ACCT 621 Individual Case #1 Introduction You are a junior financial analyst for the CPA firm, ACCT621 LLP. Your firm specializes in providing a wide variety of internal financial solutions for local small businesses. Today is your first, a Senior Manager has requested your support on the first client engagement to provide financial reporting service for the year end. Client Background Godox Inc. was established in 1995 when it first opened its doors in Calgary, AB. Godox Inc. has grown over the years with lighting equipments but the wireless strobe lightings remain the most popular items amongst the 10 varieties of lighting. The business has been expended to distribute its products in different province and it is currently owned by Strobe family. Godox operates out of 10,000 sqft location and it has one studio and warehouse at the back. Godox pays $10,000 per month for the rental of the space. Strobe family was able to negotiate with the landlord and were not required to pay the first months rent in advance. All of the rental payments are current and up to date. For the last two years, Strobe has had a very reliable external accounting firm prepare its year-end financial statements and everything has been correct. This year, Strobe is planning to hire a junior accountant in house to cut the cost, and the junior did the best he could collect and record financial information to their financial systme. For the information he was not sure about, he kept all of the required supporting documentation. Now it is year end preparation and Strobe hired your firm to prepare their financial statements for the year. They provided you with the unadjusted trial balance and the information in Exhibit 1.1 to assist you. Supplementary Information Godox has a note that their owed $15,000 in wages to his employees for the period ending December 31st. Godox owed $5,000 in rent the period ending December 31st To expand their warehouse, Godox has started a bank loan of $20,000 with the local bank on January 1st this year. The loan carried an interest rate of 10%. The interest is due as the same time as the loan by the end of this year. Godox sometimes book special workshop with local well-known photographer and they have a payment in two weeks. On December 28th, a local photographer had a workshop at the location for 3 days. Godox charges one time setup fee of $500 and $300 for daily rental. The junior has not yet send out invoice and recorded. Godox declared a dividend of $1,000 on December 30th. Godox has some office supplies. At begin of the year, they had $2,500 of the office supplies in their warehouse including printing paper, backdrop and tapes. During the year, they purchased $5,000 more. On December 31st, there are only $2,000 of the supplies left. The junior didnt know how to record depreciation for the year and so left it for you to record. depreciation 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: Computer: 2 years Lift equipment: 15 years Studio furniture and fixtures: 10 years The invoice shows that Godoxs owes $1,500 for a utilities bill and $4500 for advertising agency for the month of December. These amounts have not been recorded yet. Currently, Godox has a $150,000 of Accounts Receivable and a $3,000 of Allowance for Doubtful Accounts. Godox records its bad debt expense based on aging percentage of Accounts Receivable (See Exhibition 1.2 Aging Schedule) The amount currently sitting in prepaid insurance due the insurance policy purchased in June this year. The junior didnt know how to correct it, so he left it. This years insurance policy was purchased on June 1 st for $12,000. The policy runs from June 1 to May 31 of each year. Requirements Based on the information you need to prepare depreciation schedule, the adjusting journal entries, an adjusted trial balance, the statement of earnings (income statement), statement of retained earnings and the statement of financial position (balance sheet). Exhibit 1.1 Godox Inc. Unadjusted Trial Balance December 31, 2015 Accounts Debit Credit Cash $185,000 Accounts Receivable $150,000 Allowance for Doubtful Accounts $3,000 Inventory $750,000 Office Supplies $7,500 Prepaid Insurance $18,000 Computers $30,000 Accumulated Amortization Computers $15,000 Lift Equipment $90,000 Accumulated Amortization Lift Equipment $18,000 Furniture and Fixtures $150,000 Accumulated Amortization Furniture and Fixtures $60,000 Accounts Payable $18,000 Salary Payable - Interest Payable Dividend Payable - Long-term Loan $20,000 Common Shares $100,000 Retained Earnings $101,000 Equipment Sale Revenue $1,580,000 Rental Revenue $30,000 Rental Expense $55,000 Advertising Expense $62,000 Utility Expense $16,500 Telephone Expense $12,000 Interest Expense $0 Salary Expense $350,000 Insurance Expense $9,000 Supplies Expense $0 Depreciation Expense - Rent Expense $60,000 Bad Debt Expense $0 $1,945,000 $1,945,000 Exhibit 1.2 Accounts Receivable Aging Schedule Number of Days Past Due Account Numbers Total Not Yet Due 30-Jan 31 - 60 61 - 90 Over 90 Customer 001 $ 30,000 $ 8,500 $ 4,000 $ 5,500 $ 7,000 $ 5,000 Customer 002 $ 20,000 $ 7,500 $ 5,500 $ 3,500 $ 2,000 $ 1,500 Customer 003 $ 18,000 $ 3,500 $ 4,500 $ 3,600 $ 3,500 $ 2,900 Customer 004 $ 45,000 $ 10,000 $ 14,300 $ 9,000 $ 8,000 $ 3,700 Customer 005 $ 37,000 $ 15,500 $ 7,200 $ 5,300 $ 7,800 $ 1,200 Total $ 150,000 $ 45,000 $ 35,500 $ 26,900 $ 28,300 $ 14,300 Estimated Percentage Uncollectible 2% 4% 6% 10% 20% Total Estimated Uncollectible Accounts Grading Rubric This Case will be marked in its entirety out of 100. The following rubric indicates the criteria students are to adhere to, and their relative weights to the assignment overall. The instructor may also generate a class case discussion, upon which a grade scaling might be deemed appropriate. Activity/Competencies Demonstrated % of Final Grade 1. Financial Reporting (100%) a. Depreciation Schedule (Fixed Assets) /10 b. Accounts Receivable Aging Schedule /10 c. Adjusting Entries (Unrecorded Transaction by the Junior) /20 d. Adjusted trial balance /10 e. Income Statement /20 f. Retained Earnings /10 g. Balance Sheet /20 Total /100