Madhdi Khan, was a self-employed Electrician. He regularly worked for several companies on a contract basis. While he was an expert in his field, but he was definitely not a financial expert. His previous accountant left for a new company few months ago, but Madhi has not found anyone to work on his book. Madhi's "books" were becoming a mess. He comes to you to put his financial house back in order.

Madhi is not fond of using computer for his work. He often joked all he needed was a cell phone, tools, supplies, and a truck.

Madhi's Electrician had a hand-written method of creating invoices and preferred to be paid by cash. Companies who were late in payments were a problem. He didn't want to insist on payment, which he preferred to receive within 30 days, for fear of losing future contracts.

He didn't depreciate his tools and simply throw them out when it is no longer useful and buy new ones. The truck was purchased new at the beginning of 2020 and was being depreciated.

Below is the trial balance that was partially done as of March 31, 2021 with the help of hisfriend.

Madhi has asked you to become his new accountant. He wants to know his income for the three months 2021, he has provided the following information from his computer and shoe box.

Madhi's Electrician Company			Madhi's Electrician Company
PARTIAL Trial Balance			Trial Balance
December 31, 2020			March 31, 2021
Accounts	Debit	Credit			Accounts	Debit	Credit
Cash	$ 5,238.00				Cash
Accounts receivable	8,370.00				Accounts receivable	12,351.00
Supplies	3,250.00				Supplies	3,370.00
Truck	52,000.00				Truck	52,000.00
Accumulated depreciation-truck		$ 3,400.00			Accumulated depreciation-truck		$ 6,800.00
Tools	9,000.00				Tools	9,000.00
Accounts payable		3,367.00			Accounts payable		2,712.00
HST payable		0.00			HST payable		3,250.00
Bank loan		8,000.00			Bank loan		7,400.00
M. Khan, Capital		18,445.00			L. Buenavista, Capital		63,091.00
					L. Buenavista, Drawings	6,000.00
					Fees earned		25,000.00
Additional note for December 31, 2020					Depreciation expense	3,400.00
The trial balance is pre closing					Insurance expense	3,600.00
HST payable has a zero balance after remittance to the government					supplies expense	120.00
for the amount owed					tax expense for purchases	868.40
						$ 90,709.40	$ 108,253.00
Total Revenue	103,500.00
Total expenses	40,092.00
Net income	63,408.00				Additional note: for March 31, 2021
Less: Drawings	24,000.00			1	The trial balance does not balance. Madhi and his friend does not know
Increase to capital	39,408.00				what went wrong besides the fact that the cash amount is not there
				2	The company's fiscal year is December 31, but it does quarterly adjustments
Total Debit	$ 141,950.00			3	March 31, 2021: The total debit and credit are off on the trial balance
Total Credit	$ 141,950.00

Revenue and Expenses for year 2021

Jan. 1: A year insurance of $3,600 plus HST for the year

5 service performed for cash of $16 000 (plus HST of 13%)

15 Repair expense for the truck amounted to $1200 plus HST and paid in cash.

31 Monthly cell phone was paid in cash, the cost was $120 plus HST

Feb. 1 Purchased supply of $120 plus HST and paid in cash.

12 Sales invoices: $9 000 ( plus HST of 13%)

15 Payments of $870 cash were made for the following.

1. Bank charges of $80
2. Interest charge of $135
3. The rest is for A/P

Mar. 20 Cash collected from work performed and billed in 2020: $6400

30 Account receivable of $5,520 including HST for service performed for a single client in early 2020 and the amount still not collected

30 Mahi withdrew $6, 000 cash from the business for personal use

31 Made a loan payment of $600 had been made for the first three months to pay part of the principal amount.

Madhi had some concerns and questions. He was always prompt completing his taxes. He understood that as a sole proprietor the income of the business was his personal income. But at times some of the contacts at the companies he worked for asked for work on their private homes. Those individuals asked to pay cash and didn't require an invoice. Madhi wondered if this should be recorded at all and in general how to proceed in these instances.

Questions:

1. Consider Madhi's issue with what is commonly known as "work on the side." What are your recommendations to him? 
2. How would you improve his ability to collect revenue that has been earned and is long overdue? Include in your answer any new accounts and calculations necessary.(3 marks)
3. Based on the two trial balances, what method of depreciation is he using for the Truck?. 
4. Which method of depreciation is best for the tools if the company wants to min tax payment in thefirst year of the asset? The asset will last 5 years with no residual value or the CCA rate of 20%. Show your calculation.(2 marks)
5. Prepare journal entries for his activities from January through March of 2021. 
6. Preform adjusting entries to some of the accounts during this quarter. ( Bring the some of the accounts up to date because Madhi Electronic performs quarterly adjustments)) 

. a. Supplies on hand on Mar. 31 is $3,100

b. The Tools will last 5 years with no residual value and is depreciated using straight line

1. What other recommendations would you have for Madhi with regards to his ongoing accounting record keeping? ( Hint: some of the information presented on the trial balance and the accounting procedures that have been used by Madhi are not in according to GAAP) 
2. Build a new correct trial balance with adjustments for three months. Does the company have a net income or loss for the three months ended March 31, 2021 with the correct GAAP being applied. Show your calculation  
3. How much cash does he have at the end of March. 
4. Calculate the current ratio and comment on your finding.