Question
Munchies Convenience Store Ltd. is a small retailer operated by a number of shareholders from a First Nations community. It reports under IFRS at the
Munchies Convenience Store Ltd. is a small retailer operated by a number of shareholders from a First Nations community. It reports under IFRS at the request of the creditor holding the note payable. The companys post-closing trial balance at December 31, 2020, the end of its fiscal year, is presented below:
MUNCHIES Convenience Store LTD. Post-Closing Trial Balance December 31, 2020 | ||||
Debit | Credit | |||
Cash | $5,500 | |||
Accounts receivable | 132,000 | |||
Allowance for doubtful accounts | $8,800 | |||
Inventory | 66,000 | |||
Estimated inventory returns | 1,100 | |||
Prepaid insurance | 13,200 | |||
Equipment | 198,000 | |||
Accumulated depreciation | 88,000 | |||
Accounts payable | 74,800 | |||
Employee income tax payable | 7,480 | |||
CPP payable | 3,520 | |||
EI payable | 1,320 | |||
Refund liability | 3,300 | |||
Dividends payable | 5,500 | |||
Notes payable (due 2023) | 132,000 | |||
Common shares | 55,000 | |||
Retained earnings | 36,080 | |||
$415,800 | $415,800 |
The company had the following transactions during January 2021. When recording these transactions, use the item number listed instead of the date. The company records adjusting entries on a monthly basis.
1. | Paid off accounts payable of $60,500. | |
2. | Purchased inventory costing $29,700 on credit. | |
3. | Sold inventory that cost $33,000 on credit for $112,200. However, $2,200 of the amount sold is expected to be refunded due to returns and the cost of the inventory expected to be returned is $880. | |
4. | Collected accounts receivable amounting to $119,900. | |
5. | Wrote off $5,500 of uncollectible accounts receivable. | |
6. | Received inventory returns from customers and reduced accounts receivable from these customers for $3,080. The inventory that these customers returned was in excellent condition and had a cost of $990. | |
7. | Paid all salary-related liabilities outstanding at the beginning of January. | |
8. | Paid salaries to employees, who earned a total of $44,000 of gross pay less employee income tax, CPP, and EI of $7,920, $2,244, and $713, respectively. Withholdings will be remitted in February. | |
9. | Recorded employee benefits expense relating to the employers share of CPP of $2,244 and EI of $998. | |
10. | Paid rent of $9,900. | |
11. | Paid dividends owing on payment date at the beginning of the month. | |
12. | Expired $1,100 of prepaid insurance. | |
13. | Paid monthly interest on the 4%, $132,000 note payable. | |
14. | Sold equipment at the end of January for $15,400 cash. The equipment had a cost of $22,000 and a carrying amount of $13,200. | |
15. | Purchased new equipment at the end of the month costing $11,000 by issuing common shares. | |
16. | Incurred depreciation on equipment on a straight-line basis. The equipment has a useful life of six years and no residual value. | |
17. | Estimated at the end of January that $4,620 of accounts receivable was uncollectible. | |
18. | Estimated that income tax incurred in January amounted to $4,400. This amount will be paid next month. |
(a)
Prepare T accounts and enter the December 31 balances.
Cash | |||||
Dec. 31 Bal. | Dec. 31 Bal. |
Accounts Receivable | |||||
Dec. 31 Bal. | Dec. 31 Bal. |
Allowance for Doubtful Accounts | |||||
Dec. 31 Bal. | Dec. 31 Bal. |
Inventory | |||||
Dec. 31 Bal. | Dec. 31 Bal. |
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