Henrietta?s Pine Bakery

Background

You are an Analyst for the professional service firm, BUSI 1043 LLP. Your firm specializes in providing a wide variety of internal business solutions for different clients. Given the outstanding feedback you received on your first engagement working for Big Spenders Inc., a Senior Manager in the Financial Advisory group requested your support on a compilation engagement.

Additional Information

Henrietta?s was established in 1963 when it first opened its doors in Dwight, Muskoka on highway 60. Over the past 50 years, there have been four owners and is currently owned by Carine & Geoff Harris who incorporated and took over the store on January 1, 2013. Their sons, Kyle and Nicholas have been an intricate part of the business from dishwashing to head bakers. Henrietta's has grown over the years with the addition of new items all the time, but the "Sticky Buns and Clouds" remain the most popular items amongst the 150 varieties of breads and pastries.

Henrietta?s runs out of 90 square meters (1,000 share feet) of space. It has one entrance into the bakery and doors leading out to highway 60. Henrietta?s pays $5,000 per month for the rental of the space.Carine and Geoff were able to negotiate with the landlord and were not required to pay the first month?s rend in advance. All of the rental payments are current and up to date. For the last two years, Henrietta?s has had a very reliable accountant prepare its year-end financial statements and everything has been correct. This year, Henrietta?s accountant retired and Geoff 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. Geoff hired your firm, BUSI 1043 LLP to prepare his financial statements for the year. Geoff supplied you with his unadjusted trial balance and the information in Exhibit I to assist you.

Supplementary Information

• The amount currently sitting in prepaids arose due the insurance policy last year. Geoff didn?t know how to correct it, so he left it. This year?s insurance policy was purchased on November 1 for $9,000. The policy runs from November 1 to October 31 of each year.
• Geoff has a note that he owed $900 in wages to his employees for the period ending December 31st.
• The loan was incurred when the bakery was opened. The loan carried an interest rate of 8%. The interest is payable two months after year end and the principal is due in 2019.
• Henrietta?s will sometimes book special events with small organizations that are allowed to pay after the event has taken place. On December 29th, a small company had a gathering at the bakery. The company was billed $1,089 and has 30 days to pay it. Geoff has not yet recorded this in his financial records.
• Henrietta?s declared a dividend of $5,000 on December 30th.
• Geoff 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:Computer: 5 years
• Bakery equipment: 10 years
• Furniture and fixtures: 20 years
• The information shows that Henrietta?s owes $400 for a telephone bill and $400 for electricity for December. These amounts have not been recorded yet.

Exhibit I

Henrietta?s Pine Bakery

Unadjusted Trial Balance

December 31, 2015

Account Name

Debit

Credit

Cash

$35,000

Accounts Receivable

5,600

Food Inventory

21,000

Merchandise Inventory

62,500

Prepaids

3,400

Computers

30,000

Accumulated Amortization ? Computers

12,000

Bakery Equipment

90,000

Accumulated Amortization ? Bakery Equipment

18,000

Furniture and Fixtures

150,000

Accumulated Amortization ? Furniture and Fixtures

15,000

Accounts Payable

18,000

Accrued Liabilities

-

Interest Payable

Dividend Payable

-

Long-term Loan

220,000

Common Shares

50,000

Retained Earnings

22,000

Food Revenue

468,500

Internet Revenue

127,000

Merchandise Revenue

103,000

Food Expense

240,000

Internet Expense

54,000

Electricity Expense

65,000

Telephone Expense

20,000

Interest Expense

0

Salary Expense

200,000

Insurance Expense

9,000

Supplies Expense

8,000

Depreciation Expense

-

Rent Expense

60,000

1,053,500

1,053,500

Based on the information you have prepare the adjusting journal entries, an adjusting 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 posting closing trial balance. Ensure you show all of your work, and prepare proper journal entries and properly formatted financial statements.

Instructions In order to complete your case analysis successfully, you should consider identifying the role you are playing, assessing the financial reporting landscape considering the user needs, constraints, and business environment, identifying the issues, analyzing the issues (qualitatively and quantitatively), and providing a recommendation for each issue identified in the case. An average grade will come from you answering all questions with basic coverage and accuracy, showing all your work. Additional points come from including greater detail, astute and informed commentary where appropriate, and connections to readings and other content. Respond in a single Word doc (or comparable text editor). If you have any technical issues please contact Technical Support immediately by clicking on the AskYU icon in the top right of any screen on the campus. Henrietta's Pine Bakery Background You are an Analyst for the professional service firm, BUSI 1043 LLP. Your firm specializes in providing a wide variety of internal business solutions for different clients. Given the outstanding feedback you received on your first engagement working for Big Spenders Inc., a Senior Manager in the Financial Advisory group requested your support on a compilation engagement. Additional Information Henrietta's was established in 1963 when it first opened its doors in Dwight, Muskoka on highway 60. Over the past 50 years, there have been four owners and is currently owned by Carine & Geoff Harris who incorporated and took over the store on January 1, 2013. Their sons, Kyle and Nicholas have been an intricate part of the business from dishwashing to head bakers. Henrietta's has grown over the years with the addition of new items all the time, but the "Sticky Buns and Clouds" remain the most popular items amongst the 150 varieties of breads and pastries. Henrietta's runs out of 90 square meters (1,000 share feet) of space. It has one entrance into the bakery and doors leading out to highway 60. Henrietta's pays $5,000 per month for the rental of the space. Carine and Geoff were able to negotiate with the landlord and were not required to pay the first month's rend in advance. All of the rental payments are current and up to date. For the last two years, Henrietta's has had a very reliable accountant prepare its yearend financial statements and everything has been correct. This year, Henrietta's accountant retired and Geoff 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. Geoff hired your firm, BUSI 1043 LLP to prepare his financial statements for the year. Geoff supplied you with his unadjusted trial balance and the information in Exhibit I to assist you. Supplementary Information The amount currently sitting in prepaids arose due the insurance policy last year. Geoff didn't know how to correct it, so he left it. This year's insurance policy was purchased on November 1 for $9,000. The policy runs from November 1 to October 31 of each year. Geoff has a note that he owed $900 in wages to his employees for the period ending December 31st. The loan was incurred when the bakery was opened. The loan carried an interest rate of 8%. The interest is payable two months after year end and the principal is due in 2019. Henrietta's will sometimes book special events with small organizations that are allowed to pay after the event has taken place. On December 29th, a small company had a gathering at the bakery. The company was billed $1,089 and has 30 days to pay it. Geoff has not yet recorded this in his financial records. Henrietta's declared a dividend of $5,000 on December 30th. Geoff 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 straightline method by taking the cost of the asset and dividing it by its expected useful life. The assets have expected useful lives as follows: o Computer: 5 years o Bakery equipment: 10 years o Furniture and fixtures: 20 years The information shows that Henrietta's owes $400 for a telephone bill and $400 for electricity for December. These amounts have not been recorded yet. Exhibit I Henrietta's Pine Bakery Unadjusted Trial Balance December 31, 2015 Account Name Debit Credit Cash $35,000 5,600 Food Inventory 21,000 Merchandise Inventory 62,500 3,400 30,000 12,000 90,000 18,000 150,000 Accumulated Amortization - Furniture and Fixtures 15,000 Accounts Payable 18,000 Accrued Liabilities Accounts Receivable Prepaids Computers Accumulated Amortization - Computers Bakery Equipment Accumulated Amortization - Bakery Equipment Furniture and Fixtures Interest Payable Dividend Payable Longterm Loan 220,000 Common Shares 50,000 Retained Earnings 22,000 Food Revenue 468,500 Internet Revenue 127,000 Merchandise Revenue 103,000 240,000 Internet Expense 54,000 Electricity Expense 65,000 Telephone Expense 20,000 0 200,000 Food Expense Interest Expense Salary Expense Insurance Expense 9,000 Supplies Expense 8,000 Depreciation Expense Rent Expense 60,000 1,053,500 1,053,500 Based on the information you have prepare the adjusting journal entries, an adjusting 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 posting closing trial balance. Ensure you show all of your work, and prepare proper journal entries and properly formatted financial statements