Music on Wheels

You have started your second year of the BCom at York University and decided to start your own business with your passion: be a DJ in parties. A family friend that works as a lending officer in one of Canada's largest banks explained to you how the business plan has to be presented so you can get some financing.

On January 1^st you set up a company-Music on Wheels Ltd with a capital of 50,000 shares at $1 each. A lawyer produced all the needed paperwork. On the same day, you submitted the business plan to the bank and was successfully granted a start up loan of $96,250, you deposited $57,750 of your personal savings and start up loan of $96,250 in the newly opened chequing account of your company. On January 1^st, you transfers ownership of your van to the company. The van has a fair market value of $19,250 and is estimated to last for 50 months and then discarded.

On January 1^st you purchase music equipment for $69,300 and $2,310 worth of music files from the same shop. Half was paid in cash, and the remaining half is paid on Feb 15^th. The music equipment wil be used for 60 months with no resale value at the end, while the music files are expensed immediately.

On January 1^st you sign the insurance contract for the van and the music equipment. The insurance premium for the van is $9,240 per year and for the equipment is $4,620 per year with payment at a latter date.

On January 1^st you rented a warehouse to store musical equipment for one year, starting on that day and paid $23,100 in advance.

Performed service as the DJ of a fundraing event of a large international charity on Jan 10^th. Got a cheque of $7,700 for your service and $11,550 on account to be collected on Jan 31^st.

On January 14^th, paid a local radio 90 days (16 days in January, 28 days in February, 31 days in March and 15 days in April) of advertising for $3,465 starting on January 16^th. And on the same day, paid $3,465 of insurance for the months from January to March (whole month coverage for January, February, and March).

On January 17^th, provided the music for three small events. One promised to pay the $3,080 on Feb 7^th, the other will pay the $3,080 by the end of January, while the third event of $3,850 will be paid on March 2^nd.

On January 19^th, hired a car painter to freshen up the look of the van (this will not change the value or the useful life of the van). The work is completed by Jan 21^st. Paid $770 on Jan 19^th, and paid $1,925 on Feb 19^th, and the rest $1,540 on March 19^th.

On January 20^th, collected and paid for 800 pieces of nicely designed brochures. Total Cost $3,080. Distributed 150 brochures in January, 250 brochures in February, and 300 brochures in March.

On January 23^rd, two envents were served. Provided services in a morning event at local church and collected $2,310 for your service. And one big event was serviced in the afternoon, the bill of $15,400 was paid 50% before the beginning of the event and the rest will be paid in 30 days.

On January 28^th, received the bill from the lawyer that helped you to set up the company for $5,775 payable by Feb 15^th. (Hint: treat this as an asset). You have paid the bill on time.

On January 29^th, received a deposit of $6,930 for servicing a fund raising event in February, and received a deposit of $11,550 for servicing a wedding in March.

On January 31^st, collect $11,550 from the event on January 10^th and got a phone call indicating the $3,080 owed for the January 17^th event will be paid sometime in February.

Bank changes monthly service fee of $385, and in addition, bank charges 6% per year for interest on start up loan, both fees will be automatically deducted from chequing account at the end of each month.

Declared dividends to yourself of $100 per 1,000 shares on January 31^st, all dividends declared in the current month will be paid in the next month.

Required:

1. Prepare the statement of proof of cash by January 31^st.
2. Prepare the Income Statement (accrual accounting) for the Month of January.
3. Prepare the Balance Sheet (accrual accounting) as of January 31^st.