Get Cheapest Assignment in Australia, UK, US, UAE, Canada and NZ Order Now

ACCOUNTING SIMULATION LE MUR DU SON LTD

0 Comments

END OF STUDIES PROJECT I

ACCOUNTING SIMULATION LE MUR DU SON LTD

Get this end of studies project for just $250 CAD now at

Email: Punjabassignmenthelp@gmail.com

Call or whats app: +918053884564

WRITTEN BY: BERNARD AND CARRIER PREPARED BY: C. GUMELLI AND R. GRECO

Table of Contents

Introduction Page -1-

Work to Be Completed………………………………………………………………………………………………………………………………………………………………………………………….. Page -4-

Chart of Accounts …………………………………………………………………………………………………………………………………………………………………………………………………. Page -5-

December 20X4 Transactions ……………………………………………………………………………………………………………………………………………………………………………….. Page -7-

Adjusting Entries and Information for the Preparation of Financial Statements…………………………………………………………………………………………………. Page -13- Trial Balance as at November 30, 20X4 ………………………………………………………………………………………………………………………………………………………………. Page -16-
Appendices ………………………………………………………………………………………………………………………………………………………………………………………………………….. Page -19- Appendix A-1 Employment Insurance Contributions Table ……………………………………………………………………………………………….. Page -20-
Appendix A-2 Quebec Pension Plan Contributions Table…………………………………………………………………………………………………… Page -21-
Appendix A-3 Federal Income Tax Deductions Table ………………………………………………………………………………………………………… Page -22-
Appendix A-4 Provincial Income Tax Deductions Table…………………………………………………………………………………………………….. Page -24-
Appendix B Simplified Income Tax Return ……………………………………………………………………………………………………………………… Page -26-
Appendix C-1 Bank Statement …………………………………………………………………………………………………………………………………………….. Page -27-
Appendix C-2 Bank Reconciliation ……………………………………………………………………………………………………………………………………… Page -28-
Appendix D T4 and Releve 1 ……………………………………………………………………………………………………………………………………………. Page -29-
Annex E TD1………………………………………………………………………………………………………………………………………………………………. Page -30-
Annex F MR-19…………………………………………………………………………………………………………………………………………………………… Page -32-

Schedule of Accounts Receivable ………………………………………………………………………………………………………………………………………………………………………… Page -36-

Schedule of Accounts Payable……………………………………………………………………………………………………………………………………………………………………………… Page -37-

Financial Statements…………………………………………………………………………………………………………………………………………………………………………………………….. Page -38-
Income Statement……………………………………………………………………………………………………………………………………………………………………………… Page -39-
Statement of Retained Earnings ………………………………………………………………………………………………………………………………………………………… Page -40-
Balance Sheet…………………………………………………………………………………………………………………………………………………………………………………….. Page -41-
Notes to the Financial Statements …………………………………………………………………………………………………………………………………………………….. Page -43-
Details for Income Statement……………………………………………………………………………………………………………………………………………………………. Page -47-

INTRODUCTION
Throughout this accounting simulation the student will work with the following journals and ledgers.

1- General Ledger
2- Accounts Receivable Subsidiary Ledger 3- Accounts Payable Subsidiary Ledger
4- General Journal
5- Sales Journal
6- Purchases Journal
7- Payroll Journal
8- Individual Employee Payroll Records 9- Cash Receipts Journal
10- Cash Disbursements Journal

Description of the organization and nature of certain operations.
Le Mur du Son Ltd. sells high quality electronic sound equipment. The company sells through retail outlets as well as on credit to major clients.

1- The company gives credit terms of 2/10, n30, on the total amount including GST and QST.

2- The company has to determine the federal goods and services tax (GST) and the Quebec sales tax (QST).
For example if Le Mur du Son Ltd. buys merchandise from a vendor for $100 and sells it for $200 the calculations would be as follows:

On the seller’s books:

Accounts receivable 113.96
Sales 100.00
GST payable(7% X $100) 7.00
QST payable (6.5% X $107) 6.96

On the buyer’s books:

PURCHASE:
Purchases 100.00
GST Receivable (7%) 7.00
QST Receivable (6,5%)
Accounts Payable 6.96
113.96
SALE:
Cash/Accounts Receivable
Sales 227.91
200.00
GST Payable (7%) 14.00
QST Payable (6,5% of $214) 13.91

The simulation excludes the GST and QST from the amounts listed for sales, purchases and return. Four sales tax accounts are used one each of receivable and payable for the GST and QST

The net balance in the GST & QST Receivable and Payable accounts will result in a monthly remittance to Revenue Quebec where the net balances of these accounts is a credit. Revenue Quebec will give the federal government its portion of the total respectively.

3- The company prepares a bi-weekly (26 pay periods per year) pay for its four employees. The following information will be useful in preparing the payroll:

Civil Status Armand Frappier

Married Claude Bernard

Single Rene Trudeau

Married
Hourly Rate $ 12.50 9.375 18.75
Amount that allows determination of the appropriate deduction at source code for TD1 17 650 6456 17 600
Amount that allows determination of the appropriate deduction at source code for MR-19 16 005 5 900 16 100
Cumulative amounts as of Nov. 30, 20X4
Gross Salary 35 500.00 19 725.00 35 425.00
QPP (employees contribution) 893.20 461.86 893.20
Employment Insurance (employees contribution) 1 047.25 581.89 1 045.04

As far as Celine Lafrance is concerned, you have to consult her payroll register, which you must also complete. Normally, you would keep a payroll register for each employee, however, in order to facilitate your task you will only be required to complete one register. Also, you will have to complete Céline Lafrance’s T-4 and Relevé 1 slips at the end of the year.

The above information will be useful when you will use the federal and provincial tax tables in Appendix A. Note that A. Frapier and C. Bernard are working at the sales department.

4- The contributions to Employment Insurance are as follows:

Employee’s share: According to the table in Appendix A. Employer’s share: 1.4 times the employee’s share.

The employer must retain both the employer and employee contributions and remit the total to Revenue Canada no later than the fifteenth day of the month following the month in which the employees were paid.

5- The employees are obliged to contribute to the Quebec Pension Plan (Regimes des rentes du Quebec – RRQ). For calculation purposes a table is provided in Appendix A. The employer’s contribution is equal to that of the employee.

6- The employer contributes 4.26 % of the total gross salaries to the Quebec Health Services Fund QHSF (In french the “fonds des service de sante”) . No amount is withheld from the employee.

7- The Federal and Provincial income tax deducted from the employee’s salary is calculated based on the gross salary using the income tax deduction tables provided

8- In completing the payroll journal, the student must be aware that two employees, Armand Frappier and René Trudeau, have surpassed the maximum allowable income of $31 900 ($35 400 minus the $3 500 general exemption) in regards to the QPP deductions. Armand Frappier occasionally puts in some overtime hours.

9- Le Mur du Son Ltd. is a business corporation as well as a taxpayer. It must pay federal and provincial income tax and make anticipated income tax payments. To meet its tax liability , Mur de Son will make installments, at the latest the last day of the month, 1/12 of last year’s tax. The remaining balance, based on the actual taxable revenue, will be paid at the latest, three months after the end of the taxable year. Last year, the taxable revenue was $96 000. Appendix B contains an income tax rate table and serves as a guide in calculating the income tax.

10- A chart of accounts can be found at the beginning of the General Ledger.

11- Appendix C contains the December 31, 20X4 bank statement and associated space to complete the bank reconciliation for the month ended December 31, 20X4..

WORK TO BE COMPLETED

(A) Record the December 20X4 transactions in the journals. Post to the general ledger appropriately.

(B) Prepare the bank reconciliation.

(C) Prepare the December 31, 20X4 worksheet.

(D) Prepare the financial statements1, including the notes to the financial statements, the supplementary information and calculations required . The financial statements are provided; simply fill in the proper amounts.

(E) Fill out the T4 slip and the Relevé 1 for Céline Lafrance, found in Appendix D.

The student must, however, determine the deduction codes for Céline Lafrance using the forms TD-1 and TPD-1 (MR-19) found in Appendix E. These forms were filled out by the employee at the beginning of 20X4.

Fill out these forms using the following information: Céline Lafrance is married; has no dependant children; she supports her husband who had no income during the year.

(F) Prepare a schedule of Accounts Receivable and Accounts Payable as at December 31, 20X4.

(G) Prepare closing entries.

(H) Prepare reversing entries.

1 Note: Round off numbers to the nearest dollar only in the financial statements.

CHART OF ACCOUNTS

Short-term Assets:

1000 Cash
1002 Payroll Bank Account
1005 Petty Cash
1110 Marketable Securities
1120 Accounts Receivable
1125 Allowance for Doubtful Accounts 1127 Other Receivables
1130 Advance to a Shareholder
1150 Dividends Receivable
1155 Interest Receivable
1160 Merchandise Inventory
1170 Supplies
1174 Prepaid Insurance
1176 Prepaid Advertising Long-term Assets:
2300 Investment – Sonex Inc.
2310 Land
2320 Building
2325 Accumulated Depreciation – Building
2330 Store equipment
2335 Accumulated Depreciation – Store equipment
2340 Cars and Trucks
2345 Accumulated Depreciation – Cars and Trucks
2350 Furniture and Fixtures
2355 Accumulated Depreciation – Furniture and Fixtures
2360 Land Held for Future Development

Short-term Liabilities

3000 Bank Loan
3500 Accounts Payable
3520 Other Payables
3525 Note Payable
3530 Income Tax Payable
3535 GST Payable
3536 GST Receivable
3537 QST Payable
3538 QST Receivable
3540 Federal Deductions at Source and Payroll Taxes Payable
3550 Provincial Deductions at Source and Payroll Taxes Payable
3580 Salaries Payable
3590 Interest Payable
3595 Other Accrued Expenses Payable
3600 Dividends Payable
3610 Unearned Revenue
3620 Short-term Payment Due on Long-term Debt

Long-term Liabilities

4000 Mortgage Payable
4500 Deferred Income Tax

Shareholder’s Equity

5000 Common Stock
5200 Retained Earnings
5300 Dividends

Revenue

6000 Income Summary
6100 Sales
6105 Sales Returns and Allowances

Expenses

7050 Purchases
7100 Purchase Returns and Allowances
7150 Transportation-In
8000 Salaries – Sales
8100 Payroll Taxes – Sales
8200 Advertising
8300 Traveling Expense – Sales
8400 Packing Supplies Expense
8500 Car and Truck Expense
8600 Depreciation Expense – Car and Truck
8650 Depreciation Expense – Store equipment
9000 Salaries – Administration
9050 Payroll Taxes – Administration
9300 Traveling Expense – Administration
9350 Taxes, Licenses and Permits
9400 Insurance Expense
9450 Electricity and Heating
9500 Building, Maintenance and Repairs
9600 Office Supplies Expense
9650 Telephone, Telegrams, Courier and Stamps
9700 Legal and Auditing Fees
9750 Accounting Fees
9800 Bad Debts Expense
9850 Bank Charges
9870 Miscellaneous Expenses
9900 Depreciation Expense – Building
9920 Depreciation Expense – Furniture and Fixtures

Interest Expenses

10000 Interest Expense on Short-term Debt 10050 Sales Discounts
10100 Interest Expense on Long-term Debt Other Revenue
12000 Purchase Discounts
12100 Dividend Revenue
12150 Interest Revenue
12200 Gain on Disposal on fixed assets 12300 Miscellaneous Revenue

Other Expenses
13000 Income Tax Expense

LE MUR DU SON LTD. DECEMBER 20X4 TRANSACTIONS
December 3 Received an invoice for merchandise purchased from H.P.S. Ltd.. Terms: 2/10, n30. Date: November 30, 20X4. Total: $9 975.00 plus the appropriate taxes.

December 3 Le Mur du Son Ltd. wishes to increase its percentage of common shares of Sonex Inc. to 10 %. The company purchases 3 000 new shares at a price of $10.50 per share. The transaction will be recorded upon receipt of the invoice from the broker.

December 3 A short term bank loan of $20 000 was taken at the National Bank. The annual interest rate is 15 %.
Starting December 31, this loan will be repaid in monthly installments.
December 4 Cheque no. 400 was issued to Techno-Logic Inc. to settle our account. A 2% discount was taken. December 4 Signed a contract with Hebdo-Son Inc. for advertisements that will appear in their magazine in December,
January and February. Cheque no. 401 for $6 000.00 plus the appropriate taxes was issued.

December 4 Received a cheque from Alco Inc. as payment for the November 27 invoice (no. 1001). A 2 % discount was taken.

December 4 Brocol Ltd. returned merchandise which they had received by mistake. Issued credit note no. 14 in the amount of $5 000.00 plus the appropriate taxes.

December 5 Purchased merchandise from Microson Ltd., a new vendor. Cheque no. 402 for $4 220.00 was issued since Microson requested immediate payment for our first purchase.

December 5 Merchandise received from Photolum Ltd. on November 26 was defective. They were returned along with debit memo no. 12 for $1 790.00 plus the appropriate taxes. In return, the vendor sent us a credit memo.

December 5 Cheque no. 403 was issued to Son et Lumière Inc. in settlement of our account. A 1 % discount was taken.

December 5 Sold merchandise on credit to Aux Frontières du Possible Inc. Issued invoice no. 1010 for$21 000.00 plus the appropriate taxes. Terms: 2/10, n30.

December 5 Received a cheque from Dorémi Ltd. to settle the November 26 invoice (no. 999). A 2 % discount was taken.

December 5 Received an invoice from Sanscartier, Sansregret et Associes, Avocats, for $1 250.00 plus the appropriate taxes to cover legal fees relative to a case which was heard in October. A judgement has not been rendered. Cheque no. 404 was issued.

December 6 Cheque no. 405 for $700.00 plus the appropriate taxes was issued for payment of purchases of office supplies made at Le Manuscrit Inc.

December 6 Received a favorable credit report concerning a new client. His order for $15 900.00 plus the appropriate taxes was filled out. Invoice no. 1011 was issued to Gérard D. Laflac Inc.

December 6 Purchased $140.16 (tax included) of gasoline for the truck and car with our Petro-Canada credit card. The GST tax credit for this purchase is $8.61. The QST tax credit for this purchase is $8.55.

December 7 Issued cheque no. 406 for $325.00 plus the appropriate taxes to Jules Poitras Inc. for maintenance work in the building.

December 7 Issued cheque no. 407 to H.P.S. Ltd. to settle our account. A 2 % discount was taken.

December 7 Cheque no. 408 was issued to our broker, Omer Cantil, upon receipt of the invoice regarding our purchase of shares from Sonex Ltd. on December 3. A 2 % commission fee was added. The total amount will be considered as our investment cost. Financial services are exempt from tax.

December 7 The cash sales of the week totaling $24 000.00 plus the appropriate taxes were deposited.

December 10 Received an invoice totaling $19 100.00 plus the appropriate taxes for merchandise purchased from Cabernet Ltd.. Terms: 2/10, n30. Date: December 7. Transportation: FOB point of shipment.

December 10 Received a cheque from Valbert Musique Inc. in settlement of the November 10 invoice (no. 925). December 10 Received a cheque from Abacada Inc. in settlement of the November 10 invoice (no. 928).
December 10 Issued cheque no. 409 to Octoson Ltd. to settle our account.

December 10 Issued cheque no. 410 for $4 826.47 plus the appropriate taxes to Construction Cité Nouvelle Inc. for work done at the home of the major shareholder of Le Mur du Son Ltd., Mr. Ondiret.

December 11 Prepared the payroll for the 2 weeks ended December 7.

Regular Hours

Armand Frappier 80
Claude Bernard 80
Céline Lafrance 70
René Trudeau 80

Do not forget to record the payroll taxes in the general journal.

December 11 Issued cheque no. 411 to transfer amount of net salaries to the payroll bank account for the 2 weeks ended December 7.

December 11 Issued payroll cheques no. 101 to 104 to the employees.

December 11 Received an invoice from Petro-Canada for our November transactions. The invoice date is December 5 and the due date is December 28. The amount due is $329.00.

December 11 René Trudeau attended a conference in Quebec City in mid-November. The conference dealt with the technological advances in sound equipment. Issued cheque no. 412 for $925.00 plus the appropriate taxes to Mr. Trudeau to cover the costs of his hotel.

December 12 Received a cheque from La Plume du Nord Inc. to settle the November 12 invoice (no. 950).

December 12 Issued cheque no. 413 for $115.00 plus the appropriate taxes to Imprimerie Garnier Inc. to pay for the advertising posters in the store.

December 12 Sold merchandise on credit to Dorémi Ltd. in the amount of $ 48 900.00 plus the appropriate taxes Invoice no. 1012.

December 12 Received an invoice for merchandise purchased from Photolum Ltd. Terms: n30. Date: December 10.
Total: $15 200.00 plus the appropriate taxes.

December 13 Received merchandise ordered on December 10 from Cabernet Ltd.. Cheque no. 414 for $425.00 plus the appropriate taxes was issued to Rapidex Ltd. to pay for the transportation.

December 14 Issued cheque no. 415 for $325.00 plus the appropriate taxes to Jules Poitras Inc. for maintenance work on the building.
December 14 Received a cheque from Aux Frontières du Possible Inc. to settle invoice no. 1010 and invoice no. 952.
The invoices are dated December 5 and November 14 respectively.

December 14 Received a cheque from Gérard D. Laflac Inc. to settle the December 6 invoice. (no. 1011)

December 14 Issued cheque no. 416 to the Receiver General of Canada for $1 144.92, along with the third part of form PD7A duly completed for remittance of income tax, QPP and EI premiums withheld at source. The company could have made the payment directly at the bank.

December 14 Issued cheque no. 417 to the Minister of Revenue of Quebec for $10 229.00, along with the first part of form PV-4 duly completed and titled “Sales Tax Remittance Form”. Once again the payment could have been made at the bank.

December 14 Issued cheque no. 418 to the Minister of Revenue of Quebec for $1 256.20, along with the second part of form TPZ-1015.R. duly completed and titled “Remittance of withholdings and contributions.”

The following is a detailed list of Provincial withholdings for the month of November.

Quebec income tax Employee’s Share

$ 851.20 Employers Share


QPP 66.00 $ 66.00
QHSF – 273.00

$ 917.20 $ 339.00

December 14 The cash sales of the week, $21 000.00 plus the appropriate taxes were deposited.

December 14 Issued cheque no. 419 in the amount of $1 070.00 to the Order of the Corpusculaire Reg’d for various maintenance services provided. This enterprise does not bill the GST and QST. According to the law an organization that has sales less than $30 000.00 per year is not required to charge sales tax but at the same cannot receive a tax refund for sales taxes paid.

December 14 Issued cheque no. 420 to replace cheque no. 415 that was lost by Jules Poitras Reg’d. Indicate canceled in the cash disbursements journal and cross a line through cheque no. 415.

December 14 Purchased $104.32 (tax included) of gasoline for the truck with our Petro-Canada credit card. The GST on this purchase is $6.41, the QST is 6.37.

December 14 Received a bank statement listing all our transactions for the month of November. The bank debited
$22.40 from our account for bank charges.

December 17 Received merchandise ordered from Photolum Ltd. on December 12.

December 17 Received a cheque of $48 000.00 from Omer Cantil, our stock broker, following the issuance of 5 000 shares of Le Mur du Son Ltd. at $10 a share. The broker took a $2 000 commission. Credit Common Stock for the net amount.

December 18 Used our Petro-Canada credit card to pay for repairs to the truck. The total of the repairs amounted to
$432.00 plus the appropriate taxes.

December 19 Sonex Inc. declared dividends of $0.50 per share to all shareholders registered by December 26. We own 11 000 shares.
December 19 Issued cheque no. 421 for $221.00 plus the appropriate taxes to pay for packing supplies purchased from Embaltout Ltd.

December 20 Received an invoice from Son et Lumière Inc. for merchandise purchased on December 18. Terms: 1/10, n30. Total: $17 800.00 plus the appropriate taxes.

December 20 Sold merchandise on credit to Cosmos Inc.. Invoice no. 1013. Total: $28 700.00 plus the appropriate taxes. Terms: 2/10, n30.

December 20 Issued cheque no. 422 to Cabernet Ltd. In payment of our November 29 invoice.

December 21 Sold merchandise on credit to a new client, Sondec Ltd.. Invoice no. 1014. Total: $39 900.00 plus the appropriate taxes.

December 21 Declared dividends of $0.25 per share to all shareholders of record on December 31, 20X4.

December 21 Received an invoice for $8 500.00 plus the appropriate taxes from Microson Ltd. for merchandise purchased on December 19. Terms: 1/10, n30.

December 21 Sold merchandise on credit to La Plume du Nord Inc.. Invoice no. 1015. Total: $32 200.00 plus the appropriate taxes.

December 21 Received a cheque from Dorémi Ltd. as payment for invoice 1012.

December 21 Issued cheque no. 423 for $325.00 plus the appropriate taxes to Jules Poitras Inc. December 21 Deposited this week’s cash sales, $36 000.00 plus the appropriate taxes.
December 24 Received an invoice of $4,500.00 plus the appropriate taxes for office supplies purchased from Papeterie St-Paul Inc. on December 24. Terms: 2/10, n30.

December 24 Brocol Ltd. sends a truck to pick up merchandise that it urgently needs. Invoice no. 1016 for $55 700.00 plus the appropriate taxes is sent along with the merchandise.

December 24 The payroll for the week ended December 21 is being prepared today instead of the 25th since December 25 (Christmas) is a legal holiday.
Regular Hours
Armand Frappier 80
Claude Bernard 80
Céline Lafrance 70
René Trudeau 80

December 24 Issued cheque no. 424 to transfer amount of net salaries to the payroll bank account for the week ended December 21.

December 24 Issued payroll cheques no. 105 to 108 to the employees.

December 24 Purchased $106.00 plus the appropriate taxes of gasoline for our truck, paid for with our Petro-Canada credit card.

December 26 Received a credit note for $2 100.00 plus the appropriate taxes relating to some defective merchandise received on December 20th from Son et Lumière Inc.

December 26 Received an invoice for $8 938.00 plus the appropriate taxes relating to merchandise purchased from Techno-Logic Inc.. Invoice date December 24. Terms: 2/10, n30.

December 26 Issued cheque no. 425 for $329 to Petro-Canada as payment for the statement received on December 11th.
December 27 Issued cheque no. 426 to Photolum Ltd. to pay the November 26 invoice. The December 5 debit memo was taken into account.

December 28 Received a cheque from Cosmos Ltd. as payment for the November 30 invoice (no. 1000), as well as partial payment of invoice no. 1013 (half the amount).

December 28 Sold $7 500.00 plus the appropriate taxes of merchandise on credit to Valbert Musique. Invoice no. 1017. December 28 Received a cheque from Sonex Inc. for the dividends it had declared.
December 28 Received an invoice for $16 350.00 plus the appropriate taxes from Octoson Inc. for merchandise purchased on December 26. Terms: n30.

December 28 Received a cheque for $3 000.00 plus the appropriate taxes from Emile Bordulac, a young painter who wishes to use our showroom to exhibit his work. The exhibition will take place in January 20X5.

December 28 This week’s cash sales were deposited, $20 000.00 plus the appropriate taxes.

December 28 Issued cheque no. 427 for $195.00 plus the appropriate taxes to Jules Poitras Inc. for three days of maintenance work.

December 31 Received an invoice from Confort au Travail Inc. for office furniture purchased on December 28. Terms: n30. Total: $15 000.00 plus the appropriate taxes.

December 31 Received merchandise, along with the invoice, from Antonel Ltd.. Terms: n45. Date: December 28. Total:
$11000.00 plus the appropriate taxes.

December 31 Issued cheque no. 428 to Papeterie St-Paul to pay the December 24 invoice.

December 31 Received a cheque from La Plume du Nord Inc. for $9 800.00, as partial payment of invoice no. 1015, less the 2% discount.

December 31 Issued cheque no. 429 to the National Bank to pay the monthly interest on the December 3 loan, as well as $1 666 of the principal. Calculate one whole month’s interest.

December 31 Issued cheque no. 430 to Omer Cantil in the amount of $20 400.00 for the purchase of bonds issued by Mines d’or Klondike. The bonds provide 16% annual interest rate paid semiannually every June 30 and December 31. Include the whole amount of the cheque as the investment.

December 31 Received a bill from Hydro-Quebec for $660.00 plus the appropriate taxes. The bill covers the period beginning October 1 and ending November 30. Date: December 28. Terms: n30.

December 31 Received the November telephone bill from Bell Canada for $320.00 plus the appropriate taxes. Date: December 28th.

December 31 Issued cheque no. 431 for $250.00 plus the appropriate taxes to Exact Ltd. for bookkeeping services received in December.

December 31 Issued cheque no. 432 to the Receiver General of Canada for the monthly payment of taxes on the company’s 20X4 income. Payment was based on last year’s income and the amount of the cheque was $1
440.00. These payments are made in advance and are normally recorded as a debit to income tax payable, even though the actual amount payable will not be known until the end of the year.

December 31 Issued cheque no. 433 to the Minister of Revenue Quebec for the monthly payment of taxes on the company’s 20X4 income. The amount of the cheque is $288.00.

December 31 Issued cheque no. 434, for the amount of $307.69 tax included, payable to Céline Lafrance, petty cash cashier. She presents the following receipts and uses the proceeds of the cheque to reimburse the fund:

Rapidex Courier Service $28.49
Taxi fare for Salesmen (Traveling Expense)
85.47
Federal Express Courrier service 136.75
Parking for Mr. Réne Trudeau (Travelling Expense)
56.98

December 31 Issued cheque no. 435 payable to Quebec Trust Co. in the amount of $99,450 in payment of a note payable signed in 20X3 plus accrued interest since that date.

ADJUSTING ENTRIES AND INFORMATION FOR THE PREPARATION OF FINANCIAL STATEMENTS

1- In order to verify that all transactions pertaining to cash were correctly recorded, the December 31, 20X4 bank statement is included in Appendix C. With the help of this document, complete the bank reconciliation found in Appendix C.

The Company made $2 000.00 plus the appropriate taxes in cash sales on Saturday, December 29 and Monday, December 31 combined. The money has not been deposited and the sales were not recorded on December 31.

2- The marketable securities account includes $6 000 of Exploration Beauport Ltd. bonds. These bonds carry a 15 % annual interest rate paid every September 30 and March 31.

3- Since the company has very few clients they decided to evaluate each account individually in order to determine the amount of doubtful accounts. They estimated that $2 000 of the accounts receivable will not be collected.

4- Following a physical count, our ending inventory was evaluated at $80 000 on December 31, 20X4. The transportation costs pertain to merchandise sold in 20X4.

5- On December 31, 20X4 we had the following supplies on hand: Packing Supplies $1 000
Office Supplies $1 500

6- Our insurance policies as of December 31, 20X4 were:

Type of Insurance Cost Date Length
Liability $2 700 March 1, 20X4 1 year
Fire & Theft $3 200 Sept. 1, 20X4 1 year
Car & Truck $1 440 April 1, 20X4 1 year

Last year, the same policies had the following costs:

Liability $2 400
Fire & Theft $3 060
Car & Truck $1 200

7- The company signed an advertising contract with a television station in August 20X4. Each commercial will cost
$400. On December 31, 20X4, twenty commercials which had been paid for had not yet aired, as well as, two-thirds of the commercials relating to the Hebdo-Son contract signed on December 4.

8- The investment in Sonex Inc. included a portfolio of 8 000 common shares at the beginning of the period. Sonex Inc. usually declares dividends on a quarterly basis.

9- The building is depreciated using the straight-line method. The salvage value is $10 000 and it has a useful life of 50 years.

The store equipment is also depreciated using the straight-line method. It has a useful life of 10 years and no salvage value.

The declining balance method of depreciation is used for the car and truck. Annual depreciation is calculated by multiplying the net book value by 20 %.

The furniture and fixtures are depreciated using the straight-line method. They a useful life of 10 years and no salvage value.

As far as the office furniture is concerned, please note that the company sold part of its furniture on July 1, 20X4. They sold furniture on credit, which was purchased on January 2, 20X1 for $10 000 plus the appropriate taxes and had $3 500 of accumulated depreciation on July 1, 20X4, to Mr. Charles Beaudet for $8 500 plus the appropriate taxes. The account has not been settled, but it will be settled shortly. This amount can be found in the Other Payables account. The furniture that was sold was replaced on December 31.

10- The bank loan taken at the beginning of the month is the only one we have on December 31.

11- For financial statement purposes, the term “Accounts Payable” is used exclusively for the purchase of merchandise. 12- The term “Other Payables” is used for non-inventory goods and services owed by the company.
13- The income tax payable on December 31, 20X4 corresponds to the difference between the twelve monthly payments anticipated during the year and the actual income tax, based on the actual income.

The total of the twelve payments, based on last year’s income, was $20 736. Use Appendix B to calculate the actual income tax for 20X4.
14- The last payroll prepared was for the week ended December 21, 20X4. However, between December 21 and December 31 the following employees worked regular hours.

Armand Frappier 48 hours
Claude Bernard 48 hours
Céline Lafrance 42 hours
René Trudeau 48 hours

Make an estimate of accrued salaries payable, deductions withheld and the employer’s contribution without using the tables. Instead, take a fraction of a normal work week.

15- Miscellaneous revenue is usually entered in account no. 12 300. The company sometimes receives this revenue in advance.

16- In order to evaluate the accrued interest payable and the short-term payment due on the long-term debt, use the following amortization table pertaining to the mortgage.

Total Payment Interest Principal Balance Date
$400 000
57 118 $56 000 $1 118 398 882 01-07-X1
57 118 55 843 1 275 397 607 01-07-X2
57 118 55 665 1 453 396 154 01-07-X3
57 118 55 462 1 656 394 498 01-07-X4
57 118 55 230 1 888 392 610 01-07-X5

In your calculations pertaining to the mortgage, round off to the nearest dollar.

17 – With the objective of calculating the income tax expense, complete the simplified income tax calculation in appendix B. For simplicity we will assume that the tax depreciation is equal to the accounting depreciation.

18 – At the beginning of the month of December 20X4, the company’s common stock consisted of 25 000 common shares with the right to vote.

19- Hydro-Quebec’s last invoice covered a two month period ending November 30, 20X4. An estimation based on consumption for the month of December shows $410 of accrued expense. Do not take into consideration the GST and QST.

20 – Without an invoice from Bell Canada, the company estimates the telephone expense to be $218 for the month of December. Do not take into consideration the GST and QST.

LE MUR DU SON LTD
TRIAL BALANCE AS AT NOVEMBER 30, 20X4

Account Account Name Debit Credit
1000 Cash 125 056.36
1002 Payroll Bank Account —
1005 Petty Cash 500.00
1110 Marketable Securities 6 000.00
1120 Accounts Receivable 66 993.00
1125 Allowance for doubtful accounts —
1127 Other Receivables 8 500.00
1130 Advance to a Shareholder —
1150 Dividends receivable —
1155 Interest receivable —
1160 Merchandise inventory 74 960.00
1170 Supplies —
1174 Prepaid insurance —
1176 Prepaid advertising —
2300 Investment in Sonex Inc. 79 490.00
2310 Land 155 000.00
2320 Building 410 000.00
2325 Accumulated Depreciation, Building 24 000.00
2330 Store Equipment 40 000.00
2335 Accumulated Depreciation, store equipment 12 000.00
2340 Cars and Trucks 27 000.00
2345 Accumulated Depreciation, Cars and Trucks 13 176.00
2350 Furniture and Fixtures 40 000.00
2355 Accumulated Depr., Furniture and Fixtures 11 500.00
2360 Land held for future development 182 245.00
3000 Bank Loan —
3500 Accounts Payable 270 992.00
3520 Other Payables 329.00
3525 Note Payable 90 000.00
3530 Income tax payable 19 008.00
3535 GST Payable 6649.00
3536 GST Receivable 1517.00
3537 QST Payable 6606.00
Sub total 1 236 269.36 435 252.00

LE MUR DU SON LTD
TRIAL BALANCE AS AT NOVEMBER 30, 20X4

Account Account Name Debit Credit
Balance 1 236 269.36 435 252.00
3538 QST Receivable 1 509.00
3540 Federal deductions at source and payroll taxes 1 144.92
3550 Provincial deductions at source and payroll taxes 1 256.20
3580 Salaries payable —
3590 Interest payable —
3595 Other accrued expenses payable —
3600 Dividends payable —
3610 Unearned revenue —
3620 Short term payment due on long term debt —
4000 Mortgage payable 394 498.00
4500 Deferred income tax 10 073.00
5000 Common Stock 200 000.00
5200 Retained earnings 178 977.00
5300 Dividends —
6000 Income Summary —
6100 Sales 1 173 515.00
6105 Sales returns and allowances 26 000.00
7050 Purchases 814 807.00
7100 Purchase returns and allowances 12 000.00
7150 Transportation in 4 615.00
8000 Salaries – Sales 55 225.00
8100 Payroll taxes – Sales 7 063.16
8200 Advertising expense 114 625.00
8300 Travelling expense – Sales 12 128.00
8400 Packing supplies 5 280.30
8500 Car and Truck expenses 2 920.57
8600 Depreciation expense, Cars and Trucks —
8650 Depreciation expense, Store equipment —
Sub total 2 280 442.39 2 406 716.12

LE MUR DU SON LTD
TRIAL BALANCE AS AT NOVEMBER 30, 20X4

Account Account Name Debit Credit
Balance 2 280 442.39 2 406 716.12
9000 Salaries – Administration 51 700.00
9050 Payroll taxes – Administration 6 044.67
9300 Traveling expenses – Administration 3 125.43
9350 Taxes, licenses and permits 3 199.94
9400 Insurance expense 10 080.00
9450 Electricity and heating 2 724.36
9500 Building, maintenance and repairs 18 275.00
9600 Office supplies expense 3 134.27
9650 Telephone, telegrams, courier, and stamps 2 310.28
9700 Legal and auditing fees 1 875.00
9750 Accounting fees 2 750.00
9800 Bad debts expense —
9850 Bank charges 290.12
9870 Miscellaneous expense 32.39
9900 Depreciation expense, building —
9920 Depreciation expense, furniture and fixtures —
10000 Interest expense on short term debt 512.00
10050 Sales Discounts 19 182.51
10100 Interest expense on long term debt 27 731.00
12000 Purchase discounts 11 943.24
12100 Dividend revenue 12 000.00
12150 Interest revenue 450.00
12200 Gain on disposal of fixed assets 2 000.00
12300 Miscellaneous revenue 300.00
13000 Income tax expense —
Total 2 433 409.36 2 433 409.36

APPENDICES

APPENDIX A-1 EMPLOYMENT INSURANCE CONTRIBUTIONS TABLE

APPENDIX A-2 QUEBEC PENSION PLAN CONTRIBUTIONS TABLE

APPENDIX A-3 FEDERAL INCOME TAX DEDUCTIONS TABLE

APPENDIX A-4 PROVINCIAL INCOME TAX DEDUCTIONS TABLE

APPENDIX B SIMPLIFIED INCOME TAX RETURN

A) Simplified Federal Income Tax Return

Taxable income $

Multiplied by the actual federal tax rate:

Base rate Less:
Federal abatement for income earned in a province (note 1) 38%

(10%)
28%
Plus: Surtax (4% of the above amount) 1.12%
Less: Deduction for small business (16%) 13.12%

Federal income tax payable for 20X4
$

b) Simplified Provincial Income Tax Return

Taxable income $

Multiplied by the actual provincial tax rate:

Base rate 16.25%
Less: Provincial abatement for business
income (note 2) (7.35%)
8.9%

Less: Provincial abatement for income eligible for federal small business
deduction. 3.15% 5.75%

Provincial income tax payable for 20X4
$

note 1: this abatement is given due to the fact that the income is also taxed provincially.

note 2: this abatement is given as an incentive to businesses to create jobs and stimulate the economy.

APPENDIX C-1 BANK STATEMENT NATIONAL BANK
75 René Levesque West Montreal, Quebec tel: 288-2480

BANK STATEMENT
Le Mur de Son Ltd. Period ending : 12-31-X4
800 St. Denis Account number: 789-32
Montreal, Quebec Page : 1

DESCRIPTION DEBIT CHEQUES CREDIT DEPOSITS DATE BALANCE

BALANCE CHEQUE NO 398
CHEQUE NO 399 BANK LOAN DEPOSIT DEPOSIT CHEQUE NO 400
CHEQUE NO 401 DEPOSIT CHEQUE NO 402
CHEQUE NO 403
CHEQUE NO 404
CHEQUE NO 405
CHEQUE NO 406
CHEQUE NO 407
CHEQUE NO 408
CHEQUE NO 411
CHEQUE NO 410
CHEQUE NO 412 DEPOSIT CHEQUE NO 409
CHEQUE NO 413 DEPOSIT CHEQUE NO 420
CHEQUE NO 414
Miscellaneous Expense CHEQUE NO 416
CHEQUE NO 417
CHEQUE NO 418
CHEQUE NO 419 DEPOSIT CHEQUE NO 421
CHEQUE NO 422
CHEQUE NO 423
CHEQUE NO 424 DEPOSIT CHEQUE NO 425
CHEQUE NO 426
CHEQUE NO 427
CHEQUE NO 429
CHEQUE NO 434 DEPOSIT
BANK CHARGES

567.89
1 623.22

48 706.00
6 837.30

4 808.90
45 495.45
1424.44
797.69
370.35
31 602.07
32 130.00
3 212.03
5 500.00
1 054.08

28 650.00
131.05

370.35
484.31
70.00
1 144.92
10 229.00
1 256.20
1 070.00

251.84
38 775.00
370.35
3 212.03

329.00
15 850.21
222.21
1 916.00
307.69

13.10

20 000.00
11 956.00
10 045.00

27 349.20

91 613.96

48 000.00

95 633.32

56 203.15

9 800.00

03-12-X4
03-12-X4
03-12-X4
04-12-X4
05-12-X4
07-12-X4
07-12-X4
07-12-X4
10-12-X4
10-12-X4
10-12-X4
10-12-X4
11-12-X4
11-12-X4
11-12-X4
11-12-X4
13-12-X4
14-12-X4
14-12-X4
17-12-X4
17-12-X4
17-12-X4
17-12-X4
18-12-X4
18-12-X4
19-12-X4
19-12-X4
19-12-X4
19-12-X4
21-12-X4
24-12-X4
24-12-X4
24-12-X4
24-12-X4
28-12-X4
31-12-X4
31-12-X4
31-12-X4
31-12-X4
31-12-X4
31-12-X4
31-12-X4
127 225.07
126 657.18
125 033.96
145 033.96

209 043.02

APPENDIX C-2 BANK RECONCILIATION

LE MUR DE SON LTD. BANK RECONCILIATION AS AT DECEMBER 31 20X4

Cash book balance as at December 31, 20X4 before adjustments $ Plus: Cash and cheques on hand and not yet deposited
Less: Bank charges not recorded $
Office Equipment

Adjusted Balance $

Bank statement balance as at December 31, 20X4
$

Plus: Unrecorded deposit as at December 31, 20X4 (Cash and cheques on hand)

Less: Outstanding cheques as at December 31, 20X4

no $
no no no no no

Adjusted Balance $

APPENDIX D T4 AND RELEVE 1

ANNEX E TD1

ANNEX F MR-19

LE MUR DU SON LTEE SCHEDULE OF ACCOUNTS RECEIVABLE
AS AT DECEMBER 31, 20X4

Account Number Account Name Amount

Total

LE MUR DU SON LTEE SCHEDULE OF ACCOUNTS PAYABLE
AS AT DECEMBER 31, 20X4

Account Number Account Name Amount

Total

FINANCIAL STATEMENTS

LE MUR DU SON LTD INCOME STATEMENT
FOR THE PERIOD ENDED DECEMBER 31, 20X4

Sales 20X4

$ 20X3

$ 951 000
Cost of Goods Sold 570 600
Gross Income 380 400

Operating Expenses
Selling Expenses 119 950
Administrative Expenses 73 815
Interest Expenses 67 649

Total Operating Expenses
261 414

Income before Other Revenues
118 986
Other Revenues 9 747

Income before Income Tax
128 733

Income Tax Payable

20 736
Deferred 2 436

Income Tax Expense
23 172

Net Income
$
$ 105 561

LE MUR DU SON LTD STATEMENT OF RETAINED EARNINGS
FOR THE PERIOD ENDED DECEMBER 31, 20X4

Beginning Balance 20X4

$ 20X3

$ 79 666
Plus: Net Income for the Period 105 561
185 227
Less: Dividends 6 250

Ending balance
$
$ 178 977

LE MUR DU SON LTD BALANCE SHEET
AS AT DECEMBER 31, 20X4

ASSETS 20X4 20X3
Current Assets:

Cash

$

$ 9 906
Marketable Securities (market value = 27 000 $) —
Receivables (note 3) 64 605
Merchandise inventory 74 960
Prepaid expenses (note 4) 17 190

Total Current Assets
166 661

Long Term Assets:
Investments, at cost (note 5) 79 490
Fixed assets, at net book value (note 6) Other asset:
Land held for future development 562 824

182 245

Total Long Term Assets
824 559

Total Assets
$
$ 991 220

LIABILITIES 20X4 20X3
Current Liabilities:
Bank Loan (note 7) $ $ 10 000
Note payable 90 000
Payables and accrued expenses (note 8) 98 266
Income tax payable 1 200
Dividends payable 6 250
Unearned revenues 300
Short term payment due on long term debt 1 656

Total Current Liabilities
207 672

Long Term Debt (note 9)
394 498

Deferred Income Tax
10 073

Total Liabilities
612 243

SHAREHOLDERS’ EQUITY
Common Stock (note 10) 200 000
Retained Earnings 178 977

Total Shareholders’ Equity
378 977

Total Liabilities and Equity
$
$ 991 220

LE MUR DU SON LTD
NOTES TO THE FINANCIAL STATEMENTS AS AT DECEMBER 31, 20X4

  1. Status of enterprise and nature of activities

The company, being incorporated federally, sells electronic equipment for transmission of sound, at retail.

  1. Accounting Practices

Marketable Securities:

The marketable securities are valued at the lower of cost or market.

Inventory:

The inventory is valued at the lower of cost or net realizable value; the FIFO method of inventory valuation is also used.

Fixed Assets:

The fixed assets are presented both at cost and accumulated depreciation according to their useful life and method of depreciation is also presented. The following methods and rates are used to depreciate the assets:

Method Rate

Building Linear 2% Sales Material Linear 10%
Cars and Trucks Declining Balance 20% Furniture and Fixtures Linear 10%

Income Tax:

The company calculates income tax expense on its accounting income. The deferred income tax results in the difference between accounting depreciation and the capital cost allowance.

  1. Receivables
    1984 1983
    Accounts receivable $ $ 60 500
    Less: Allowance for doubtful accounts 120
    60 380
    Other receivables Advance to a shareholder Interest receivable —-
    —- 225
    Dividends receivable 4 000
    $ 64 605
  2. Prepaid expenses
    Supplies $ $ 7 650

Prepaid Insurance
2 740
Prepaid Advertising 6 800
$ $ 17 190

  1. Investments

Share investments:

Sonex Inc. common shares $ $ 79 490 (market value: $121 000; $80 000 in 20X3)

The company holds common shares (8 000 in 20X3) for a total share of 10% of Sonex Inc.

  1. Fixed Assets 20X4 20X3
    Cost Accumulated Depreciation Net Book Value Cost Net Book Value
    Land $ $ $ 100 000 100 000
    Building 410 000 386 000
    Sales Material 40 000 28 000
    Cars and Trucks
    27 000
    13 824
    Furniture and Fixtures
    50 000
    35 000
    627 000 562 824
  2. Bank Loan

The accounts receivables and the inventory serve as guarantees for the bank loan.

  1. Payables and Accrued Expenses
    20X4 20X3
    Accounts Payable $ $ 46 307
    Other Payables 1 128
    Accrued Expenses 29 079
    Sales Tax Payable 18 524
    Deductions at source and payroll taxes 3 228
    $ $ 98 266
  2. Long Term Debt
    Mortgage payable at 14% annually, due in 20X30
    $
    $ 396 154
    Less: Amount due in short term 1 656
    $ $ 394 498

The capital payments required for the next five years are as follows:

Year Payment

20X5 $

20X6 $

20X7 $

20X8 $

20X9 $

  1. Common Stock

The common stock is made up of issued voting shares (25 000 in 20X3).

The company is authorized to issue an unlimited number of shares.

In 20X4 the company issued shares of this category for $.

  1. Income Statement

The income statement includes these accounts among others:
20X4 20X3
Depreciation of fixed assets $ $ 20 456
Interest on the long term debt 55 564
Dividend revenue 3 650

  1. Contingency

The company is a defendant in a legal suit started by one of its former employees. The employee is suing for $30 000 for a violation of the Labor Code. Judgement has not yet been given on the case. The company’s lawyers are certain the judgement will be in the company’s favor and therefore will have no effect on its financial situation.

LE MUR DU SON LTD DETAILS FOR INCOME STATEMENT
FOR THE PERIOD ENDED DECEMBER 31, 20X4

20X4    20X3

Sales
Gross sales $ $ 968 624
Less: Sales returns and allowances 17 624
Net Sales 951 000

Cost of Goods Sold
20X4 20X3
Beginning Inventory 64 810
Plus: Purchases 587 618
Less: Returns and allow. 10 094
577 524
Plus: Trans-in 3 226 580 750
Goods Available for sale 645 560
Less: Ending inventory 74 960
570 600

LE MUR DU SON LTD DETAILS FOR INCOME STATEMENT
FOR THE PERIOD ENDED DECEMBER 31, 20X4

20X4 20X3

Selling expenses

Salaries $ $ 46 735
Payroll taxes 5 928
Advertising 45 066
Travelling expenses 8 436
Packing supplies expense 3 344
Car and Truck expenses 2 985
Depreciation, cars and trucks 3 456
Depreciation, sales material 4 000
$ $ 119 950
Administrative expenses

Salaries
Payroll taxes 27 312
2 912
Travelling expenses 1 314
Taxes, licenses and permits 2 110
Insurance 5 994
Electricity and heating 2 457
Building, maintenance and repairs 7 422
Office furniture 5 457
Telephone, telegrams, courier and stamps 1 112
Legal and auditing fees 2 000
Accounting fees 1 870
Bad debts 120
Bank charges 317
Miscellaneous 418
Depreciation, building 8 000
Depreciation, furniture and fixtures 5 000

Interest Expenses
$ $ 73 815
Interest on short term debt $ 3 463
Sales discounts 8 622
Interest on long term debt 55 564
$ 67 649

LE MUR DU SON LTD DETAILS FOR INCOME STATEMENT
FOR THE PERIOD ENDED DECEMBER 31, 20X4

20X4    20X3

Other revenue
Purchase discounts $ $ 5 632
Interest revenue 355
Dividend revenue

Gain on disposal 3 650

Miscellaneous revenue 110

$ $ 9 747

Leave a Reply

Your email address will not be published. Required fields are marked *