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#1 Required: a) Journalize the selected following transactions for ABC Sales and Service Company Inc. for 2019:
July 1 – Alex B. Carter opened an incorporated company by investing $400,000 cash in his business.
July 1 – Paid the first year’s rent of $36,000.
July 15 – Purchased $2,000 of supplies on credit.
July 19 – Received $5,000 from a client for work to be started in November, 2019. The contract calls for $2,000 of work to be done each month from Nov. 1/2019 to Mar.31/2020. The balance of the contract will be paid on Mar.31/2020.
Sept. 1 – Lent $5,000 to an employee (James Smith), accepting a 6-month, 12% note receivable.
Oct. 16 – Signed a contract to sell $6,000 of product per month starting January 1, 2019.
ABC has a December 31st year end. The following selected information is available on December 31, 2019:
• Supplies on hand = $400
• Interest has accrued on the Sept 1st Note.
• Estimated warranty expense is 1% of total sales of $600,000
• The allowance for doubtful accounts is estimated at 5 % of total Accounts Receivable of $80,000. The current balance in the Allowance is a $300 credit.
After preparing a bank reconciliation, you identified reconciling items as:
- Outstanding cheques of $750
- Bank error of $50
- EFT deposit from a customer for $250
- EFT withdrawal for utilities of $175
- Bank service charges of $35
Required: b) Using the above information and reviewing the transactions given in part a), journalize all adjustments that would be required on December 31, 2019. Show all calculations! No adjusting journal entries have been made to the accounts yet.
Mar. 1 – Received payment for Sept. 1 Note.
#2 Required:
a) Prepare the required journal entries to record the following transactions assuming the FIFO inventory perpetual method. Ignore taxes. Beginning inventory was 5,000 units costing $6 per unit.
Nov. 3 – Purchased 15,000 units of inventory at $7 per unit on credit
Nov. 10 – Paid for the purchase made on Nov. 3rd.
Nov. 30 – Sold 12,000 units for $20 per unit on credit
Dec. 30 – the customer of Nov. 30 paid their account
b) Record the sales journal entry for Nov. 30 instead assuming that PST is 7% and GST is 5%.
# 3 Required:
Blue Company pays total salaries of $55,000 per week. Canada Pension Plan contributions are $2,076 for the employee, and the same for the employer. Income taxes withheld are $8,875. Employment Insurance premiums are $1,238 for the employee and 1.4 times that amount for the employer. Record the payroll journal entries for Nov. 25.
# 4 Required:
Journalize the following transactions for the Suchuck Ladder Company: 3 July 1st – Purchased Land, Building and Equipment for $1,200,000 by paying $200,000 cash and signing a 1 year promissory note at 8% for the balance. An appraisal showed the market value of the Land as $560,000, the building as $490,000, and the equipment as $350,000.
July 1st – Paid the following costs relating to the purchase:
• $4,000 to transfer title of the land to their name
• $3,000 for attachments to the equipment to make it operational
December 31st – Recorded depreciation on the Building and equipment. The Building is depreciated using the straight line method and is estimated to have a useful life of 20 years with a residual value of $40,000 at that time. The Equipment is depreciated using the straight line method and is estimated to have a useful life of 5 years with a residual value of $50,000 at that time.
December 31st – Recorded interest on the note payable.
April 1st (following year) – Sold the equipment for $225,000 cash.
July 1st (following year) – Paid the promissory note in full.
5) Required: Depreciation Methods Assume that your business purchased a truck for $100,000 with an expected useful life of 8 years or 400,000 km and a residual value of $20,000. The truck is used for 50,000 in its first & second year, and 72,000 km in its third year. Calculate depreciation using the straight-line method and the units of production method for year 1 & 3.
If you wanted to sell the truck after year 3. IF you used the “Straight line” method of depreciation what would you hope to sell it for?
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