ACCT 621: Assignment 1
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ACCT 621: Assignment 1Question 1a) Alaina’s Bandana Corporation (ABC) is in its first year of operations. Using the information below,prepare a year-end income statement and balance sheet for the business (Remember to increase/reduceequity by the amount of income/loss).1. Through 2020, ABC purchased 5,000 bandanas at an average cost of $2 per bandana. Alainamarked up her bandanas to 2.5 times purchase price and sold all items in the same year. OnDecember 31st, Alaina had $5,950 cash in her corporate bank account and no remaininginventory, so she ordered 2,000 bandanas (with cash) at a cost of $2.10 each (they weredelivered to her the same day).2. Alaina is paid a monthly salary of $1,000 from ABC. Also, she rents a sales booth on weekends,so she can sell bandanas in person (in addition to online). The booth costs her $500 per month.3. At the start of the year, Alaina invested $5,000 into her business (100 common shares). She alsoobtained a bank loan of $5,000 (ABC has only paid annual interest of 5%). Other than the bankloan and a $4,200 accounts payable balance, ABC holds no debts.4. At the start of the year, Alaina purchased furniture for $3,000 (expected life of 15 years with nosalvage value) and sewing equipment for $2,000 (expected life of 10 years with no salvagevalue). Both assets are depreciated using the straight-line method.b) In 2021, Alaina plans to double her salary and spend $2,500 on marketing. She projects her cost torise to $2.25 per bandana, but she expects to sell twice as many units as last year, at a price of $6apiece. Assuming the other expenses remain constant, what does ABC’s second year look like? Write ashort essay on what Alaina should expect and give her appropriate business advice (You may use theprojections below as part of your analysis).
December 31, 2021 projection
ACCT 621: Assignment 1Question 2For each bank reconciliation item, describe the appropriate action an accountant should take. If ajournal entry is needed, please make one (assume a date of July 31st).a) Of three cheques written in July (no. 15 for $35.00, no. 16 for $49.32, and no. 17 for $231.09),two cheques (no. 15 and no. 17) are outstanding.b) A customer visited the company bank and deposited $300 to settle a bill from last month.c) The bank charged account management fees of $8.50 and overdraft fees of $20.d) A customer wired $400 for work completed last week. The electricity bill of $235.70 and gas billof $201.78 were automatically withdrawn. The company policy is to record e-transfers whenthey show up on the bank statement.e) On the evening of July 31st, a company employee deposited an envelope containing a $375cheque in the bank mail slot. The transaction was not included in the July bank statement.ACCT 621: Assignment 1Question 3a) On March 1st, Manav had six TVs ($200 cost). Each Monday this month (March 7th, 14th, 21st, and28th), Manav purchased ten TVs from his supplier. The price increased to $210 on March 12th, butdropped to $205 on March 28th. Manav sold five TVs in week one (March 1st to 7th), eight in week two,eleven in week three, and six in week four. Assuming the selling price was $400 per TV and Manav usesthe moving-weighted-average method, what was his gross margin for March? Make all necessary journalentries and SHOW YOUR WORK!b) Repeat 3a, but using the first-in-first-out method.ACCT 621: Assignment 1Question 4Molten Models Inc. has two employees (both pay a 20% tax rate). Kim, an engineer who designs volcanothemed merchandise and maintains the machines, and Wren, a machinist who mass produces the items.Kim earns $54,000 per year while Wren earns $3,800 each month. Showing all your work, completeMolten’s bi-weekly payroll journal entries for November 30th (Ignore any exempt amounts in yourcalculations). Also, make the journal entry for MONTHLY payroll remittance to the CRA on December15th.
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