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Henriettas was established in 1963 when it first opened its doors in Dwight, Muskoka on highway 60. Over the past 50 years, there have been

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 bread 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 to record 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 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 NameDebitCredit
    Cash$35,000
    Accounts Receivable5,600
    Food Inventory21,000
    Merchandise Inventory62,500
    Prepaids3,400
    Computers30,000
    Accumulated Amortization – Computers12,000
    Bakery Equipment90,000
    Accumulated Amortization – Bakery Equipment18,000
    Furniture and Fixtures150,000
    Accumulated Amortization – Furniture and Fixtures15,000
    Accounts Payable18,000
    Accrued Liabilities-
    Interest Payable
    Dividend Payable-
    Long-term Loan220,000
    Common Shares50,000
    Retained Earnings22,000
    Food Revenue468,500
    Internet Revenue127,000
    Merchandise Revenue103,000
    Food Expense240,000
    Internet Expense54,000
    Electricity Expense65,000
    Telephone Expense20,000
    Interest Expense0
    Salary Expense200,000
    Insurance Expense9,000
    Supplies Expense8,000
    Depreciation Expense-
    Rent Expense60,000
    1,053,500

    1,053,500

  • Based on the information, you have prepared 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.

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