Question

Q2. Kelsey Kennels Inc. (KKI) is a company that provides boarding services for domestic pets outside of Brandon, Manitoba. You are the newly hired assistant controller for this company. KKI was established on November 1, 2019 and the following transactions occurring in the month of November are provided for your review:

1. There are four owners that jointly contributed $40,000 cash ($10,000 each), a building valued at $80,000 and land valued at $125,000. Each investor received 3500 shares in exchange.

2. Built a dog run for $34,000. The company paid half the amount in cash on November 30, 2019, and signed a two-year note for the balance.

3. Purchased food and supplies on account for $2,450 to be used over the winter.

4. Purchased a one-year insurance policy for $2,400 cash at the end of the month.

5. Provided kennel services to customers, on credit, in the amount of $17,400.

6. Paid $1,500 on accounts payable for previous purchases.

7. Received a payment of $2,000 from a customer to secure a kennel spot over the upcoming Winter Break.

8. Received $9,000 from customers on accounts receivable.

9. Paid $3,500 in wages to employees who worked during the month.

10. Received a bill from Manitoba Hydro for $900 for usage in November; the bill

will be paid in December.

11. Paid $400 cash dividend to each investor at the end of the month.

Required:

1. Set up T-accounts (all accounts will have a zero-beginning balance) and record the effects of each transaction for KKI in November. Make sure to reference each transaction with the transaction number and show the ending balances in the T- accounts.

2. Prepare a statement of earnings for the month ended November 30, 2019 and a classified statement of financial position as at this date.

Answer 1