Attached is what I have for part 2 of other attached document. Could you please check over it and see if there is anything wrong?

BTown Coach Service On November 1, 2015, BTown Coach Service (BTown) was incorporated in Massachusetts. BTown will be offering commuter bus service from Boston Logan International Airport to various locations in New England and the Mid-Atlantic region. There will not be any overnight service. Limited service is expected to begin on January 1, 2016, and new routes will be added over the next twelve months. BTown is authorized to issue up to 800,000 shares of its $1 par common stock. On November 1, 2015, the co-founders Ted and Tim, CEO and CFO of BTown, each purchased 50,000 shares of common stock of BTown. The CEO (Ted) purchased his stock for cash in the amount of $10 per share, for a total of $500,000. The CFO (Tim) gave BTown a building on a parcel of land with a total fair market value of $500,000 in exchange for 50,000 shares. The CFO purchased the property 15 years ago at a purchase price of $200,000. The building has a front office space and is of sufficient square footage and height to store several buses when they are not in use and has available space to build a small repair shop so that BTown can perform light maintenance on its own buses. The building is empty and has a fair market value of $400,000, with the remainder of $100,000 attributed to the fair value of the parcel of land. The building has an expected useful life of 40 years with zero salvage value. BTown hired Harbor Legal and Accounting Services to draft and process the documents relating to the incorporation and establishment of BTown. Harbor has billed BTown $50,000. The owner of Harbor is a friend of the co-founders of BTown and agreed to accept 2,500 shares of common stock in exchange for half of the legal and accounting services rendered, with the balance of $25,000 paid in cash. The bill to Harbor was dated November 15, for work performed related to the start-up of BTown. On November 30, Harbor was paid and the common shares were distributed to Harbor. On November 15, BTown signed a purchase order for 5 luxury coach buses at a unit price of $820,000, for a total purchase price of $4.1 million. This purchase order does not have any cancellation penalties and deposits are 100% refundable up until the date the buses are delivered in satisfactory condition. These buses seat 50 passengers and have ample storage capacity for luggage. The buses are hybrid fuel buses relying on diesel fuel. BTown expects the buses to have a 20 year life with zero salvage value and the buses will go into service on January 1, 2016, the date BTown starts to provide transportation services. BTown finances the purchase with $100,000 in cash paid on the date the purchase order contract is signed, November 15, 2015, and a note for 5 equal annual payments of $800,000 plus interest beginning on December 31, 2016. BTown's borrowing rate is 10%. The buses were delivered in satisfactory condition and the note was signed on December 31, 2015. On December 5, BTown purchased state of the art reservation software and a computer for the total price of $60,000. BTown pays the bill in full on the date of delivery, December 5, 2015. BTown expects the software and hardware to have a life of 5 years with no salvage value. BTown also entered into a 5 year service contract with the vendor at a cost of $300 per month and paid for the first year ($3600) up front on December 5. BTown will begin using the 1 computer and reservation system on January 1, 2016. The service contract also goes into effect on January 1. During December, BTown embarked on a print, radio and TV ad campaign to make the local market aware of the new bus service at a total cost of $8,000. BTown made an initial retainer payment to the advertising agency on December 1 in the amount of $1,000. The ad agency billed the remaining $7,000 to BTown on December 31, terms n/30. BTown paid the bill on January 31. All advertising services were received during December 2015. On December 20, BTown placed an order in the amount of $40,000 for essential parts to keep its bus fleet in good working order. The order is fully cancellable and refundable without penalty. The parts were delivered on January 5, 2016, terms 2/10, n/30. BTown realized on inspection of the delivery that a box of gas filters was damaged and refused to accept this box. It was returned to the supplier for a credit on the bill of $500. BTown paid the net amount owed to the supplier on January 15. About half the parts were used for repairs in January, but BTown expects to use, on average, $40,000 of parts per month when business stabilizes. BTown's policy is to take all purchase discounts and record purchases net of the discount. Further, BTown expenses all parts when purchased. On December 22, BTown purchases a 2 year liability policy effective January 1, 2016 at a cost of $66,000 for the full two years. BTown hired the aunt of the CFO (Aunt Martha) to pay the bills during the start-up phase, November and December 2015. Martha is not a trained accountant but she is very meticulous in her record keeping. Martha received a fixed payment for her work and was paid in full on December 31 for her services, in the amount of $2500. Ted and Tim did not take any salary during the start-up months and no dividends were paid. On December 31, BTown paid utilities in the amount of $3000 and BTown owes accrued utilities in the amount of $1000 on December 31. BTown owes $800 for office supplies purchased on account on December 15. BTown expenses all office supplies. The bill for office supplies was paid on January 10, 2016. The utility bill was paid again on January 31. Effective January 1, a local CPA firm will be taking care of the write up work, paying bills, and filing tax returns. Billings from the CPA firm will be $4,000/month, payable on the 15th day of the following month. 2 Martha recorded all receipts and disbursements for the two months ended 12/31/15 in the cash account ledger, duplicated below. The balance per the December 31, 2015 bank statement is $238,900. Cash Account, BTown Coach Service November 1, 2015 through December 31, 2015 Date Check # Amount Cash Balance Memo November 1 Deposit 500,000 500,000 From Ted -Common Stock November 15 #101 (100,000) 400,000 Buses November 30 #102 ( 25,000) 375,000 Harbor legal December 1 #103 ( 1,000) 374,000 Advertising December 5 #104 ( 63,600) 310,400 Computer, Software, Service December 22 #106 ( 66,000) 244,400 Liability insurance policy December 31 #107 ( 3,000) 241,400 Utilities December 31 #108 ( 2,500) 238,900 Martha BTown began taking reservations and offering service on January 1, 2016, with the introduction of 4 daily round trip reserved bus routes from Boston Logan Airport to Manchester, New Hampshire. Tickets purchased on the bus on the date of the trip cost $65 round trip and $35 one way. In order to encourage riders to purchase reserved seats in advance, a discount ($60 round trip and $32 one way) is offered. The reservation must be made online using a credit card and can be made up to 4 hours prior to the scheduled departure. Point of purchase tickets also must be purchased with a credit card. Unused tickets can be used for up to one year at which time they expire without a refund to the customer. Demand for the service was brisk and the following chart records the sales activity in January: Advance One Way Tickets Sold Advance Round Trip Tickets Sold Point of Purchase One Point of Purchase Round Way Tickets Sold Trip Tickets Sold 2,000 1,000 1,000 1,100 BTown ran 3 round trips per day for each of the 31 days in January. All credit card sales are settled on the day that the charge is processed and assume that all customer ticket purchases are made via credit card. The credit card companies require a .5% fee on the day of the transaction. All point of purchase one way and round trip tickets were used in January. Of the advanced sales, 1200 one way tickets were used in January and 800 round trip tickets were used in January. The credit card fee is expensed as incurred since the tickets are not refundable. On January 1, the CFO of BTown made arrangements with a local diesel fuel supplier for Diesel Fleet Cards to be kept in each bus. The cards can be used at diesel stations in the region to purchase diesel fuel at $2.90 per gallon, locked in for one year. The current price for diesel in the New England market is $2.90 per gallon but it fluctuates quite a bit. BTown has committed to 3 purchase a minimum of 10,000 gallons of diesel fuel at the locked in price of $2.90 per gallon, with a maximum amount of 30,000 gallons purchased at that price. BTown expects one round trip to use about 30 gallons of diesel fuel, depending on the weather, traffic conditions and weight of the bus. The cost of all fuel purchased on the Diesel Fleet Cards is settled every evening, like a credit card, so it is essentially immediate payment to the diesel supplier. No diesel fuel is stored and any left in the bus fuel tanks at the end of the day is immaterial. BTown has adopted the policy of expensing fuel as purchased. During January, BTown purchased and paid for 2900 gallons of gas all at the locked in price. BTown has made a commitment to safety and hired experienced drivers through BusDrivers, Inc., a company that trains drivers and covers their benefits and liability insurance. The agreed upon fees depend on the route length with premiums paid when routes take longer than anticipated for weather and traffic delays with the average payment to BusDrivers, Inc. per round trip equal to $650. BusDrivers, Inc. bills BTown every Monday for the prior week (Monday through Sunday) and BTown makes an immediate wire transfer. Wire transfers for January 2016 are: Date of Payment Dollar Amount January 4 $ 7,800 January 11 13,650 January 18 13,650 January 25 13,650 Phone service and internet service in the office and wifi on the buses is provided by a local company at the cost of $1000 per month beginning January 1. The bill for January was received on February 3 with terms n/10 and paid on February 13. Utilities used for the month of January amounted to $3000, and a payment of $2500 was made on January 31. BTown uses straight line depreciation for all productive assets, and follows USGAAP. Assume all long-term assets purchased are placed in service on January 1, 2016. Ignore income taxes. In March 2016, BTown made the following additional accounting decisions: 1. After reviewing the accounting treatment of their long-term assets on March 1st, 2016, BTown changed the useful lives of the buses from 20 to 15 years and also now believes that the buses will have a salvage value of $200,000 combined when fully depreciated. Further, the building's useful life has been reduced from 40 to 25 years. 4 2. BTown has contracted with a local construction company to build their small repair shop (construction completed March 31, 2016). Construction costs incurred include the following: Legal fees for drawing up the construction contract ($5,000), materials and labor ($37,000), advance payments of property taxes for Summer 2016 ($4,000), State registration fees ($500), and Architect fees for construction plans ($2,500). 3. On March 1st, BTown receives a bank statement for the period ending January 31, 2016. The bank statement has an ending cash balance of $373,550. BTown performs a bank reconciliation with these items: Outstanding checks ($20,500), January 31st cash deposits not submitted to bank until February 1st ($11,000), Check written by BTown for $5,800 was recorded on the books at $8,500. The bank correctly deducted $5,800, Bank service charges ($350), Check from customer included in book cash returned from bank due to non-sufficient funds ($377). 4. Demand for the new bus service has been brisk since it is a cost effective way for college students enrolled at a variety of colleges near Manchester, New Hampshire to travel back and forth to Boston. BTown wants to tap into this market in other locations in New England, and intends to expand to several additional geographic areas within the next six months. BTown believes that the service will be even more popular if college students can use a purchase interface to quickly purchase tickets with funds loaded on their university student accounts, eliminating the need for a credit card. The CEO also believes demand will be further enhanced if customers can track the location of buses via an App. The CEO has hired a start-up company affiliated with a college in Boston to create the purchase interface and a GPS locater App for a total fee of $100,000, to be delivered for testing by the end of May. Development of the software is quite doable and its use is expected to increase future revenue. The first progress payment of $20,000 was made on March 31, 2016 for work performed to date to develop the software. The second progress payment of $40,000 is due on April 30, and another $30,000 is due on May 31. Testing of the software and determination of technological feasibility is expected to occur in early May, with release of the App in late May, 2016. The last $10,000 is not paid until the software has been running successfully for one month, or at the end the June 2016. Required PART I - DUE SEPTEMBER 20TH 1. Prepare all journal entries in good form for the two month period from November 1 through December 31, 2015. Please prepare any adjusting journal entries in chronological order. The closing entry is not necessary. 2. Using the journal entries and the data provided by Martha, prepare an income statement, for the two months ended December 31, 2015, and balance sheet at December 31, 2015. 3. Prepare all the journal entries in good form for January 2016, including any adjusting journal entries. Record one revenue entry, one entry for the purchase of diesel fuel, and one entry for the compensation to the bus drivers for the entire month. 4. Prepare an income statement for the month ended January 31, 2016, and a balance sheet at January 31, 2016. 5. Calculate the net increase in Cash during the period from the date the company was formed to the balance sheet date of January 31. How much of this increase came from or 5 was used by operating activities, how much from investing activities, and how much from financing activities? PART II - DUE DECEMBER 1ST 1. Why is BTown's method of accounting for parts inventory appropriate? Discuss. 2. How should BTown account for the software development costs? Show all appropriate journal entries under GAAP. If BTown used IFRS instead of USGAAP, would the accounting for the software be the same or different as of March 31, 2016? Explain. 3. BTown expects the Manchester routes to be at 85% capacity in February. Estimate net income for February. Assume all tickets are round trip and 50% are advance tickets (50% point of purchase) and that none of these 85% riders had a ticket before February (they all purchased their ticket via credit card in February). BTown expects to continue to run only 3 round trips/day in February. In addition, consider all estimable expenses but assume utilities, wi-fi, and parts used are the same as in January (use the same expense for both months). 4. Compute the new depreciation expense for the buses and building for the month of March 2016 and create the new journal entry for March 2016. What is the book value of these assets as of March 31st, 2016? 5. What is the amount that BTown should capitalize (if anything) for the new repair shop completed March 31st, 2016? If an amount should be capitalized, why does BTown capitalize these expenditures as opposed to expensing them immediately? 6. Create a bank reconciliation for the month ended January 31st, 2016. Use your cash balance from the balance sheet created in Part I, Question 4 above as your starting book balance. What is the correct ending book cash balance? 6 2 31-Mar-16 30-Apr-16 31-May-16 30-Jun-16 Research and Development Expense Cash 20,000 Research and Development Expense Cash 40,000 Research and Development Expense Cash 30,000 Software Development Costs Cash 10,000 3times a day 28 days 1785 advanced 1785 point of purchase Revenue Less: Credit Card Fee Fuel Expense Parts Expense Utilities Expense Wifi Expense Liability Insurance Expense Accounting Expense Salary Expense (drivers) Depreciation Expense Interest Expense service cost expense Total Expense Net Income 4 31-Mar-16 Depreciation Expense on Building Depreciation Expense on Buses Depreciation Expense on Comp. & Software Accumulated Depreciation--Building Accumulated Depreciation--Bus Accumulated Depreciation--Com & Software Book Value of Building Book Value of Buses Book Value of Comp and Software 5 capitalized 20,000 40,000 30,000 10,000 50 passenger capacity 85% complete $60 $65 $107,100 $116,025 $223,125 0.005 30g x 3trips x 2.9 x $ $ $580 7,308 $38,710 $3,000 $1,000 $2,750 $4,000 54,600 $37,833 $33,333 $300 $183,414 1333 21667 3000 2500 51250 3000 396167 4027083 54000 6 legal fees for drawing up the construction contract materials and labor Architect Fees $5,000 $37,000 $2,500 Total Capitalized $44,500 Book Balance book error service charge NSF check 362,077 -2700 -350 -377 358,650 $39,711 Bank Balance outstanding checks deposits in transit check deduction 373,550 -20500 11,000 -5800 358,250 Part II 1. Why is BTown's method of accounting for parts inventory appropriate? Discuss. a. BTown expenses all parts when purchased. They expense the parts because it does not extend the useful life of the asset or improve its quality or efficiency. Subsequent expenditures are only capitalized then. b. Recording purchases net of discount is appropriate because it enables the managers to draw their attention to the opportunities that have not been taken. Will allow management to account for the forfeited discount as an expense without including the expense as part of the cost of inventory 2. How should BTown Account for software development costs? a. Software development costs are incurred after technological feasibility is established are capitalized. Technological feasibility is when all development, planning, coding, and testing has been performed and we know that the software can be produced. Software Development costs should be capitalized as part of the assets of the company. Capitalization of the costs should be stopped only when substantial testing has been done. b. Under IFRS costs in the research phase are expensed as incurred. Costs in the development phase are capitalized. Under IFRS the costs after March will be expensed as and when they occur until the company will be able to approve that the software is technically feasible and can be used by the company to generate its revenue. 5. BTown should capitalize the legal fees, the materials and labor, and the architect fees. They should be capitalized because rather than being expensed they can be associated directly with the development and construction of the repair shop which is a capital structure. General Journal Date Nov 2014 Particulars 1 Cash PR Debit 500,000 Common Stock Security Premium Land Building 100,000 400,000 Common Stock Security Premium 15 Preliminary Expenses Harbor 15 Advance for Buses Cash 30 Harbor 50,000 100,000 50,000 Cash Common Stock Security Premium Dec 2014 1 Advertisement Exp Cash 5 Computer & Software Cash Service Cost Cash 1,000 50,000 3,600 20 Building Improvement Cash 80,000 22 Liability Insurance Cash 55,200 31 Buses 4,000,000 Advance for Buses Notes Payable 31 Advertisement Exp Advertising agency 7,000 31 Salary - Accountant Cash 2,000 31 Utilies 4,000 Cash Creditors for Exp. 31 Office Supplies Creditors for Exp. 31 Accrued service cost Service cost 31 Accrued Liability Insurance Liability Insurance 800 3,600 55,200 Jan 2015 5 Store & Repairs Suppliers 5 Suppliers 40,000 500 Store & Repairs 10 Crediotrs for exp. Cash 15 Suppliers 800 39,500 Cash Discount on Store & repairs purchase 31 Advertising agency Cash 7,000 31 Crediotrs for exp. Cash 1,000 31 Accounting Exp Creditors for Exp. 4,000 31 Cash Processing Fess Revenue 232,510 490 31 Unearned Revenue Revenue 31 Fuel Expenses Cash 41,000 8,410 31 Compensation to Bus Driver Cash 48,750 31 Phone and Internet service Creditors for Exp 1,000 31 Utilities 3,000 Cash Creditors for Exp 31 Software development Cash 20,000 31 Store & Repairs Used Store & Repairs 19,750 31 Accumulated depreciation on building Accumulated depreciation on building Improvement Accumulated depreciation on Computer & Software Accumulated depreciation on Buses 833 333 833 16,667 Building Building Improvement Computer & Software Buses 31 Dep on Building Dep on Building Improvement Dep on Computer & Software Dep on Buses 833 333 833 16,667 Accumulated depreciation on building Accumulated depreciation on building Improvement Accumulated depreciation on Computer & Software Accumulated depreciation on Buses 31 Service cost Accrued service cost 300 31 Liability Insurance Accrued Liability Insurance 31 Interest exp Interest Payable 2,300 32,500 Credit 50,000 450,000 50,000 450,000 Income Statement for the two months ended December 31, 2014 Expenses Amount Income Amount Preliminary Exp. Advertisement Exp Utilities Office Supplies Salary Accountant 50000 8000 4000 800 2000 Net Loss 64800 64800 64800 50,000 100,000 25,000 2,500 22,500 1,000 50,000 3,600 80,000 55,200 Income Statement for the months ended January 31, 2015 Expenses Amount Income Fuel Exp 8410 Revenue Compensation to Bus Driver 48750 Discount on Store & repairs Utilities Office Supplies Accounting Exp. Processing Fees Phone and Internet service Store & Repairs 100,000 3,900,000 7,000 Depreciation Service cost Liability Insurance Interest exp Net Profit 3000 0 4000 490 1000 19750 18666 300 2300 32500 53624 Amount 192000 790 192790 2,000 3,000 1,000 800 3,600 55,200 40,000 500 800 38,710 790 7,000 1,000 4,000 233,000 192790 41,000 8,410 48,750 6. The method of accounting of Btown for parts inventory is apporpriate because for stores and repairs parts it is not easy track down the parts which is used in which months so some time it is appropriate to use this type of accouting, 1,000 7. There would be the same treatment for software development expenses if Btown used IFRS instead of US GAAP 2,500 500 20,000 19,750 8 Income Statement for the months ended February 31, 2015 Expenses Amount Income Fuel Exp 8410 Revenue Compensation to Bus Driver 48750 Utilities Office Supplies Accounting Exp. Processing Fees Phone and Internet service Store & Repairs 833 333 833 16,667 Depreciation Service cost Liability Insurance Interest exp Net Profit 3000 0 4000 1000 40000 18666 300 2300 32500 158926 There is nothing mention about how much tickets are sold in february, so I am not able to calculate the revenue. 833 333 833 16,667 300 Amount 0 2,300 32,500 Balance Sheet at December 31, 2014 Assets Non-Current Assets Land Building Building Improvement Computer & Software Buses Amount 100000 400000 80000 50000 4000000 Current Assets Accrued service cost Accrued Liability Insurance Cash Liabilities Common Stock Security Premium Net Loss Notes Payable Current Liabilities Creditors for Exp Advertisement Agency Balance Sheet at January 31, 2015 Assets Non-Current Assets Land Building Acc. Dep. 3600 55200 180200 4869000 Amount 102500 922500 (64800) 3900000 1800 7000 4869000 Amount 100000 400000 (833) 399167 Building Improvement Acc. Dep. 80000 (333) 79667 Computer & Software Acc. Dep. 50000 (833) 49167 4000000 (16667) 3983333 Buses Acc. Dep. Software Development Current Assets Store & Repairs Accrued service cost Accrued Liability Insurance Cash 20000 19750 3300 52900 285540 361490 4992824 Liabilities Common Stock Security Premium Net Loss Amount 102500 922500 (11176) Notes Payable Current Liabilities Creditors for Exp Interest Payable Unearned Revenue 1013824 3900000 5500 32500 41000 79000 4992824 Cash Flow Statement for the three month ended 31 Jan, 2015 Particulars Amount Amount Cash flow from Operating Activities Preliminary Expenses (25000) Advertising exp. (8000) Utilities Exp (6500) Accountant Salary (2000) Liability Insurance policy (55200) Revenue 232510 Office Supplies (800) Stores & Repairs (38710) Fuel Exp (8410) Driver Salary (48750) 39140 Cash flow from Investing Activities Advance for Buses Paid for Computor, software & Service Repair of Building Software Development (100000) (53600) (80000) (20000) (253600) Cash flow from Financing Activities Issue of Common Stock with security premium Cash Balance hich months 500000 500000 285540.00