Note: this task is based on the analysis of very extensive narrative and detailed project documents. The next pages have all the documents that Bob brought to you in a shoebox so you can prepare the financial statements of his company (use 2 decimal places, if needed round up the figures to the next cent). Students with the last digit being 0 (zero), must use 8 as if it were the last digit for all transactions in this part C of the term project.

1.Check and use the Chart of Accounts provided (do not create new accounts).

2.Prepare the General Journal for the month

Bob has just retired at 52 and has plenty of time in his hands. One day his next door neighbor asked him to take care of her dog while she was away. The next door neighbor is a lovely 87 years old lady who lives with a very well educated Great Dane. The neighbor would be away for a minor surgery and unable to walk and talk to her dog. Bob offered to walk and talk with the dog. The recovery period from the surgery extended for some days so Bob took care of the Great Dane for several more days, and the care now included other non-essential things such as washing the dog. In his daily walks he met several people that shared to him that although the love their dogs, they do not have the energy to walk them for more than 5 minutes. One day he decided to walk the dog of another neighbor and by the end of the week he was enjoying a full day of walks. One of the old ladies that asked him to walk her dog invited him for tea, another made him a present (home baked soft cookies) and another offered him to pay. At that point at the end of March Bob realized that he would convert his recently discovered passion into a side business, which would generate some extra money while channeling all his energy. Bob had accumulated savings and also one of his neighbors offered to match his contribution to the firm in the form of a loan with an interest rate of 1% per month payable at the end of each quarter. Bob Thoron contacted a lawyer for advice about incorporating. Bob had heard stories from friends about dog s with bad behavior whose owners tried to sue their walkers and he certainly did not want to expose himself to that kind of risk. The legal firm The 6 Law provided the necessary legal advice and did all the necessary paper work to incorporate as a Canada Business Corporation. Initial capitalization allowed for 100 no par value shares. Bob and his mom were named as Directors of the Corporation which was called Walk with Bob Service Ltd. The lawyers also checked that the name was not already registered and register his Internet domain website URL as www.walkwithbob.ca. While Bob felt quite comfortable running his own website, designing it was another matter. He decided to engage the services of a gifted computer science student who put together a fabulous website with all the necessary interactive software for appointments and payments. He did record the transaction on his books as an expense. Bob contributed his money in exchange for 50 of the shares. This was deposited into a new corporate bank account he set up with AMD Bank Canada. The bank account, a standard commercial chequing account that gave cheques returned with monthly statements for a monthly fee, can have overdrafts at no cost for the first three months. Bob interest was to walk dogs, not keeping tabs on his accounts; therefore he hired you to be his accountant. You have explained your fee and Bob has agreed to retain you for the whole year. You have prepared a document with the terms of engagement and payment on it. You, the accountant, informed Bob that if his company would use part of his house to conduct business (wash the dogs); the company can pay rent to you for its use. The rent has to be reasonable for the Canada Revenue Agency. In his second day of walking the Great Dane Bob realized his company needed some sort of third party liability insurance just in case a dog went rough on other dogs or people. He contacted an old acquaintance of him that works for an insurance company and asked for advice. His friend suggested a product that was just for his needs, it was not expensive so Bob signed off on an annual contract. Dog walking does not need any equipment, but washing them was complicated without the right equipment. So after washing twice the Great Dane he decided to get the washing and drying equipment and installed them in one of the bathrooms of his house. He selected the washroom that has the shower. He estimates all the equipment will last 2 years and will have no residual value at all. As soon as operations started, Bob purchased some office supplies that would allow him to keep a paper trail of each dog walked, washed and whos their owner. Just in case he bought plastic tags that were attached to each dog so he did not mix them up when providing the services and returning them to their homes and owners. Shampoo, conditioner, soap, body wash and other dog beauty specific supplies were bought. However the largest items of supplies are treats, as dogs expect to receive treats and behave extremely well when they associate their good behavior with treats. So Bob had plenty of treats. In a couple of occasions the dogs got minor injuries during the walks due to wires, sharp objects, porcupines or other dogs. When Bob feels that the injury needs attention, he takes the dog to a veterinarian clinic that is in the neighborhood. He pays for the treatment and explains to the dog owners that he does not need to be reimbursed, that it is included in the fee they pay. Owners are extremely pleased with this approach and thank Bob for being proactive in protecting their dogs. Most of Bobs customers are in their 80s and with some mobility issues therefore they cannot go to pet stores to buy toys, accessories or even balanced food. Bob saw a great opportunity here and decided to buy in bulk the most common items asked by his customers. The terms of sale were 50% cash on delivery and the other 50% in 60 days. He did a very good job at sourcing those products, allowing him to have a large gross margin and still be competitive matching the prices of the local posh pet store. All sales of merchandising must include HST at 13%. None of the purchases made (merchandising, supplies, office supplies, etc.) paid HST, therefore Bob has a liability with the Federal and Provincial government for the HST collected from customers (this is a simplification of the reality done for educational purposes only). Seeing how well his activity was going and how happy his was with his new enterprise, Bob decided to make his presence more noticeable by printing flyers to be left in stores and colorful posters to be placed in the announcement section of the condo buildings where the majority of his customers reside. Under the company name, Bob signed a 2 years contract for a new phone. His use was intensive because some of the customers would call him to ask for advice on what to do with their dogs. Some days Bob had more appointments than time and hands available, therefore first he tried picking up the dogs with his car and taking them to an off leash park, but lately he started to have more demand than what he can serve or dogs can safely be accommodated in his car. Bob talked with a teenager neighbor and offer her $15 per walk of multiple dogs. She was happy and accepted the deal. At the end of the month when you the accountant had an idea of Bobs business size, youve estimated the income tax liability of the month. To keep things simple youve sent him an e-mail. Bob knew all his customers and was comfortable in collecting his service fees from them once per week. At the end of the week he would prepare a summary note of the walks, washes, and merchandising delivered and would collect the money from the customers (Bob accepted cash, cheques, direct bank deposits or interact). Given the volume, he would submit the bills on Thursdays, Fridays or Saturdays (he did not provide service on Sundays). Some customers were so pleased with his job that asked him to pay in advance. One gentleman considered the bank charged too much to print cheques so he issues a large cheque to Bob on account for future services. Bob received and cashed it, at the end of each week he would show the customer what the balance left is given the services consumed so far. The customer was happy. All services sales must include HST at 13%. Bob decided to declare dividends for 50% of the maximum amount possible. You, the accountant, explained to him that only net income that accumulates in Retained Earnings can be distributed as dividends. Bob understood and decided to distribute up to 50% if possible while the other half would be maintained within the company. In terms of setting up his accounting system Bob decided on the following records: Chart of Accounts General Journal Sales Journal Disbursements Journal One event happened near the end of the month that left Bob somewhat distressed and depressed. The owner of a dog in the neighborhood has been complaining that Bob should not be walking others dogs, because if they have no time to walk their dogs they should not have dogs at all. One day the dog of this lady tried to bite the Great Dane who in a protective reaction kicks the little dog making it to roll down a muddy hill. Bob had just received a letter from a lawyer stating that a lawsuit had been launched against him and the Great Dane owner for huge sums in punitive damages. On consultation with The 6 Law, he was advised that the suit would probably deem frivolous and there was no need to accrue for it. A financial statement footnote would be appropriate until such time as a court decision was reached. The 6 Law did inform him that the expected legal fee for his defense would be the same amount paid to incorporate his company but a billing would not be prepared until the expected court date. Required: Prepare the accounting records for Walk with Bob Note: this task is based on the analysis of very extensive narrative and detailed project documents. The next pages have all the documents that Bob brought to you in a shoebox so you can prepare the financial statements of his company (use 2 decimal places, if needed round up the figures to the next cent). Students with the last digit being 0 (zero), must use 8 as if it were the last digit for all transactions in this part C of the term project. 1. Check and use the Chart of Accounts provided (do not create new accounts). 2. Prepare the General Journal for the month 3. Post all transactions to the T-accounts 4. Prepare a trial balance 5. Prepare the Financial Statements in good form including footnotes for a Summary of Significant Accounting Policies and for contingency disclosures that are exclusive of the transactions of this case (do not include general notes). 6. Special instructions: Each General Journal entry should have an explanation under. Every place where the word Bob appears substitute with your own first name. 7. Based on all the information provided in this project, prepare a memo to Bob where you as a professional accountant evaluate the business. Specifically address his concerns: a) How much can be paid in dividends? b) With the data of the financial statements that you have completed, is the business sustainable? c) Make two clear suggestions of how the business can improve its bottom line? Chart of Accounts ASSETS Accounts Receivables Accumulated Depreciation Dryer Accumulated Depreciation Phones Accumulated Depreciation Washer Liabilities Accounts Payable Advances from Customers Dividends Payable HST Payable Cash Equipment Dryer Equipment Washer Merchandising Organizational Costs HST Paid Phone Equipment Prepaid Insurance Prepaid Office Supplies Prepaid Promotion (flyers) Prepaid Publicity (posters) Prepaid Rent Prepaid Supplies (shampoo) Owners Equity Owners Equity Revenue Revenue Merchandising Revenue Services Dividends Question1: general entry Income Tax Payable Interest Payable Loan Payable Phone Payable Accounting Services Payable Expenses Accounting Expenses Bank Fees Expense Cost of Goods Sold Depreciation Expense Dryer Depreciation Expense Phones Depreciation Expense Washer Employees Expenses Income Tax Expense Insurance Expense Interest Expense Office Supplies Expense Phone Expense Promotion Expense (flyers) Publicity Expense (posters) Rent Expense Supplies Expense Vet Expenses Web Expenses