ACCT71210-Case Assignment # 2

To be submitted by a group of 3 Students

Total Marks: 60 (To be converted to 4%)

Question #1: Application of Concepts(60 Marks)

Sunshine Enterprise Ltd. started its operation in 2015.The following is the balance sheet of Sunshine Enterprise Ltd as at Dec. 31, 2015.

Assets
Current Assets:
Cash	$99,000
Accounts receivable	15,000
Allowance for doubtful accounts (AFDA)	(2,000)
Inventory	1,750
Prepaid expenses	9,250
Property, Plant and Equipment:
Equipment	125,000
Accumulated depreciation	(62,500)
Total assets	$185,500
Liabilities and Equities
Current Liabilities:
Accounts payable	$8,000
Long-term Liabilities:
Mortgage payable	10,500
Equity:
Common stock	114,500
Retained earnings	52,500
Total liabilities and stockholders' equity	$185,500

It is the second year of its operation.

The transactions of the company for the year 2016 are described below:

• Net sales for the year were $100,000 All the sales were on credit.(Transaction #1) The company collected 50% of credit sales during the year(Transaction #2) and 90% of the accounts receivable of last year.(Transaction #3) The rest of last year's receivable was uncollectible and written off as bad debt.(Transaction #4) The company uses allowance method for recording allowances for doubtful accounts (AFDA).It calculates AFDA by using the percentage method. It estimates that 1% of credit sales will be uncollectible.(Transaction #5)

• Sunshine buys finished goods for resale to the customers. It records inventory under perpetual method following FIFO cost flow. The company sold 800 units of inventory during the year. All the purchases are on credit and the ending balance of accounts payable was $4,500.(Transaction #7, paid payables) The details of all purchases for the year are as follows;(Transaction #6 - do not include beginning inventory)

Date	Units	Rates	Amount
Beginning inventory	50	35	$1750
Jan.30,2016	100	$30	3,000
March,30,2016	200	$32	6,400
Sept.30,2016	200	$35	7,000
Dec.28,2016	300	$34	10,200
Total	850	-	$28,350

• Sunshine purchased the equipment in 2015. The useful life of the equipment was estimated to be 4 years. The salvage value of the equipment was estimated to be $5,000.The Company uses double-declining method of depreciation for equipment.(Transaction #8)

Other information:

• Interest expenses for the year were $ 1,000, relates to Mortgage Payable.(Transaction #9)
• Operating expenses of sunshine for 2016 was $ 20,000(Transaction #10)
• Prepaid expenses of last year relates to prepaid insurance premium. The total amount of insurance premium paid in last year has expired during current year.(Transaction #11)
• Mortgage payable amount of $3,500 is paid by the company in the month of February.(Transaction #12)
• Record Cost of Goods Sold of 800 Units(Transaction #13)

Required:

1. Record the above transactions in the accounting equation. (Show necessary calculations). (35 Marks)Hint: Record the beginning balances from the above Balance Sheet first
2. Prepare a multi-step income statement. (10 Marks)
3. Prepare a Classified Balance Sheet(15 Marks)