Reference no: EM132715808
Question - Pandama Limited has the following information available for accruals for the year ended December 31, 2018. The company adjusts its accounts annually.
1. The December utility bill for $425 was unrecorded on December 31. Pandama paid the bill on January 21.
2. Pandama is open seven days a week and employees are paid a total of $3,500 every Monday for a seven-day (Monday-Sunday) workweek. December 31 is a Monday, so employees will have worked one day (Monday, December 31) that they have not been paid for by year end. Employees will be paid next on Monday, January 7.
3. Pandama signed a $45,000, 5% bank loan on November 1, 2017, due in two years. Interest is payable on the first day of each following month and was last paid on December 1.
4. Pandama receives a fee from Dan's Deli next door for sandwiches sold to customers using Pandama's facility. The amount owing for December is $300, which Dan's Deli will pay on January 4. (Hint: Use the Fees Earned account.)
5. Pandama rented some of its unused warehouse space to a client for $6,000 a month, payable the first day of the following month. It received the rent for the month of December on January 2.
Instructions -
(a) For each situation, prepare the adjusting entry required at December 31.
(b) For each situation, prepare the journal entry to record the subsequent cash transaction in 2019.
Five independent situations follow:
1. Three computer science professors have formed a business selling technology that enables digital monitoring of cardiac patients outside of hospital settings. Each has contributed an equal amount of cash and knowledge to the venture. While their plans look promising, they are concerned about the legal liabilities that their business might confront.
2. Jamie Martin, a student looking for summer work, has opened a bicycle rental shop in a small shed on the Trans Canada Trail system.
3. Kevin Jones and Alex Baker each owned businesses manufacturing customized snowboards and have now decided to combine their businesses. They expect that in the coming year they will need to raise funds to expand their operations.
4. Mason McColl, Emily Underhill, and Judy Lawson recently completed their Chartered Professional Accountant training after articling with a public accounting firm. Friends since childhood, they have decided to start their own accounting practice.
5. Anthony Johnson wants to install and then rent storage lockers in airports across the country. His idea is that customers will be able to leave their luggage at the airport if they have a long layover so they can explore the local surroundings without being burdened with luggage. This will require the rental of space in each airport as well as the hiring of employees and other operating costs.
Instructions -
(a) In each of the above situations, explain what form of organization the business is likely to take: proprietorship, partnership, public corporation, or private corporation. Give reasons for your choice.
(b) Indicate which type of accounting standards-IFRS or ASPE-each of the business organizations you identified in part (b) is most likely to use for external reporting purposes.