BUSI 1043 CASE ANALYSIS #2

Supplementary Information
 The amount currently sitting in prepaids arose due the insurance policy last year. Geoff
didn’t know how to correct it, so he left it. This year’s insurance policy was purchased on
November 1 for $9,000. The policy runs from November 1 to October 31 of each year.
Prepaid Insurance monthly consumption: 9,000/12 = 750
Dec Prepaid Insurance 9,000
31
Insurance Expense 1,500
Cash 9,000
Prepaid Insurance 1,500
To account for new Prepaid
Insurance and 2 month
consumption

Prepaid Insurance   Insurance Expense

  9000 1500         3400  
              1500  
                 
                 
                 
Bal 7500       Bal 4900    

 Geoff has a note that he owed $900 in wages to his employees for the period ending
December 31st.
Dec Salary Expense 900
31
Salary Payable 900
To account for salaries owed

Salary Expense   Salary Payable

  200,000         200,000 200,000  
  900           900  
                 
                 
                 
Bal 200,900       Bal 900    
  The loan was incurred when the bakery was opened. The loan carried an interest rate of
8%. The interest is payable two months after year end and the principal is due in 2019.
Dec Interest Expense 17,600
31

 Henrietta’s will sometimes book special events with small organizations that are allowed
to pay after the event has taken place. On December 29th, a small company had a
gathering at the bakery. The company was billed $1,089 and has 30 days to pay it. Geoff
has not yet recorded this in his financial records.
Dec Accounts Receivable 1,089
31
Service Revenue 1,089
To account for services
provided on account on Dec 29

Accounts Receivable   Service Revenue

  5,600           1,089  
  1089              
                 
                 
                 
Bal 6,689       Bal 1,089    

 Henrietta’s declared a dividend of $5,000 on December 30th.

Dec 31 Retained Earnings 5,000
5,000
To pay dividends to shareholder(s)

Retained Earnings   Dividends

  5,000 22000         5,000  
                 
                 
                 
                  
Bal 17,000       Bal 5,000    

 Geoff didn’t know how to record amortization for the year and so left it for you to record.
Amortization for all assets is charged using a straight-line method by taking the cost of
the asset and dividing it by its expected useful life. The assets have expected useful lives
as follows:
o Computer: 5 years

SLM: 30,000/5 = 6,000/yr or 500/mth

o Bakery equipment: 10 years
SLM: 90,000/10 = 9,000/yr or 750 mth
o Furniture and fixtures: 20 years

SLM: 150,000/20 = 7,500/yr or 625/mth

Dec Depreciation Expense - Computer 6,000
31
Depreciation Expense - Equipment 9,000
Depreciation Expense – Furniture & Fixture 7,500
Accumulated Depreciation – Computer
6,000
Accumulated Depreciation – Equipment
9,000
Accumulated Depreciation – Furniture &
Fixture 7,500

Depreciation Expense - Computers   Accumulated Depreciation - Computers

  6,000           12,000  
              6000  
Bal 6,000       Bal 18,000    
                 
Depreciation Expense - Equipment   Accumulated Depreciation - Equipment
  9,000           18,000  
              9000  
Bal 9,000       Bal 27,000    
                 
Depreciation Expense - Furniture & Accumulated Depreciation - Furniture
Fixture   & Fixture
  7,500           15,000  
              7500  
Bal 7,500       Bal 22,500    

 The information shows that Henrietta’s owes $400 for a telephone bill and $400 for
electricity for December. These amounts have not been recorded yet.
Dec Telephone Expense 400
31
Electricity Expense 400
Accounts Payable 800

Telephone Expense   Electricity Expense

  400         400    
                 
Bal 400       Bal 400    
                 
Accounts Payable          
    18,000            
    400            
    400            
Bal 18,800              
Henrietta’s Pine Bakery
Unadjusted Trial Balance
December 31, 2015 

Account Name Debit Credit

Cash $35,000  

Accounts Receivable 5,600  

Food Inventory 21,000  

Merchandise Inventory 62,500  

Prepaids 3,400  

Computers 30,000  

Accumulated Amortization –   12,000

Computers

Bakery Equipment 90,000  

Accumulated Amortization – Bakery   18,000

Equipment

Furniture and Fixtures 150,000  

Accumulated Amortization –   15,000

Furniture and Fixtures

Accounts Payable   18,000

Accrued Liabilities   -

Interest Payable    

Dividend Payable   -

Long-term Loan   220,000

Common Shares   50,000

Retained Earnings   22,000

Food Revenue   468,500

 Internet Revenue   127,000

Merchandise Revenue   103,000

Food Expense 240,000  

Internet Expense 54,000  

Electricity Expense 65,000  

Telephone Expense 20,000  

Interest Expense 0  

Salary Expense 200,000  

Insurance Expense 9,000  

Supplies Expense 8,000  

Depreciation Expense -  

Rent Expense 60,000  

  1,053,500 1,053,500

  Adjusted Trial Balance

Henrietta’s Pine Bakery    
Unadjusted Trial Balance    
December 31, 2015     
Account Name Debit Credit
Cash $35,000  
Accounts Receivable 6,689  
Food Inventory 21,000  
Merchandise Inventory 62,500  
Prepaids 7,500  
Computers 30,000  
Accumulated Amortization – Computers   18,000
Bakery Equipment 90,000  
Accumulated Amortization – Bakery Equipment   27,000
Furniture and Fixtures 150,000  
Accumulated Amortization – Furniture and   22,500
Fixtures
Salary Payable   900
Accounts Payable   18,800
Accrued Liabilities   -
Interest Payable    
Dividend Payable   5000
Long-term Loan   220,000
Common Shares   50,000
Retained Earnings   17,000
Food Revenue   468,500
Internet Revenue   127,000
Merchandise Revenue   103,000
Service Revenue   1,089
Food Expense 240,000  
Internet Expense 54,000  
Electricity Expense 65,400  
Telephone Expense 20,400  
Interest Expense 0  
Salary Expense 200,900  
Insurance Expense 4,900  
Supplies Expense 8,000  
Depreciation Expense 22500  
Rent Expense 60,000  
  1,078,789 1,078,789
Income Statement

XHenrietta’s Pine Bakery

Income Statement
For the year ended December 31, 2015
       
Income      

Food Revenue   468,500  

Internet Revenue   127,000  

Merchandise Revenue   103,000  

Service Revenue   1,089 699,589

Expenses      

Food Expense   240,000  

Salary Expense   200,900  

Electricity Expense   65,400  

Rent Expense   60,000  

Internet Expense   54,000  

Depreciation Expense   22,500  

Telephone Expense   20,400  

Supplies Expense   8,000  

Insurance Expense   4,900  

Interest Expense   - 676,100

Net Income     23,489

 XHenrietta’s Pine Bakery
Consolidated Balance Sheet
As at December 31, 2015
  Current Assets   2015

1 Cash $ 35,000 Balance Sheet

2 Accounts Receivable   6,689

3 Inventories   83,500

4 Prepaids   7,500
5      
Statement of Retained
6     132,689 Earnings
       
  Non-Current Assets     XHenrietta’s Pine Bakery
Statement of Retained Earnings
7 Property, plant, and equipment, net   202,500 For the year ended December 31, 2015
8              
9       Beginning retained earnings     17,000
1 Net income     23,489
0     202,500
Cash dividends     -5,000
1 Ending retained earnings     35,489
1 Total Assets   335,189
       
  Current Liabilities    
1
3 Short-term borrowing $  
1
4 Accounts payable and accrued liabilities   19,700
1
5 Income and other taxes payable    
1
6 Dividends payable   5,000
1
7     24,700
  Non-Current Liabilities    
1
8 Long-term debt   220,000
1
9 Other long-term liabilities    
2
0     220,000
2
1 Total Liabilities   244,700
       
  Shareholder's Equity    
2
2 Share capital   50,000
2
3 Retained Earnings   40,489
2
4      
2
5     90,489
Closing Entries
Dec Food Revenue 468,500
31
Internet Revenue 127,000
Merchandise Revenue 103,000
Service Revenue 1,089
Retained Earnings
699,589
Dec Retained Earnings 676,100
31
Food Expense
240,000
Internet Expense
54,000
Electricity Expense
65,400
Telephone Expense
20,400
Salary Expense
200,900
Insurance Expense 4,900
Supplies Expense 8,000
Depreciation Expense
22,500
Rent Expense
60,000
Dec Retained Earnings 5,000
31
Dividends 5,000
Post-Closing Trial Balance
XHenrietta’s Pine Bakery
Closing Trial Balance
As at December 31, 2015 
Account Name Debit Credit
Cash 30000  
Accounts Receivable 6689  
Food Inventory 21000  
Merchandise Inventory 62500  
Prepaids 7500  
Computers 30000  
Accumulated Amortization – Computers   18000
Bakery Equipment 90000  
Accumulated Amortization – Bakery
Equipment   27000
15000
Furniture and Fixtures 0  
Accumulated Amortization – Furniture and
Fixtures   22500
Salary Payable   900
Accounts Payable   18800
Accrued Liabilities   -
Interest Payable    
Dividend Payable   5000
22000
Long-term Loan   0
Common Shares   50000
Retained Earnings   35489
39768 39768
  9 9