Question 1 and Question 2 Accounting Exercises

Question 1: Prepare journal entries, adjusted trial balance, multi-step income statement, and balance sheet for a local rock climbing company

Today’s date is February 25th. You are the owner of a local rock climbing company called “On Belay”. This is the business’ 10th year of operations. Last year’s financial performance was poor, to say the least. You are on track to do better in the current year.

You got some help from a friend who is looking after the books for you while you focus on growing the business. One area that you started growing was doing day rock climbing excursions for beginners. Mrs Smith, a local teacher in school division 12, has been organizing class trips with you and her students which appears promising.

Your friend the bookkeeper recently got sick and is unable to complete the books for you. She has given you a list of items that need your attention (next page- Appendix 1). She has left it up to you to complete the journal entries, then post these journal entries to create an adjusted trial balance where you will need to create a Balance Sheet and Income statement for the year ended December 31.

Required:

• Prepare the journal entries, in good form. 

• You will then need to “post” these journal entries to create an Adjusted Trial Balance NOTE FROM JEFF – don’t spend too much time on this part. You can use the Trial balance given to you (below) and simply add to it on the side. Doesn’t need to be pretty, just functional so you can use it for the next part. The bulk of the marks are making the Balance Sheet and Income Statement!

• Prepare, in good form, a Multi-step Income Statement 

• Prepare, in good form, a Balance Sheet 

Tom Hunton’s is a local coffee shop in Kamloops. They uses a perpetual inventory system, recorded the following inventory transactions for this month:

onth: Purchases Sales Units Unit Cost Units Selling Price/Unit Apr 1 Beginning inventory 90 $ 16 5 Purchase 300 18 9 Purchase 130 20 16 Sale 240 $32 20 Purchase 100 24 

Instructions

                                                                                                                              Purchases                                                                       Sales

Question 2: Calculate cost of goods sold and ending inventory using FIFO and average cost formula for a local coffee shop

                                                                                                                       Units                             UniCost                            Units                   Selling Price/Unit

Apr       1 Beginning inventory                                                                            90 $                        16

             5 Purchase                                                                                             300                          18

             9 Purchase                                                                                             130                         20

             16 Sale                                                                                                                                                                               240                    $32

           20 Purchase                                                                                             1 00                        24 

(a) Using the FIFO cost formula, calculate the cost of goods sold for the quarter ended April 30. Show calculations.

(b) Using the average cost formula, calculate the ending inventory at April 30. Show calculations and use unrounded numbers in your calculations but round to the nearest cent for presentation purposes in your answer.