Reference no: EM131388794

Question Information -

Sure Fire Sporting Company is a Canadian retail store (and a public corporation) which sells a wide variety of sporting equipment.                                       

The partially completed pre-closing (before tax) trial balance accounts for the fiscal year ended March 31, 2014 are:       

Accounts payable		$ 97,000
Accounts receivable	$ 103,000
Accumulated Depreciation: Plant Assets		250,000
Advertising expense	45,000
Allowance for doubtful accounts		39,000
Available for Sale Investment	100,000
Bonds payable		550,000
Cash	97,000
Common Shares		650,000
Cost of Goods Sold	2,475,000
Damage due to snow storm (note 2)	29,000
Depreciation expense	37,000
Discount on Bonds	27,986
Gain on sale of discontinued operations		96,500
General and administrative expenses	43,000
Impairment loss on assets from discontinued operations	3,000
Insurance Expense	26,500
Interest expense	65,000
Interest payable		15,000
Inventory	274,560
Investment revenue		7,500
Land	1,589,000
Loss on sale of plant assets	2,200
Unrealized gain on AFS Investment		4,000
Plant Assets	2,145,000
Preferred Shares		500,000
Retained Earnings		908,646
Sales revenue		4,562,000
Sales returns and allowances	2,000
Unearned revenue		85,000
Utilities expense	8,400
Wages and Salaries expense	692,000
	$ 7,764,646	$ 7,764,646

Recommended order and format of presentation:

1. You must prepare the statements in Word or Excel not alternative programs - Excel would be preferred and simpler for your preparation.  You can copy and paste the trial balance above into Excel which will allow you to link cells rather than retype numbers.

2. Start with the Statement of Comprehensive Income but you must read all of the notes and additional information before starting this statement.

3. You canprepare the tax entries before preparing the Statement of Comprehensive Income but you must prepare them before the Statement of Financial Position because they will result in an additional liability account and amount.

4. Prepare the Statement of Financial Position to the end of Total Assets.

5. Before preparing the Liabilities and Shareholders' Equity sections of the Statement of Financial Position, prepare the Statement of Changes in Shareholders' Equity.  This will give you the closing (reported) balances for the Statement of Financial Position Equity section.

Notes and additional information

HINT: Although textbook questions use a calendar year-end, corporations are not required to have a calendar year-end. The year-end is shown above the trial balance.

Note 1: The company has not yet recorded income taxes for the year so all items shown are before tax.The corporate income tax rate is 35% on all items.                                         

Note 2: The damage due to the snow storm arose as a result of a huge snow fall in Victoria.  The snow caused the ceiling to partially collapse at the retail store.  The company has never has such damage before, and the company has a building maintenance review every year to ensure the upkeep of property.                                        

Note 3: On November 15, 2013, the company formally decided to discontinue its scuba diving division. The division was sold on February 1st, 2014. The results of the scuba diving division have been included in the above trial balance.  A review of the figures reveals the following:

• On November 15, 2013 on the date of discontinuance, assets were written down to lesser of NRV or cost which resulted in a recorded impairment loss. The asset values did not change between the date of discontinuance and the sale date.
• Sales revenue includes $350,000 from the scuba diving division.
• COGS includes $275,000 from the scuba diving division.
• 15% of the depreciation, utilities, and wages and salaries expense relate to the scuba diving division.
• All other expenses, losses, revenues relate to the remaining continuing divisions of the business.

Note 4: On March 1, 2014 the board of directors declared a $30,000 dividend which was paid before year end.                                   

Note 5: Common Shares has 1,000,000 authorized and 500,000 shares issued by the end of the year.

On December 31:  500,000 common shares were retired at an average value of $3 each as a company planned repurchase, they were issued at $3 initially.                                 

On January 1: 500,000 common shares were issued at $1.3 per share.                                    

Note 6: Preferred shares had 250,000 shares authorized and 250,000 issued by the end of the year.  The preferred shares were all issued on January 22.                                   

The preferred shares dividends are cumulative and pay $.10 (ten cents) per share.

Sure Fire requires information for each class of share's dividends (relevant).      

Note 7: The Available for Sale Investment was purchased on January 18, 2014 for 96,000. Management has no immediate plans to sell this investment.                                     

Required:

1. Prepare, in good form, a multi-step Statement of Comprehensive Income for 2014 in a single statement (continuous) format. (Hint: The "single statement" refers to the presentation of OCI and is NOT a single step statement as you would have prepared in first year.)

2. Prepare all relevant tax journal entries needed in order to calculate taxes for the financial statements.  Remember this will add accounts to the trial balance that are not currently recorded.  All other adjusting entries have been made.                                          

3. Prove the total tax expense (or recovery) from your journal entries (requirement 2) to the recorded tax amounts on your statement. (Hint: Remember the presentation and relationship of tax to DR or CR items. Review on your handout if necessary.)        

4. Prepare a classified Statement of Financial Position for 2014.(Hint: Classified refers to current and non-current classification including sub-categories.)

5. Prepare a Statement of Changes in Shareholders' Equity (Hint: remember descriptions and total columns and the timing of transactions.)