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ASAC010 Assignment #1

Software Advisors Limited1


Software Advisors Limited was organized on January 1, 2017, to provide customized support to
design and maintain in-home computer networks. The company does not have any full-time
employees other than the principal shareholder and manager, Manroop Dhariwal. Instead it
hires consultants to perform the work for the company. Initially, the company and the
consultant split the revenue evenly. Consultants who stay with the company or who have
special expertise increase their percentage of client revenue to as much as 70% of the total
billing. This is an incentive for consultants to stay with the company and to develop their range
of skills.

Software Advisors Limited plans to use the following chart of accounts:

1000 Cash 4500 Retained Earnings


1100 Accounts Receivable 5000 RevenueClient Services
1200 Supplies 7000 Advertising Expense
1300 Prepaid Insurance 7100 Consultant Fees Expense
1400 Prepaid Rent (security deposit) 7200 Interest Expense
2000 Equipment 7300 Office Expense
2500 Client List 7400 Rent Expense
3000 Accounts Payable 7500 Telephone Expense
3100 Bank Loan Payable 7600 Travel and Entertainment Expense
4000 Common Shares 9000 Income Tax Expense

month of January:
The company had the following transactions in the

January 2 Issued 1,000 common shares for $15 each.


3 Borrowed $50,000 from the bank on a long-term loan.
4 Finalized the lease and paid the first month's rent of $3,000 plus a security
deposit of $3,000. The company shares office space with another business.
5 Purchased equipment and laptops for $40,000 cash.
10 Paid for an advertisement in a local paper, $500.
11 Purchased supplies on account, $1,000.
12 Took the manager of a local computer store to lunch and paid $50.


1
Kimmel, Paul D., Weygandt, Jerry J., Kieso, Donald E., Trenholm, Barbara, Irvine, Wayne. Financial Accounting:
Tools for Business Decision Making, Fifth Canadian Edition; Wiley.
Copyright 2012 John Wiley & Sons Canada, Ltd. Posted with permission from John Wiley & Sons Canada, Ltd.

January 13 Paid for several advertising spots on the local radio station, $3,000.

16 Attended a local business fair. Paid $1,000 for promotional items and $500 for
booth rental.
17 Summarized and recorded the billings to clients for the first two weeks of
January. Billings totalled $15,000. These amounts are due by the 10th of the
next month.
18 Calculated and recorded amounts payable to consultants for their work.
Payments of $7,500 will be made to the consultants on the 18th of the next
month.
20 Paid $1,000 for the company's share of the current month's office administration
expenses.

23 Paid $4,000 cash for a client list from a graduate student who had a similar
business and is moving out of town.

24 Received $3,000 from clients in settlement of their accounts billed on the 17th.
30 Paid annual insurance policy with coverage up to February 1, 2018 for $6,000.

30 Summarized and recorded the billings to clients for the last two weeks of
January. Billings totalled $18,000. These amounts are due by the 28th of the
next month.
31 Calculated and recorded amounts payable to consultants for their work.
Payments of $10,000 will be made to the consultants on the 28th of the next
month.
31 Made a bank loan payment for $1,000 of which $300 related to interest and
$700 to the principal.

31 Paid $1,200 to the Canada Revenue Agency for an income tax instalment.

Required

(a) Journalize the January transactions.


(b) Set up T accounts and post the journal entries prepared in (a).
(c) Prepare a trial balance at January 31, 2017.
(d) Prepare an income statement, statement of changes in equity, and statement of financial
position for January.
(e) Will Software Advisors Limited have enough money to pay its accounts payable in the
next 30 days? Explain.

Your assignment must be prepared and filed as an Excel workbook. Detailed formatting
requirements for assignments are found on the course website under Course Deliverables,
Assignment Format Requirements. Please ensure that any numbers that have been calculated
in the assignment are supported by workings (which can be in the Excel cell or linked to an
Excel cell elsewhere in your file), so we can effectively diagnose the cause of any errors. Do not
use Excel as a word processor, i.e. all calculations must be made in Excel, not on a
calculator and then keyed in.