1,700 was thrown out. (chapter 8 of textbook). No entry was recorded at the time. 10. $11,000 of staff salaries were owed at the end of the year as well, Doggy Higgins is going to be paid a $10,000 bonus in January 2020. 11. A physical count of the supplies inventory indicated the value at year-end was $4,200. 12. In October a customer paid a $4,500 deposit for a custom dog cage to be delivered in January. At the time, this was recorded as sales. 13. Income is taxed at 25%. In Excel, prepare all the necessary journal entries, adjusted trial balance, closing entries, income statement, statement in changes in shareholders’ equity and balance sheet for December 31, 2019 and year ending December 31,2019.

Trial Balance as December 31, 2019 Debit Credit Cash 500,000 Accounts Payable 95,000 Accounts Receivable 270,000 Equipment 372,000 Accumulated Depreciation equipment 100,200 Advertising expense 25,000 Bank loan 300,000 Sales 2,650,000 Common shares 147,450 COGS 1,400,500 Dividends declared 150,000 Goodwill 185,000 Income tax expense interest expense-bank loan 15,750 inventory 320,000 Prepaid insurance 24,000 Rent expense 100,000 Retained earnings 452,000 Salaries expense 370,000 Bonus expense Supplies Inventory(A) 12,400 Customer deposits (L) Depreciation expense Legal fees Repairs expense interest payable Deposit (A) Insurance expense salary payable bonus payable supplies expense Loss on disposal of equipment Janitorial services Current portion of bank loan Income tax payable Total 3,744,650 3,744,650

Answer 1

Trail Balance	Trail balance		Adjustment entries		Adjusted trail balance
Dec 31, 2019	Dr	Cr	Dr	Cr	Dr	Cr
Cash	500000				500000
Accounts payable		95000		6000		101000
Accounts receivable	270000				270000
Equipment	372000		3200	7000	368200
Accumulated depreciation equipment		100200	1700	21058		119558
Advertising expense	25000				25000
Bank loan		300000	45000			255000
Sales		2650000	4500			2645500
Common shares		147450				147450
COGS	1400500		7000		1407500
Dividends declared	150000				150000
Goodwill	185000				185000
Income tax expense			165910.5		165910.5
Interest expense-bank loan	15750		5250		21000
Inventory	320000			7000	313000
Prepaid insurance	24000			4000	20000
Rent expense	100000				100000
Retained earnings		452000				452000
Salaries epxense	370000		11000		381000
Bonus expense			10000		10000
Supplies inventory	12400			8200	4200
Customer deposit				4500		4500
Depreciation expense			21058		21058
Legal Fees			1200		1200
Repairs expense			400		400
Interest payable				5250		5250
Deposit			4000		4000
Insurance expense			4000		4000
Salary payable				11000		11000
Bonus payable				10000		10000
Supplies expense			8200		8200
Loss on disposal of equipment			1300		1300
Janitorial services			1200		1200
Current portion of bank loan				45000		45000
Income tax payable				165910.5		165910.5
						0
	3744650	3744650	294918.5	294918.5	3962168.5	3962168.5
Assumption depreciation on current equipment does not include depreciation on photocopier machine			0

Journal entries
Legal fees	1200
Janitorial services	1200
Air conditioner repairs	400
Equipment	3200
To accounts payable		6000
(being expenses accrued and asset purchased on account)
(As accrued expense not given it is added to accounts payable alternatively it may be added to accued expenses account)
Deposit	4000
To equipment		4000
(being deposit given for asset purchase corrction entry)
Current portion of bank loan	45000
To bank loan		45000
(being bank loan current liability created)
Interest expense-bank loan	5250
To interest payable		5250
(being accrued interest for the quarter)
Depreciation expense	21000
To accumulated depreciation		21000
(depreciation on old equipment)
Depreciation expense	58
To accumulated depreciation		58
(being depreciation on new equipment rounded off)
Insurance expense	4000
To prepaid insurance		4000
(being insurance for the year expensed)
Cost of Goods sold	7000
To inventory		7000
(being obselete inventory written off/expensed)
Loss on disposal of equipment	1300
Accumulated depreciation	1700
To equipment		3000
(being asset disposed off)
Salary expense	11000
Bonus expense	10000
To salaries payable		11000
To bonus payable		10000
(being salary and bonus accrued)
Supplies expense	8200
To supplies		8200
(being supplies expensed)
Sales	4500
To customer deposit		4500
(being rectification entry for customer deposit)
Income tax expense	165910.5
To income tax payable		165910.5
(being income tax payable)

Depreciation on photo copier	=(cost-residual value)/useful life
	=(3200-400)/4/12
	58.33
Round off	58

Income statement
Sales	2645500
COGS	1407500
Gross margin	1238000
Operating expenses
Rent expense	100000
Salaries epxense	381000
Bonus expense	10000
Depreciation expense	21058
Legal Fees	1200
Repairs expense	400
Insurance expense	4000
Supplies expense	8200
Loss on disposal of equipment	1300
Janitorial services	1200
Advertising expense	25000
Total operating expenses	553358
Operating profit	684642
Interest expense-bank loan	21000
Profit before tax	663642
Tax expense	165910.5
Profit after tax	497731.5
Statement of changes in equity
Retained earnings begg balance	452000
Net income	497731.5
Dividend declared	150000
Reatined earnings end balance	799731.5
Balancesheet
Assets
Current Assets
Cash	500000
Accounts receivable	270000
Inventory	313000
Prepaid insurance	20000
Supplies inventory	4200
Deposit	4000
Total Current Assets	1111200
Non-current Assets
Equipment	368200
Accumulated depreciation equipment	-119558
Goodwill	185000
Total non-current assets	433642
Total assets	1544842
Liabilities
Current liabilities
Accounts payable	98200
Customer deposit	4500
Interest payable	5250
Salary payable	11000
Bonus payable	10000
Current portion of bank loan	45000
Income tax payable	165910.5
Accrued expenses	2800
Total current liabilities	342660.5
Non-current liabilities
Bank loan	255000
Total liabilities	597660.5
Equity
Common stock	147450
Retained earnings	799731.5
Total equity	947181.5
Liabilites+equity	1544842