Introduction ...................................................................................................................................................................................................................................... Page -1- Work to Be Completed.................................................................................................................................................................................................................... Page -4- Chart of Accounts ............................................................................................................................................................................................................................ Page -5- December 20X4 Transactions ........................................................................................................................................................................................................ Page -7- Adjusting Entries and Information for the Preparation of Financial Statements................................................................................................................ Page -13- Trial Balance as at November 30, 20X4 ..................................................................................................................................................................................... Page -16- Appendices ...................................................................................................................................................................................................................................... Page -19-

Schedule of Accounts Receivable ................................................................................................................................................................................................ Page -36-

Schedule of Accounts Payable...................................................................................................................................................................................................... Page -37-

Financial Statements....................................................................................................................................................................................................................... Page -38- Income Statement......................................................................................................................................................................................................Page -39- Statement of Retained Earnings .............................................................................................................................................................................. Page -40- Balance Sheet..............................................................................................................................................................................................................Page -41- Notes to the Financial Statements .......................................................................................................................................................................... Page -43- Details for Income Statement..................................................................................................................................................................................Page -47-

INTRODUCTION

Throughout this accounting simulation the student will work with the following journals and ledgers.

1- General Ledger

2- Accounts Receivable Subsidiary Ledger

3- Accounts Payable Subsidiary Ledger

4- General Journal

5- Sales Journal

6- Purchases Journal

7- Payroll Journal

8- Individual Employee Payroll Records

9- Cash Receipts Journal

10- Cash Disbursements Journal

Description of the organization and nature of certain operations.

Le Mur du Son Ltd. sells high quality electronic sound equipment. The company sells through retail outlets as well as on credit to major clients.

1- The company gives credit terms of 2/10, n30, on the total amount including GST and QST.

2- The company has to determine the federal goods and services tax (GST) and the Quebec sales tax (QST).

For example if Le Mur du Son Ltd. buys merchandise from a vendor for $100 and sells it for $200 the calculations would be as follows:

On the seller's books:

Accounts receivable Sales

GST payable(7% X $100) QST payable (6.5% X $107)

On the buyer's books:

PURCHASE:

Purchases

GST Receivable (7%) QST Receivable (6,5%)

Accounts Payable

SALE:

Cash/Accounts Receivable Sales

GST Payable (7%)

QST Payable (6,5% of $214)

113.96

100.00 7.00 6.96

227.91

100.00 7.00 6.96

113.96

200.00 14.00 13.91

The simulation excludes the GST and QST from the amounts listed for sales, purchases and return. Four sales tax accounts are used one each of receivable and payable for the GST and QST

The net balance in the GST & QST Receivable and Payable accounts will result in a monthly remittance to Revenue Quebec where the net balances of these accounts is a credit. Revenue Quebec will give the federal government its portion of the total respectively.

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3- The company prepares a bi-weekly (26 pay periods per year) pay for its four employees. The following information will be useful in preparing the payroll:

Civil Status Hourly Rate

Amount that allows determination of the appropriate deduction at source code for TD1

Amount that allows determination of the appropriate deduction at source code for MR-19

Cumulative amounts as of Nov. 30, 20X4

Gross Salary

QPP (employees contribution)

Employment Insurance (employees contribution)

Armand Frappier

Married $ 12.50 17 650

16 005

35 500.00 893.20 1 047.25

Claude Bernard

Single 9.375 6456

5 900

19 725.00 461.86 581.89

Rene Trudeau

Married 18.75 17 600

16 100

35 425.00 893.20 1 045.04

As far as Celine Lafrance is concerned, you have to consult her

Normally, you would keep a payroll register for each employee, however, in order to facilitate your task you will only be required to complete one register. Also, you will have to complete Cline Lafrance's T-4 and Relev 1 slips at the end of the year.

The above information will be useful when you will use the federal and provincial tax tables in Appendix A. Note that A. Frapier and C. Bernard are working at the sales department.

4- The contributions to Employment Insurance are as follows:

Employee's share: According to the table in Appendix A. Employer's share: 1.4 times the employee's share.

The employer must retain both the employer and employee contributions and remit the total to Revenue Canada no later than the fifteenth day of the month following the month in which the employees were paid.

5- The employees are obliged to contribute to the Quebec Pension Plan (Regimes des rentes du Quebec - RRQ). For calculation purposes a table is provided in Appendix A. The employer's contribution is equal to that of the employee.

6- The employer contributes 4.26 % of the total gross salaries to the Quebec Health Services Fund QHSF (In french the "fonds des service de sante") . No amount is withheld from the employee.

7- The Federal and Provincial income tax deducted from the employee's salary is calculated based on the gross salary using the income tax deduction tables provided

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