Question

Solved | You are an Analyst for the professional service firm, BUSI 1043 LLP

Question

Henrietta’s Pine Bakery

Background
You are an Analyst for the professional service firm, BUSI 1043 LLP. Your firm specializes
in providing a wide variety of internal business solutions for different clients. Given the
outstanding feedback you received on your first engagement working for Big Spenders Inc., a
Senior Manager in the Financial Advisory group requested your support on a compilation
engagement.
Additional Information
Henrietta’s was established in 1963 when it first opened its doors in Dwight, Muskoka on
highway 60. Over the past 50 years, there have been four owners and is currently owned by
Carine & Geoff Harris who incorporated and took over the store on January 1, 2013. Their
sons, Kyle and Nicholas have been an intricate part of the business from dishwashing to head
bakers. Henrietta's has grown over the years with the addition of new items all the time, but
the "Sticky Buns and Clouds" remain the most popular items amongst the 150 varieties of
breads and pastries.
Henrietta’s runs out of 90 square meters (1,000 share feet) of space. It has one entrance into
the bakery and doors leading out to highway 60. Henrietta’s pays $5,000 per month for the
rental of the space. Carine and Geoff were able to negotiate with the landlord and were not
required to pay the first month’s rend in advance. All of the rental payments are current and
up to date. For the last two years, Henrietta’s has had a very reliable accountant prepare its
year-end financial statements and everything has been correct. This year, Henrietta’s
accountant retired and Geoff did the best he could recording his own financial information.
For the information he was not sure about, he kept all of the required supporting
documentation. Geoff hired your firm, BUSI 1043 LLP to prepare his financial statements for
the year. Geoff supplied you with his unadjusted trial balance and the information in Exhibit I
to assist you.
Supplementary information:
 The amount currently sitting in prepaids arose due the insurance policy last year. Geoff
didn’t know how to correct it, so he left it. This year’s insurance policy was purchased
on November 1 for $9,000. The policy runs from November 1 to October 31 of each
year.
 Geoff has a note that he owed $900 in wages to his employees for the period ending
December 31st.
 The loan was incurred when the bakery was opened. The loan carried an interest rate of
8%. The interest is payable two months after year end and the principal is due in 2019.
 Henrietta’s will sometimes book special events with small organizations that are allowed
to pay after the event has taken place. On December 29th, a small company had a
gathering at the bakery. The company was billed $1,089 and has 30 days to pay it. Geoff
has not yet recorded this in his financial records.
 Henrietta’s declared a dividend of $5,000 on December 30th.
 Geoff didn’t know how to record amortization for the year and so left it for you to
record. Amortization for all assets is charged using a straight-line method by taking the cost of the asset and dividing it by its expected useful life. The assets have expected useful lives as follows:

o Computer: 5 years
o Bakery equipment: 10 years
o Furniture and fixtures: 20 years
 The information shows that Henrietta’s owes $400 for a telephone bill and $400 for
electricity for December. These amounts have not been recorded yet.

The information shows that Henrietta’s owes $400 for a telephone bill and $400 for electricity for December. These amounts have not been recorded yet.

Exhibit I

Henrietta’s Pine Bakery

Unadjusted Trial Balance

December 31, 2015

Account Name<span></span>	Debit<span></span>	Credit<span></span>
Cash	$35,000
Accounts Receivable	5,600
Food Inventory	21,000
Merchandise Inventory	62,500
Prepaids	3,400
Computers	30,000
Accumulated Amortization – Computers		12,000
Bakery Equipment	90,000
Accumulated Amortization – Bakery Equipment		18,000
Furniture and Fixtures	150,000
Accumulated Amortization – Furniture and Fixtures		15,000
Accounts Payable		18,000
Accrued Liabilities		-
Interest Payable
Dividend Payable		-
Long-term Loan		220,000
Common Shares		50,000
Retained Earnings		22,000
Food Revenue		468,500
Internet Revenue		127,000
Merchandise Revenue		103,000
Food Expense	240,000
Internet Expense	54,000
Electricity Expense	65,000
Telephone Expense	20,000
Interest Expense	0
Salary Expense	200,000
Insurance Expense	9,000
Supplies Expense	8,000
Depreciation Expense	-
Rent Expense	60,000
	1,053,500<span></span>	1,053,500<span></span>

Required

Based on the information you have;

Prepare the adjusting journal entries
An adjusting trial balance
The Income statement
Statement of financial position (balance sheet) and
Statement of retained earnings

After you have completed the statements, prepare the closing journal entries and the posting closing trial balance. Ensure you show all of your work, and prepare proper journal entries and properly formatted financial statements.

Details