Chloe Bakery and Catering Services (CBCS) Founded in 2017 by Chloe Morin in the kitchen of her house, Chloe Bakery and Catering Services (CBCS) quickly grew into one of the preferred event planning and catering businesses in North York, ON. CBCS offers unique event experiences that fulfill the dynamic needs of the clients. During COVID-19 lockdowns, CBCS switched its strategy and started to offer pre-packed meals with pickup options. Chloe, the owner and head chef, was grateful that her business was able to come out of the pandemic with a more reliable catering company than before. Chloe has asked you to create a set of financial statements for the year of 2022, excluding the statement of cash flows, as she feels she has a good understanding of her cash spending as compared to her budget. Chloe will use these statements for her own use to assist with planning for the future of the company. The company's year-end is December 31. Exhibit 1 includes an unadjusted trial balance at December 31, 2022. Exhibit 2 includes information on 2022 transactions which require analysis and recording using Accounting Standards for Private Enterprises (ASPE). 1. Prepare any required year-end adjusting entries for 2022. Provide an explanation of why each entry is required and how it was calculated. The company prepares annual adjusting entries. 2. Prepare the classified Statement of Earnings, Statement of Retained Earnings, and classified Statement of Financial Position, for the period ended and as at December 31, 2022. Chloe Bakery and Catering Services (CBCS) Unadjusted Trial Balance December 31, 2022 1. An annual insurance policy was purchased on October 1,2022 , effective the same day, for $7,200 cash. 2. A count of supplies was done on December 31,2022 , where $1,340 worth of supplies was found on hand. 3. CBCS uses a perpetual inventory system to account for inventory. Below is a breakdown of inventory on hand at December 31, 2022: 4. The company ran out of cake and pastry flour, which is a key ingredient. They placed an order for 50 bags of the flour at a cost of $25 each on December 28,2022 . Terms of this order were 2/10,n/30, FOB shipping point. The company received an email notifying them of shipment on December 31, 2022, and it generally takes 7 businesses days to deliver. Chloe looked forward to replenishing stocks and adding them to inventory upon receipt. 5. CBCS has the following long-lived assets: 6. Customers must pay a $1,000 non-refundable booking deposit for a catering package provided by CBCS. An analysis of bookings during 2022 indicated that 80 deposits were received and credited to Deferred Revenue. By December 31,2022 , CBCS had provided the catering service and completed 65 of the 80 bookings but had not recorded anything yet. Cash received from all the sales is counted daily and is deposited in the company's bank account at the end of each month. Bank reconciliations are prepared on an annual basis. 7. A local business made an advance payment of $3,500 to CBCS on December 15,2022 for an event to be held in March 2023. This amount was credited to Service Revenue at the time of receipt. 8. CBCS delivered meals worth $1,800 to a customer in October 2022 , but has not received the payment and all methods of contacting the customer have been exhausted and the amount has been deemed uncollectible. Chloe has reviewed the accounts receivable balance and notes that 60% of accounts receivable balance relates to corporate events, and the rest relates to non-corporate events. Normally CBCS collects all of its outstanding receivables. Due to the unusual economic conditions during the year, Chloe fears this year might be different. She estimates that 10% of corporate receivables might not be collected and 15% of non-corporate receivables might not be collected. 9. CBCS has a monthly payroll of $14,000 and pays its employees on the 15th of every month for work done in the previous month. The payroll needs to be considered in preparing yearend financial statements (ignore payroll taxes). 10. The December 2022 utility bill of $1,650 has not yet been recorded or paid. 11. CBCS is subject to income tax and the tax rate is 20%. 12. Chloe hired a payroll clerk, who is a very hard worker and did not take vacation in 2022. Employees do not typically report payroll errors, so Chloe does not monitor the payroll clerk closely