I. Assessment(s) Description

When Mayor Nil Quimby ran out on the tavern he operated with his long-time friend Nil, it became apparent that he had embezzled thousands of dollars and left the business mired in debt. With little in the way of formal accounting statements, Joan was left with the task of analyzing the information that he could gather and trying to re-launch the financially fledgling business as his own. Mayor Diamond Nil Quimby (Nil) and Joan Szyslak (Joan) were secretly friends since they met in high school. Their friendship was mystifying because of their different personalities. Nil was an extrovert and risk taker, while Joan could be described as quiet and reliable. One consistent pattern of their relationship followed was that Nil regularly got into trouble and Joan secretly bailed him out.

Initial Operations:

In 2022, Joan and Nil decided to start a nightclub; Joans original tavern was struggling and Nil wanted a fancy operation that he could use for entertaining political allies.

On January 1, 2022, they started their corporation by each contributing $60,000. The amount was deposited into a checking account at SNB in exchange for common stock with a par value of $1 per share.

On that day (January 1st), the corporation also signed a 24-month lease on a modified warehouse for the nightclub. The monthly rent was $2,100 and was paid each month (by bank transfer). This facility attracted Nil in part because there were living accommodations on the floor above the restaurant, which were perfect for late night meetings.

The corporation borrowed $25,000 from Springfield National Bank (SNB) on January 1, 2022. The note carried an 3% interest rate that is paid annually (on December 31 of each year). The principle on the note would be due on December 31, 2025.

The corporation used the money raised from the initial financing to purchase on January 1st, 2022: $65,000 worth of equipment, $30,000 worth of food supplies and $10,000 worth of alcohol that was needed to open the nightclub. The acquisition of food supplies and alcohol could be recorded as inventory or purchase expense. We are using the periodic inventory method, so you must record these 2 transactions as purchase of (expense). It was estimated that the equipment would last five years and have zero salvage value.

The corporation paid $36,000 for insurance good, for two years beginning on January 1, 2022.

Shortly after January 1, 2022, the nightclub opened. In general, Joan managed the kitchen and the employees, as well as tending bar, while Nil interacted with the patrons, used his clout as mayor to attract customers, and paid the bills.

Furthermore, on July 1st of 2022 they acquired some software to create a specific app for the club. It costed 15,000. These acquisitions were paid by bank transfer. It was estimated that the software would last three years and have zero salvage value

Joan and Nils Tavern operated throughout 2022. It seemed to be a runaway success, but the corporation did not keep very much in the way of records. No financial statements were ever prepared.

Joan began to have a sense that there were problems in December 2022. Joan felt Nil was acting strange but could not get him to say what the problem was. Nil left town unexpectedly, saying he needed a break. He was supposed to return on December 31, 2022. The week before Nils return, Joan was inundated with angry phone calls from suppliers, employees, and the bank. A large number of bills, including the bank loan, were months past due. In addition, some of the employees paychecks had bounced. As it turned out, Nil had been embezzling from the corporation for some time. And Nil (a.k.a. Mayor Quimby) did not come back on December 31, 2022.

Joan decided to continue to operate Joan and Nils Tavern but changed the name to Joans Tavern II to avoid negative publicity. He realized that financial statements would have to be prepared as of December 31, 2022, so he has contacted a CPA. Joan needed two things: first, he needed to figure out how much income the corporation had made as of December 31, 2022. Second, he needed to figure out how much money Nil embezzled from the tavern.

Joan provided the following information for you, his CPA.

Other Operations in the year:

Joan and Nil paid themselves salaries of $7,500 a month each. These salaries were paid on the 10th of each month.

In addition to any amounts described above, as well as it could be determined the club had accrual based revenues of $800,000 during the period of its operation. This amount has been collected except one part. The club allowed some of the local athletes from the Springfield Isotopes, as well as Joans best customers (Homer Simpson, Barney Gumble, Carl Carlson, and Lenny Leonard) to carry a tab. These patrons owed the restaurant $54,000.

Furthermore, The Isotopes (some special clients) paid $25,000 in advance to rent out the club for a party on February 25, 2023.

The corporation also paid by bank transfer the following amounts for the operation of the club: employee wages for the year (this amount does not include the cash salaries paid to Joan and Nil). These expenses amounted $104,600. Paid in bank transfer except for $2,600 that its owed to the employees.

On July 7th they purchased (use again the periodic inventory method to record this transactions):

Food supplies of 177,000 (140,000 paid in bank movement and 37,000 owed to their supplier)

alcohol drinks for $80,000 (paid in bank movement).

They spent on advertising of $7,900 (paid in the exercise by banks transfer.

Rent had been paid according to the terms of the lease (bank transfer).

At the end of the period (December 31st 2022) the club had the following inventories: $29,000 worth of food supplies inventory and $3,000 worth of alcohol inventory on hand. You must record the changes in inventories (expense or revenue account, to be used to update the value of the inventory in the warehouse). Changes in inventories formula = -Beginning Inventory + Ending Inventory.

As of December 31, 2023, the bank checking account was overdrawn by $4,135.

Assignment 1.

To support your answer, the following items must be prepared:

1. Record all transactions using the journal. Please remember to record all transactions related (example acquisition of non-current asset requires to record depreciation/ amortization at the end of the year, prepaid expenses or unearned revenues requires to allocate the expense /revenue for the year, etc..) -(near 20 transactions to record)