Reference no: EM133068750
Question - The following account balances relate to the Desjardins Company's December 31, 2017 year-end financial statements:
Retained earnings, Jan. 1, Year 7 $26,000
Cash 56,000
Income tax expense 24,000
Consulting revenue 250,000
Note payable 55,000
Repairs expense 10,000
Utilities expense 15,000
Supplies expense 14,000
Supplies 4,000
Salaries expense 100,000
Accumulated depreciation, equipment 5,000
Interest expense 6,000
Equipment 65,000
Dividends - Common 25,000
Common shares, Jan, 1, Year 7 1,000
Accounts receivable 18,000
Accounts payable 3,000
Depreciation expense 3,000
Notes:
There were no common shares issued or repurchased during the year.
The current portion of the Bank Loan payable was $4,000.
All accounts have a normal balance.
Required -
a) Prepare an income statement for the year ended December 31, 2017.
b) Prepare a statement of changes in equity for the year ended December 31, 2017.
c) Prepare a Balance Sheet as at December 31, 2017.
d) Compute the company's debt ratio.
2. The following transactions occurred for Mary's Consulting in the company's first month - January, 2018 - record journal entries for each transaction.
- January 1 Mary deposited $2,000 in to the company's bank account in exchange she received 100 common shares in the company.
- January 5 The company purchased $500 of office furniture on account. Payment is due on February 5. January 8 The company did consulting work for a client. Billed $3,000. Received half of the money, with the other half due in one week.
- January 10 Paid employee's wages of $200.
- January 13 Collected the amount due from January 8.
- January 15 Paid the bill from January 5.
3. Fred's Security has the following transactions and items requiring December 31, 2017 adjustments. Prepare journal entries as necessary.
a) i) The company purchased a 12-month insurance policy for $2,000 cash on March 1, 2017.
ii) A December 31 adjustment is required.
b) i) The company entered into a contract to provide security work for a client. The client paid Fred's security $10,000 on October 1, 2017. The company was required to provide security service for 12 months, from October 1, 2017 - November 30, 2018.
ii) A December 31 adjustment is required (assume the company provided security service as promised up to December 31).
c) The company pays salaries of $8,000 every week on Sunday, based on a 7-day workweek. Assume salaries are earned at the same rate each day. This year, December 31 falls on a Thursday. Record the necessary adjustment.
d) i) The company purchased a car for $15,000 cash on February 1, 2017. The car is expected to have a 10-year useful life and no residual value. The company's accountant wishes to use straight line depreciation.
ii) A December 31 adjustment is required.