all the journal entries is and closing one's too.

Canadian Financial Accounting Cases EXHIBIT II - FINANCIAL STATEMENTS SHUTTEHBUG TRIAL BALANCE JUNE 30, 2017 Debit Credit Cash $26,200 Accounts receivable 1,044 Allowance for doubtful accounts 15 150 Prepaid rent 420 Prepaid insurance 600 Supplies 200 Inventory 7,080 Camera equipment 6,000 Accumulated depreciationcamera equipment 1,500 Vehicle 20,000 Accumulated depreciationvehicle 3,750 Computer equipment (Note 1) 4,000 Accumulated depreciationcomputer equipment 2,000 Patent, net (Note 2) 6,400 Trade name 5,000 Accounts payable (Note 3) 7,080 Unearned revenue 600 Wages payable 300 I. Ling, Capital 61,564 $76,944 $76,944 Note 1. Acquired on July 1, 2015. Note 2. Includes $1,600 of accumulated amortization. Note 3. All accounts payable relate to inventory purchases. Shutterbug Contributed by Ruth Ann Strickland Kings University College, Western University London, Ontario Iames Ling had loved photography ever since he received his rst camera as a gift from his grandmother for his fourth birthday. When he was young he took pictures of everything that interested him, and he stored them in virtual photo albums that he enjoyed looking at. He continually challenged himself to take better and better pictures. At one point he took 100 pictures of lily pads and made an entire exhibit of them. He spent so much time taking pictures that soon his nickname became Shutterbug. It was a name that he loved. By the time Iames was in his nal year of university he was asked to take pictures at so many events that he decided to start a business and he began charging for his services. On July 1, 2015, Iames o'icially launched his business, which he immediately named Shutterbug. He has now graduated and runs Shutter- bug on a full-time basis. Information about the business is in Exhibit I. It is now the beginning of July 2017, and Iames would like to know how Shutterbug has done during its second scal year. He knows that he has been busy, and he knows that he has had fun, but he also wants to know about the nancial success of his business so that he can make some important decisions about whether to expand during the upcoming scal year. He would also like to know how much he will have to pay in tax, at a rate of 30%. Throughout the year, Iames withdrew a personal salary of $2,500 per month. Iames is eager to see the nancial results of the year ended June 30, 2017, his second year of business. He has provided you with a trial balance of his accounts at June 30, 2016 (Exhibit 11) and has asked you to prepare journal entries for all transactions, as well as any adjusting or closing entries, for the year ended June 30, 2017. He would also like you to prepare T accounts and nancial statements. Please do your very best work so that James will be impressed and will ask you to prepare his nancial statements again next year. Required Prepare: (a) all journal entries, including closing entries Photogmhy Revenue Many of Shutterbug's customers are university students who pay by cash or credit card for services as they are received. Students who pay cash receive a 3% discount. Students who pay by credit card do not receive a discount. James pays a 2% service fee to the bank for all credit card transactions. For accounting purposes, credit card purchases are treated as cash. James also does work for schools and for businesses. He calls these \"corporate\" customers, and allows them to pay later, with generous credit terms of 3/30, net 60. Corporate customers never pay with credit cards. Shutterbug's gross sales for photography services in scal 2017 were $94,500. Of these sales, 78% were to corporate customers; 65% of the corporate customers paid within the discount period. For the remaining sales, 25% were in cash. All unearned revenue from scal 2016 was earned during July 2016. (No discounts or credit card fees applied to this revenue.) All accounts receivable were collected in the month following the sale, except as noted in Exhibit III. Camera Sales James's customers often commented on his great skill and the wonderful pictures he took When they asked him his secret, he said it took years of practice and great equipment. He identied a camera he really liked that sold at a retail price of $450, and he began selling them to interested customers. He found that they were particularly popular as Christmas and Valentine's Day gifts. James was able to purchase the camera he liked from CamPro for $325 each if he ordered at least 25 at a time. Otherwise he paid $350 per camera. Credit terms from CamPro were 2/ 15, net 60. Shipping was FOB shipping point, and was paid by the correct party. The shipping cost was $4 per camera for orders under 40 cameras and a at rate of $160 on orders of 40 or more. See Exhibit IV for a list of camera purchases. Five of the cameras from the November 15 purchase had defective lenses. James had already paid for these cameras before he realized that they were damaged. He called the supplier, and arranged to return them and to get a full refund for all of his costs. The supplier also agreed to pay for the shipping cost for returning the cameras. In December 2016, James needed 10 extra cameras for a customer who wanted them for holiday gifts. CamPro was unable to provide them quickly enough, so James had to order them from SnapShots, a supplier in the United States, at a cost of C$400 each. SnapShots did not offer any credit terms, and shipped overnight at a cost of C$ 10 per camera. Duty of 8% was also charged on gross purchase price. Shipping terms were FOB destination. In March 2017, James ordered ve more cameras from SnapShots for the same customer, under the same terms as the previous order. James sold a total of 100 cameras during scal 2017, and had 15 in ending inventory at the end of the year. Most of the cameras sold at the regular selling price of $450; however, the customer who wanted the special-order cameras from SnapShots paid $500 for each of them. She had paid for them, and had received them prior to the end of scal 2017. Periodic inventory with a FIFO cost ow was used for the rest of the cameras. All camera sales were for cash at the time of the sale. Canadian Financial Accounting Cases EXHIBIT I - INFORMATION ON SHUTTERBUG Operating Expenses James operates Shutterbug out of his home, and allocates 30% of the total space to his business. He pays rent on the last day of each month for the following month. On January 1, 2017, his rent increased from a total of $1,400 to a total of $1,500 per month. One part-time employee, Karen, helps James during busy periods. Karen earns $16 per hour and was paid cash for 1,400 hours that she worked during scal 2017. Prior to year end she worked an additional 11 hours that had not yet been paid. Karen also receives a 10% commission on sales that she personally makes. During scal 2017, Karen was personally responsible for 20% of Shutterbug's gross photography sales. (Gross photography sales were $94,500. Commissions are paid on the last day of each scal year.) Photography supplies were purchased on account during scal 2017 for $1,750. (All accounts payable for operating expenses are paid at the end of the current month. Use a separate journal entry.) At the end of June, $400 of supplies were still on hand that had not yet been used. Shutterbug has a telephone service plan that costs $80 every month for telephone service. On January 1, 2016, James had purchased a 12-month in- surance policy. When it expired, he paid for another 24 months, and received a 10% discount off the original price. Because this was a highly mobile business, a major expense for James was operating costs for his car. During scal 2017, James drove his car 40,000 km. He kept careful records of all costs and determined that the operating expenses for the car totalled $0.15 per kilometre. These costs were paid in cash as incurred. All of the mileage driven was for business purposes. James has a separate vehicle that he uses for personal purposes. On September 15, 2016, James paid $3,600 for 12 months of advertising in a local photography maga- zine. The ads were scheduled to start on October 1, 2016. Prope Plant, and huipment On July 1, 2015, James had paid $20,000 for a Smart Car that was specially designed for his business. He expects to use this car for a total of ve years and calculates depreciation based on an expected 160,000 total kilometres. When James started Shutterbug he already owned $6,000 worth of camera equipment that he contri- buted for exclusive use by the business. Depreciation for this equipment was done on a straight-line basis. On April 28, 2017, James traded this equipment in on some newer equipment offered by a local vendor. Because of the excellent condition of James's equipment, the vendor gave a tradein allowance of $4,000, which was the fair value of the equipment. The vendor also extended delayed payment terms by having James sign a $9,000, 4%, 12-month note payable. (All accounts payable for operating expenses are paid at the end of the current month. Use a separate journal entry.) Due to possible rapid obsolescence, James decided to use double declining-balance depreciation for the new equipment, which has a useful life of 10 years and an expected residual value of $3,000. As a condition of the note, the vendor requires a copy of James's scal 2017 nancial statements once they are completed, and requires that James not incur any other debt until the note is repaid. An additional requirement is to maintain a current ratio of at least 2:1. Shutterbug also has $4,000 worth of computer equipment that is being depreciated on a declining- balance method. For this equipment, there is $300 residual value expected at the end of its useful life. Intangible Assets 011 July 1, 2015, James had paid $5,000 to register the name Shutterbug as a trade name that has an inde- nite life. On the same day, he had also paid $8,000 for a ve-year patent to protect his unique photography process. On June 30, 2017, the patent had a fair value of $3,000. Section 2: Financial Statement Preparation and Analysis 41 EXHIBIT III - PHOTOGRAPHY SALES AND COLLECTIONS- CORPORATE CUSTOMERS August 1, 2016 James received a cheque in the mail from a business whose account had been written off in January 2015. The cheque was for 30% of the $4,000 that had been written off. September 5, 2016 The London High School called to complain that some of the pictures James had taken for a school function were not the right type. The school had already paid its bill, so James sent them a $200 refund. December 12, 2016 Stanley Company declared bankruptcy, and James decided to write off its outstanding balance of $1,700. February 10, 2017 The Business Company, a corporate customer, called to ask that their $2,000 outstanding ac- count be converted to a note. James agreed to convert the account receivable to a 12%, three- month note receivable. The note was paid in full on May 9, 2017. March 9, 2017 Sterling Corporation called to ask James if he would be available to take pictures at a family fun day they were planning for August 2017. James agreed to take the pictures, and told Ster- ling the cost would be $1,500. Sterling gave James a deposit of $500, and will pay the balance when the services are performed. This $500 was not included in the gross sales figure for the year. June 30, 2017 At the end of the fi scal year, the balance in Accounts Receivable was $3,150. James believes that 4% of outstanding accounts receivable at the end of the year will not be collectible. EXHIBIT IV - CAMERA PURCHASES Purchase # # of Cameras Date Shipped Date Delivered Date Paid 1 20 June 20, 2016 July 2, 2016 July 10, 2016 2 45 Nov. 15, 2016 Nov. 28, 2016 Nov. 29, 2016 3 10 Dec. 10, 2016 Dec. 12, 2016 Dec. 15, 2016 30 Feb. 1, 2017 Feb. 12, 2017 Feb. 20, 2017 5 Mar. 28, 2017 Mar. 30, 2017 Apr. 1, 2017 6 10 June 25, 2017 July 5, 2017 July 6, 2017