B1068 BOB’S BACK HOES STUDENT EXERCISE
In this case-study, you, the student, will set up a new service company file using the Easy Step Interview found by clicking on Detailed Start after clicking to create a new company. As you navigate through the Easy Step Interview, you will decide the best answers to the interview based on the information presented here. You will also have the opportunity to practice setting up a Chart of Accounts, and completing Journal entries, sales, Bills, and Cheques. As an extended activity, you may be required to complete the Bank Reconciliation.
Bob Brown has decided to start a business of his own, doing backhoe work for clients beginning January 1. He will run the business from his home at 123 Any Street, Chatham, Ontario N7M 1A1. He has obtained his Business Number and registered for Goods and Services tax. Tax rates are GST 5%, and HST 13%
- Bob will use the calendar year as his fiscal year.
- His first HST quarterly report period will end March 31.
- Bob will only do business in Southwest Ontario.
- This is a Service Based Business with no inventory. To assist with setting up the Chart of Accounts, choose ‘General Service-Based Business’ as the industry in the Easy Step Interview process.
- Set up a Service Item called Back Hoe Fees, Description Back Hoe Services, Default Tax will be HST Only.
- Bob Expects to invoice some Customers and collect Payment later.
- Bob will sometimes buy products and services on credit and pay his vendors later.
- Attached is a Chart of Accounts Bob has been given to use with his business.
Chart of Accounts:
|10500||Chequing Account||Bank||Chequing Account|
|11000||Prepaid Insurance||Other current asset||Prepaid Insurance|
|12000||Accounts Receivable||Accounts Receivable||Accounts Receivable|
|13000||Home Office Equipment||Fixed Asset||Home office Equipment|
|13010||Computer Equipment additions||Fixed Asset||Computer equipment additions|
|13020||Computer Equipment Depreciation||Fixed Asset||Computer equipment Depreciation|
|13510||Office Equipment Additions||Fixed Asset||Office Equipment Additions|
|13520||Office Equipment Depreciation||Fixed Asset||Office Equipment Depreciation|
|14990||Undeposited Funds||Other Current assets||Undeposited funds|
|15010||Equipment additions||Fixed Asset||Equipment Additions|
|15020||Equipment depreciation||Fixed Asset||Equipment Depreciation|
|20000||Accounts Payable||Accounts Payable||Accounts Payable|
|25500||GST/HST Payable||Other Current Liability||HST Payable|
|30000||Opening Bal Equity||Equity||Opening bal Equity|
|32000||Bob Brown Capital||Equity||Bob Brown capital|
|30800||Bob Brown Withdrawals||Equity||Bob Brown Withdrawals|
|39000||Retained Earnings||Equity||Retained Earnings|
|40100||Back Hoe fees earned||Income||Fees|
|60400||Depreciation expense||Expense||Depreciation Expense|
|61000||Advertising Expense||Expense||Advertising Expense|
|62000||Back Hoe Equipment Rental||Expense||Back Hoe Equipment Rental|
|62500||Back Hoe Gas & Oil||Expense||Back Hoe Gas & Oil|
|63000||Bank fees||Expense||Bank fees|
|64250||Liability Insurance||Expense||Liability Insurance|
|65000||Home Office Expense||Expense||Home Office Expense|
|65250||Office Supplies||Expense||Office supplies|
|65500||Utilities Expense||Expense||Utilities Expense|
|65750||Telephone Expense||Expense||Telephone Expense|
|66200||Professional fees||Expense||Professional fees|
On 3 January, Bob deposits $25,000 in a separate Bank Account for the Business at CIBC, downtown branch. (Create journal Entry # 1 to Debit Chequing Account and Credit B Brown, Capital)
Bob has decided to lease the backhoe. The monthly payment of $2,000 (plus HST) is made on the 15th day of each month to Brian’s Leasing.
The Following Transactions took place in January:
|3||Purchased a computer by cheque from Impact Computers $4,600 (plus HST)||Chq 1|
|4||Bob Contributed a ladder to the Business Valued at $400 Fair Market value||Journal Entry #2|
|6||Completed cash Job for Maple City construction, issued receipt for $2500 (plus HST). Receive Payment in full and deposited cash in bank.||Sales Receipt 101|
|7||Bob paid expenses for the business: Telephone $198.45 (plus HST $20.00) to Telus. Overwrite calculated HST||Chq 2|
|Electricity $430 (plus HST) to Origin Power||Chq 3|
|Advertising $2,000 (plus HST) to leader Papers||Chq 4|
|8||Completed Job for JP Construction, 158 Keil Drive, Chatham, Ontario N7L1A1 (519) 555-1234. Invoiced $2000 (Plus HST),||Invoice 201|
|Terms Net 30.|
|11||Completed cash job for Big Brothers Construction, issued receipt for 4,400.00 (plus HST). Received payment in full and deposited cash in bank.||Sales receipt 102|
|Bob purchased office furniture on credit Inv B333 $700 (plus HST) from Bizquip. Terms Net 30||Bill|
|12||Bob paid expenses for the business: Fuel $214(plus HST) to Echo fuels||Chq 5|
|Insurance $600 to CUG Insurance for 12 Months liability Insurance. Expense January Insurance and set up Prepaid Insurance for Balance.||Chq 6|
|Bob drew $800 cash for his own use.||Chq 7|
|15||Paid Brian’s Leasing for the lease of the backhoe.||Chq 8|
Step 1: You have been hired to set up a Service Company File for Bob and set up the chart of Accounts as provided by the Consulting Accountant.
Step 2: You have been directed to complete the transactions for the first two weeks of January. Step 3: You receive the bank statement and process the Reconciliation.
NOTE – Only complete the steps as assigned by your instructor.
Required Items for Each Step Step 1
- Create the file Bob’s Back Hoes – Your Name”. This will help distinguish your report from the other students’ assignments.
- Add, Edit, Delete or Make Inactive Accounts to match the Chart of Accounts
- Process the transactions for January (including the initial capital contribution).
- Print (or create a pdf) the following reports for the period January 1-16:
- Chart of Accounts
- Income Statement
- Balance Sheet
- Complete Bank Reconciliation using the Bank Statement dated January 16 found on the next page
- Print (or create a pdf) the following report for the Period January 1-16:
- Bank Reconciliation Detailed
Using the bank statement below, prepare the bank reconciliation at January 16
|Account Name Bob’s Back Hoes||Account No 333067|
|Statement for January 1-16|
|13 Bank fee||20.00||26,074.65||CR|
- Net Income: $3,987.55
- Book Value of Chequing Account after bank reconciliation: $20,712.83