Liam Kim spent much of his childhood playing sports like hockey, soccer, badminton and basketball. Liam always loved watching basketball in particular, and began collecting Jordan's basketball shoes in grade 12. He passed many happy hours browsing and buying the latest releases from online retailers, on Robson Street and Facebook Marketplace. His hobby has grown and his Instagram account now has 100k followers and he is viewed as a credible source for information on collectible shoes. Now at the start of his second year in university, Liam is investigating various possibilities for starting his shoe related business as part of the requirements of the entrepreneurship program in which he is enrolled. You, a long-time friend enrolled in an accounting program, insists that Liam has to somehow include shoes in his business plan. After a series of brainstorming sessions, Liam settles on the idea of operating a shoe valuation business. Collectors on campus will bring shoes to him, and he will assess their value. To certify this work, shoes will be wrapped in shrink warp with a sticker and placed in branded boxes. Photos will be taken as well. Now that he has started thinking about it, the possibilities seem endless. During the fall, he will concentrate on his current area of expertise-Jordan's. In the winter, he will expand to other sneakers. The first difficult decision is coming up with the perfect name for the business. In the end, he settles on "Shoe Doggs", inspired by one of his favourite entrepreneurs, Phil Knight, and artists, Snoop Dogg. He then moves on to more important issues. 1. What form of business organization-proprietorship, partnership, or corporation-do you recommend that Liam use for his business? Discuss the benefits and weaknesses of each form and give the reasons for your choice. After researching the different forms of business organization, Liam decides to operate "Shoe Doggs" as a corporation. While he is confident his shoe collector network, and general business, Liam is not as comfortable with the accounting aspect of Shoe Doggs. Liam just incurred the first expense ($65 in printing costs) and has no idea what to do next. He feels that saving the receipt in his Gmail is sufficient for tracking purposes. 2. Briefly explain to Liam what Financial Accounting is and why it is important to his business. 3. Briefly explain (1) the nature of an account, (2) the different types of accounts, and (3) the manner in which an account is increased and decreased and its normal balance to Liam. Explain these terms in the context of Shoe Doggs. With your help, he then starts the process of getting the business running. In November 2019, the following activities take place, and he approaches you for assistance in documenting the transactions. Nov. 8 11 He opens a bank account under the name "Shoe Doggs and transfers $1,500 from his personal account to the new account in exchange for common stock. Liam opens a credit card for day to day expense. The first expense on the card is $125 to have large advertising posters printed. He plans to put these up around campus. He also buys some supplies like branded boxes and stickers which he will use to 'certify' the shoes he values for $450. Liam starts to gather some equipment to use in the business. Based on his own experience buying shoes, he knows how important good quality photos are. He has an excellent top-of-the-line DSLR camera he received as a graduation gift that originally cost $1,750. Liam decides to start using it only in his new business. He estimates that the equipment is currently worth $1,250. He invests the equipment in the business in exchange for common stock. 14 16 Liam realizes that his initial cash investment is not enough. His grandmother lends him $2,000 cash, for which Liam signs a note payable in the name of the business. Liam deposits the money in the business bank account. 17 He buys a label maker and a heat shrink gun for $900 cash. 20 He values his first 10 pairs of shoes and collects $450 cash. 25 Liam receives $150 cash in advance as a down payment from a customer who will bring their shoes in for valuation in two weeks. 30 Liam pays $1,320 for a one-year insurance policy that will expire on December 1, 2020. 30 The credit card statement is received, and Liam pays off the balance. 4. Prepare journal entries to record the November transactions. 5. Prepare a trial balance at November 30, 2019. 6. Based on the transactions above and your general knowledge of Shoe Doggs, who are the company's stakeholders? Who are their shareholders? It is the end of November and Liam has been in touch with his grandmother. His grandmother asked Liam how well things went in his first month of ess. Liam, too, would like to know if the company has been profitable or not during November. Liam realizes that in order to determine Shoe Doggs' income, he must first make adjustments. Liam puts together the following additional information. 1. A count reveals that 30% of supplies were used during November. 2. Liam estimates that all of his equipment will have a useful life of 4 years. (Assume Liam decides to record a full month's worth of depreciation, regardless of when the equipment was obtained by the business.) 3. Liam's grandmother has decided to charge interest of 5% on the note payable extended on November 16. The loan plus interest is to be repaid in 24 months. (Assume that half a month of interest accrued during November.) 4. On November 30, a friend of Liam's asks him host a valuation booth at a sneaker shop. Liam agrees and runs a booth on the 30th for 3 hours. The next day, Liam prepares an invoice for $500 and emails it to his friend. The friend says he will pass the invoice along to the shop and it will be paid sometime in December 7. Prepare the adjusting journal entries. 8. Prepare an adjusted trial balance. Liam Kim spent much of his childhood playing sports like hockey, soccer, badminton and basketball. Liam always loved watching basketball in particular, and began collecting Jordan's basketball shoes in grade 12. He passed many happy hours browsing and buying the latest releases from online retailers, on Robson Street and Facebook Marketplace. His hobby has grown and his Instagram account now has 100k followers and he is viewed as a credible source for information on collectible shoes. Now at the start of his second year in university, Liam is investigating various possibilities for starting his shoe related business as part of the requirements of the entrepreneurship program in which he is enrolled. You, a long-time friend enrolled in an accounting program, insists that Liam has to somehow include shoes in his business plan. After a series of brainstorming sessions, Liam settles on the idea of operating a shoe valuation business. Collectors on campus will bring shoes to him, and he will assess their value. To certify this work, shoes will be wrapped in shrink warp with a sticker and placed in branded boxes. Photos will be taken as well. Now that he has started thinking about it, the possibilities seem endless. During the fall, he will concentrate on his current area of expertise-Jordan's. In the winter, he will expand to other sneakers. The first difficult decision is coming up with the perfect name for the business. In the end, he settles on "Shoe Doggs", inspired by one of his favourite entrepreneurs, Phil Knight, and artists, Snoop Dogg. He then moves on to more important issues. 1. What form of business organization-proprietorship, partnership, or corporation-do you recommend that Liam use for his business? Discuss the benefits and weaknesses of each form and give the reasons for your choice. After researching the different forms of business organization, Liam decides to operate "Shoe Doggs" as a corporation. While he is confident his shoe collector network, and general business, Liam is not as comfortable with the accounting aspect of Shoe Doggs. Liam just incurred the first expense ($65 in printing costs) and has no idea what to do next. He feels that saving the receipt in his Gmail is sufficient for tracking purposes. 2. Briefly explain to Liam what Financial Accounting is and why it is important to his business. 3. Briefly explain (1) the nature of an account, (2) the different types of accounts, and (3) the manner in which an account is increased and decreased and its normal balance to Liam. Explain these terms in the context of Shoe Doggs. With your help, he then starts the process of getting the business running. In November 2019, the following activities take place, and he approaches you for assistance in documenting the transactions. Nov. 8 11 He opens a bank account under the name "Shoe Doggs and transfers $1,500 from his personal account to the new account in exchange for common stock. Liam opens a credit card for day to day expense. The first expense on the card is $125 to have large advertising posters printed. He plans to put these up around campus. He also buys some supplies like branded boxes and stickers which he will use to 'certify' the shoes he values for $450. Liam starts to gather some equipment to use in the business. Based on his own experience buying shoes, he knows how important good quality photos are. He has an excellent top-of-the-line DSLR camera he received as a graduation gift that originally cost $1,750. Liam decides to start using it only in his new business. He estimates that the equipment is currently worth $1,250. He invests the equipment in the business in exchange for common stock. 14 16 Liam realizes that his initial cash investment is not enough. His grandmother lends him $2,000 cash, for which Liam signs a note payable in the name of the business. Liam deposits the money in the business bank account. 17 He buys a label maker and a heat shrink gun for $900 cash. 20 He values his first 10 pairs of shoes and collects $450 cash. 25 Liam receives $150 cash in advance as a down payment from a customer who will bring their shoes in for valuation in two weeks. 30 Liam pays $1,320 for a one-year insurance policy that will expire on December 1, 2020. 30 The credit card statement is received, and Liam pays off the balance. 4. Prepare journal entries to record the November transactions. 5. Prepare a trial balance at November 30, 2019. 6. Based on the transactions above and your general knowledge of Shoe Doggs, who are the company's stakeholders? Who are their shareholders? It is the end of November and Liam has been in touch with his grandmother. His grandmother asked Liam how well things went in his first month of ess. Liam, too, would like to know if the company has been profitable or not during November. Liam realizes that in order to determine Shoe Doggs' income, he must first make adjustments. Liam puts together the following additional information. 1. A count reveals that 30% of supplies were used during November. 2. Liam estimates that all of his equipment will have a useful life of 4 years. (Assume Liam decides to record a full month's worth of depreciation, regardless of when the equipment was obtained by the business.) 3. Liam's grandmother has decided to charge interest of 5% on the note payable extended on November 16. The loan plus interest is to be repaid in 24 months. (Assume that half a month of interest accrued during November.) 4. On November 30, a friend of Liam's asks him host a valuation booth at a sneaker shop. Liam agrees and runs a booth on the 30th for 3 hours. The next day, Liam prepares an invoice for $500 and emails it to his friend. The friend says he will pass the invoice along to the shop and it will be paid sometime in December 7. Prepare the adjusting journal entries. 8. Prepare an adjusted trial balance