J. Rich incorporated a marketing firm named J. Rich & Associates Ltd. in December 2018. JR (J. Rich's nickname) decided on a December 31st fiscal year end so you only need statements for the first month of operations.

Dec 1 The company issued 75 common shares to JR for $7,500 cash.

Dec 1 A business loan was approved by the bank for $25,000, which was deposited into the company's bank account on the same day. The loan bears interest at 6% per annum payable on the first day of each month. The loan principal of $25,000 is due on December 1, 2020.

Dec 1 JR was able to find suitable office space available immediately and the company paid for three month's rent in advance for a total of $4,500.

Dec 1 JR purchased a new computer on account for the company for $2,700. The total invoice is due on January 15, at which time it will be paid. The computer is expected to last three years (36 months) at which time it will have a zero value. JR felt that straight line depreciation would be appropriate for this asset.

Dec 1 JR also felt that name recognition was important for the firm and purchased an existing trademark (from a competing firm whose owner/founder was retiring and shutting down the business). JR planned to use this in all the firm's promotional material. Purchasing the trademark cost JR $5,000.

Dec 4 JR went shopping for office supplies and paid $3,800 cash for the purchases.

Dec 5 JR hired Wyatt Printing to print brochures for the Company at a cost of $1,750. These were delivered the same day and the company paid for them. All of these brochures were delivered to prospective clients that week.

Dec 6 Client #1 hired JR to prepare a marketing plan for his business.

Dec 11 JR completed the plan for Client #1 and received $3,000 cash.

Dec 13 Client #2 hired JR to prepare a media plan and media buy. JR expects it will take a couple of weeks to research and complete the work. JR will not invoice the client until the work is completed.

Dec 14 Because of the success of the first few weeks, JR hired (and immediately put to work that day) an Administrative Assistant on Friday December 14 to organize the office. The Admin Assistant agreed to a bi-weekly (every two weeks) salary of $1,600, which is to be paid every second Friday with the first paycheque due on Friday December 21. (The work week is Monday to Friday). (Hint: you will need a journal entry to record the payment of the Admin Assistant's salary on December 21 for 6 days).

Dec 27 JR completed the work for Client #2 and the Admin Assistant sent out an invoice for $14,000 to the customer. The customer said they wouldn't be able to pay the bill until January.

Dec 29 Client #3 hired JR to do a feasibility study for a new product. JR expects this will be a monthlong project and is expected to bring in $32,000 in revenue. Because of the length of time before completion, JR asked for and received a deposit from the client for a quarter of the full amount. JR does not expect to do any work on this project until the new year.

Dec 31 In order to pay off JR's personal credit card bill (a result of some enthusiastic Christmas shopping) and to celebrate the success of the first month, the Company declared a dividend of $5,000 to be paid on December 31.

Part A - Prepare the journal entries for December. (date and number, e.g Dec. 1/JE1). If you feel that an entry is not required for the item, please clearly state "No entry required" and give a short rationale for your decision.

The company plans to records adjusting entries at the end of each month on any items that should be recorded. For materiality purposed, the company plans to round any relevant amounts to the nearest dollar. Additional data for December is as follows:

1. Supplies were counted on December 31 and there was $2,750 worth of supplies remaining.

2. The firm planned to be open as much as possible over the holiday season (since it was still trying to attract clients). But it would still follow normal industry practices and be closed on Christmas Day (25th) and Boxing Day (26th).

3. JR had been using a personal cell phone during December for business activities. JR's accountant had indicated that this would be an allowable expense for the business, so JR planned to write a reimbursement cheque for $95 but hadn't gotten around to it (this would probably happen in the first week of the new-year).

4. The bank indicated that the 6% interest rate would be applied on the basis of the nearest full month for interest purposes (i.e. any month or part-month would be 1/12 of the year for interest purposes).

5. A friend of JR's, who had run a similar type of business, told JR that the Company should be prepared for some bad debts. Historically, the friend's company had found that about 10% of their billings could not be collected.

6. As this firm would be considered a small business for tax purposes, the firm faced an effective tax rate of 12% (this is the combined federal and provincial rates).

Part B - Prepare any/all adjusting journal entries you feel are necessary. (date and number, e.g. Dec. 31/AE1). If you feel that an entry is not required for the item, please clearly state "No entry required" and give a short rationale for your decision.

Part C - Post all journal entries to T accounts using the Super T form. Make sure they are referenced appropriately back to the original journal entries (use J numbers)

Part D - Prepare an adjusted trial balance as at December 31, 2018.

Part E - Prepare an Income Statement, Statement of Changes in Equity, and Statement of Financial Position for the company's bank to review