Sem 2 Assignment 02 Problems

Assignment Two
Problem One:
Jessi Paulis started a consulting firm, Paulis Consulting Ltd, on 1 May 2019. The following events occurred during the month
of May:
Events
(1) Paulis invested $8,000 cash in the business in exchange for shares.
(2) Paid $800 for office rent for the month.
(3) Purchased $500 of supplies on account.
(4) Paid $50 to advertise in the County News.
(5) Received $3,000 cash for services performed.
(6) Declared a $700 cash dividend, payable in June.
(7) Performed services worth $3,300 on account.
(8) Paid $2,100 for employee salaries.
(9) Paid for the supplies purchased in Event (3).
(10) Received a cash payment of $2,000 for services performed on account in Event (7).
(11) Borrowed $5,000 from the bank on a note payable.
(12) Purchased office equipment for $2,300 on account.
(13) Received a $150 water bill for the month of May, payable in June.
Required:
(a) Analyse the events for May, and complete the table below. The first event is shown. Afterwards, calculate the ending balances of
the accounts to prove that the accounting equation balances.
(b) Prepare a balance sheet in the ACCTG 102 form and format. The loan from the bank is due in December 2020.
(c) Prepare residual analyses for events (6) and (13).
a. Please submit this problem (problem 1c only) as your online submission.
(d) When a balance sheet is prepared at the end of the accounting period, the balances shown for assets and liabilities must be
faithfully represented. If a balance sheet were prepared for Paulis Consulting Ltd on 31 May 2019, which ending balances shown
in part a) are likely not faithful representations? Explain why. (Hint: Refer to the definitions of assets and liabilities in the
Conceptual Framework.)
Equity
Assets Liabilities
Retained Earnings
Event Cash +Accounts +Supplies +Equipment =Accounts +Dividends +Loan +Share +Service - -
Receivable Payable Payable Payable Capital Revenue Expenses Dividends
1 +8,000 +8,000
2
3
4
5
6
7
8
9
10
11
12
13
Totals
Problem Two:
Bryan Goosling has just finished his training as a fitness instructor and personal
trainer. He has been working part-time during his training program in a local gym,
and has saved $15,000 over the past 2 years. Bryan decided he would like to open
his own business as a personal trainer, so he filed all the necessary paperwork to
form a limited company, opened a business bank account, and transferred the
$15,000 in exchange for shares in the new company named ProFIT Ltd. He also
borrowed an additional $10,000 from the bank.
Bryan has been very busy in his new business, getting new clients, purchasing
equipment, and scheduling fitness sessions. Unfortunately, without any accounting
training, he has not kept formal financial records. What he has done: deposited all
the money received from his clients into and paid all of the business expenses out
of the business bank account; recorded in his diary all fitness sessions delivered for
which clients still owe him money.
Bryan has printed out his bank statements for the first 6 months (1 April 2019 to
30 September 2019), has reviewed other invoices and bills he has received in that
time period, and has prepared the following information:
1. The bank statements show that the total amount of money deposited into
the account for the 6-month period was $34,000, which included the
$15,000 share issuance and the $10,000 bank loan.
2. Total payments over the six months were for $7,500, consisting of the
following:
(a) Rent, $750.
(b) Electricity, $850.
(c) Telephone, $450.
(d) Purchase of equipment, $3,700.
(e) Advertising flyers (all distributed), $500.
(f) Wages $950.
(g) Interest on loan $300
3. Bryan has recorded in his diary that clients owe him $800 as at 30
September for fitness sessions he has already delivered.
4. On 1 September, he declared and paid a $1,200 dividend to himself.
5. Bryan has received invoices for the following, which will be paid in October:
(a) Water bill, $350.
(b) Telephone, $110.
6. Bryan owes $50 of interest on the loan, payable on 1 October 2020.
7. Income taxes are estimated at 30% of pre-tax profit.

Required:
Prepare a Statement of Comprehensive Income for ProFIT Ltd for the 6-month
period ending 30 September 2019, using the ACCTG 102 form and format. Ignore
depreciation.

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Assignment Two

4. On 1 September, he declared and paid a $1,200 dividend to himself.

6. Bryan owes $50 of interest on the loan, payable on 1 October 2020.

7. Income taxes are estimated at 30% of pre-tax profit.

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