Charlie's Internet Caf$$

Charlie's Internet Caf$($CIC$)$ was established and incorporated on January $1,2016,$ by Bruce Waiters and has just completed its third year of operations with a year end of December $31.$ Bruce was born in the Muskoka region and after completing his university degree in history, he decided to return to the area to set up his own business. After months of research, Bruce decided to open his business along the Gravenhurst waterfront. His research showed that there was tremendous potential in that area, especially during the summer tourist season, for a small caf$$ with an Internet service. Local cottagers without service suggested that they would find it appealing to check their email while shopping in the trendy area.

CIC runs out of $90$ square metres $(1,000$ square feet$)$ of space. It has one entrance into the caf$$ and patio doors leading out to a deck that overlooks the water. CIC pays $$5,000$ per month for the rental of the space. Bruce was able to negotiate with the landlord and was not required to pay the first month's rent in advance. All of his rental payments are current and up to date. For the last two years, CIC has had a very reliable accountant prepare its year$-$end financial statements and everything has been correct. This year, CIC's accountant retired and Bruce 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. Bruce hired your accounting firm to prepare his financial statements for the year and you were assigned the job. Bruce supplied you with his unadjusted trial balance and the information in Exhibit I to assist you.

Additional information:

The amount currently sitting in prepaids arose due to the insurance policy last year. Bruce didn't know how to correct it$,$ so he left it$.$ This year's instrance policy was purchased on November $1$ for $$9,000.$ The policy runs from November $1$ to October $31$ of each year.

Bruce has a note that he owed $$900$ in wages to his employees for the period ending December $31.$

The loan was incurred when the caf$$ was opened. The loan carries an interest rate of $8\%.$ The interest is payable two months after year end and the principal is due in $2022.$

$")$ CIC will sometimes book special events with small organizations that are allowed to pay after the event has taken place. On December $29,$ a small company had a gathering at the caf$.$ The company was billed $$1,089$ and has $30$ days to pay it$.$ Bruce has not yet recorded this in his financial records.

CIC declared a dividend of $$5,000$ on December $30.$

$")$ Bruce 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:

Computers: $5$ years

Caf$$ equipment: $10$ years

Furniture and fixtures: $20$ years

The information shows that CIC owes $$400$ for a telephone bill and $$300$ for electricity for December. These amounts have not been recorded yet.

Required

Based on the information you have, prepare the adjusting journal entries, an adjusted trial balance, the statement of earnings $($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 postclosing trial balance. Ensure you show all of your work and prepare proper journal entries and properly formatted financial statements.

EXHIBIT' I

CHARLIE'S INTERNET CAF$$

UNADJUSTED TRIAL BALANCE

DECEMBER $31,2018$

$\backslash$table$[[$Account Name,Debit,Credit$],[$Cash$,30,000,],[$Accounts reccivable,$5,600,],[$Food inventory,$21,000,],[$Merchandisc inventory,$61,500,],[$Prepaids$,3,400,$cdots