Part C: Advanced Bookkeeping,Brianas Apps(Version B)

Required:

STEP 1: Prepare the accounting records by doing the following:

1. Set up the Chart of Accounts.

2. Prepare the cash reconciliation for September 30th, 2015.

3. Prepare the General Journal entries for the month of September 2015. Each General

Journal entry should have an explanation under it.

4. Post all transactions to the T-accounts.

STEP 2: Prepare the financial statements by doing the following:

5. Prepare the Adjusting Journal Entries for September 2015.

6. Post all AJE transactions to the T-accounts.

7. Prepare a trial balance for the month of September 2015.

8. Prepare the Financial Statements in good form for the month of September 2015

including footnotes for a Summary of Significant Accounting Policies and for

contingency disclosures only if needed.

9. After preparing the financial statements answer the following questions:

Part C: Advanced Bookkeeping Briana's Apps (Version B) Briana Hope has had a long-standing love affair with technology and an appetite for apps. She believes that business owners that are not taking advantage of apps to reach customers through their smartphones are missing out on a golden opportunity. If you own a smartphone or tablet, you are familiar with apps, whether you are checking the weather forecast, the latest stocks reports or playing any game. Many are convinced that this is how to communicate with the next generation. Apps are very powerful tools. People even take their smartphones to the washroom, as they used to do with newspapers or magazines. There's a decline of people going on computers. The public in general are referring more and more to mobile media for their information sources. This is especially true for people under 40 in Canada, and anyone who wants to attract that demographic. Note: the project document files that accompany this project contain the information needed to complete the project 5 Briana says to her clients that if you own a business, having your own app can help market your company and build a customer base. The sky's the limit when it comes to develop apps. For example, someone could scan your QR code (similar to a bar code) from a sign in the window of your store front, from your business card or marketing material and be linked to your app, which could contain a catalogue of your products and prices, details of any specials and offer discounts for sharing the app. You may not need a retail space at all; you can use an app to build a virtual business. With an app you have a blank canvas and you can design what you like and pull bits from your website, Facebook, Twitter and You Tube. You build your own little community. You can use it to promote your products, services and events. Briana, a BAS-ITEC graduate, has more than 10 years of internet technology experience. In the year 2000 opened one of the first virtual accounting practices in Canada and in 2015 is launching DIYAppsStore Canada, an innovative app-maker platform for small businesses. The company will have the head office in Port Perry. Her experience showed that people in different lines of work had used her apps. Models can set up an app to display their portfolios. Musicians can use it to sell their music, inform fans of upcoming concerts and sell tickets. People with an interest in genealogy can use an app to build the family tree. It is not only business that can benefit from apps. One of Briana's apps was to support a wedding. Her client sent out invitations, accepted RSVPs, set up a gift registry and included stories on each person in the wedding party. Many of her current clients are churches, who use apps to attract young people. There's also a private school that plans to use apps to deliver homework assignments to its students. ONGs are heavy users of apps as well; and conference organizers are turning into apps to make available the welcome message, dinner booking, conference agenda, seminars, floor maps and speakers bios. Briana had $30,000 in accumulated savings and also her husband can loan her an equivalent amount if she needed start-up capital. Brianna has a business plan that shows the potential of making $11,000 clean per month after all normal and regular expenses and related costs are taken in consideration. In September of 2015 she contacted a lawyer for advice about the legal form to give to her new business. The legal firm Port Hope Law provided the necessary legal advice and did all the necessary paper work to incorporate1 as a Canada Business Corporation. Initial capitalization allowed for 20,000 par value shares. Briana, her lawyer and her husband were named as Directors of the Corporation which was called DIYAppsStore Canada Ltd. The lawyers also checked that the name was not already registered and she paid an additional $1,500 to register her Internet domain website URL as www.DIYAppsStore.ca. 1 Hint: start up costs can be capitalized as an intangible asset \"Organization Costs\" and are assumed to have an indefinite life for amortization purposes. You may want to read the segment in Module 10 on intangibles for further clarification. Internet domain names would be afforded similar treatment. 6 Briana contributed $10,000 in exchange for 5,000 of the shares. This was deposited into a new corporate bank account she set up with Metro Canada Trust on September 10th, 2015. The bank account was a standard commercial chequing account that gave cheques returned with monthly statements for a fee of $50/month. The September statement is included. Although Briana knew that there was no need to have a formal office, she decided to lease a small office in a boutique mall in the Bloor and Bay area in Toronto in order to gain some visibility in the first months of operations. She signed a 4 month lease on September 10th for $1,000/month plus HST (Ontario rate = 13%). As an inducement to sign the lease, the September rent was reduced to $500 plus HST, but she did have to provide a security deposit of $1,000 (HST exempt). The deposit would be returned at such time that the lease ended if there was no damage and she was to receive 6% simple interest on the amount which would be paid to her with the returned principal. She decided to treat the deposit as a miscellaneous receivable. She went next to Staples Business Depot and was able to acquire all the necessary office furniture, computing and telecommunication equipment that she did not have already in her home office. For accounting purposes all office equipment would be depreciated in four years with no residual value and all computers and telecommunications equipment (including her cell phone) will be depreciated in two years. Briana will continue to have part of her operations in the office already set up in her house of Port Perry; however, since that equipment now will be used for the newly established company, in the books it has to be reflected her capital contribution with office equipment for a value of $2,000 and computers and telecoms for $3,000. Next step for Briana was to clearly state the pricing for the diverse services. 1) Minimum of $2,000 to develop a custom app, including consulting, setup and design. 2) $50 per month for a do-it-yourself package for small-business owners that includes consulting and trouble shooting on a 24/7 basis (terms of the contracts vary but 6 months is the minimum). Briana knows that both services are subject to HST, and that DIYAppsStore Canada Ltd. as a GST/HST registrant has an annual reporting period as it is the one that requires the least frequent filing of GST/HST returns available for her threshold amount (annual sales of less than $1,500,000). DIYAppsStore Canada Ltd. has a December 31 fiscal year-end, therefore the due date for tax return is June 15 of the subsequent year. However, any HST owed is payable by April 30 of the subsequent year. This payment is to be reported on line 110 of the income tax return. 7 Briana knew that in order to develop simultaneous custom made apps she will need to rely on programmers that will be called upon need and will be paid per on a per output basis. Based on prior experience and the lawyer's advice, these people were deemed casual labour instead of employees but in order to have that legal status they are not allowed to work more than 15 hours per week. Briana felt quite comfortable running her own website that was designed during 2015 and has ever since suffered constant updates. She knew that if the website development was contracted out would cost a couple of thousand dollars, so she decided to buy it from Briana Hope for $1,800 in cash and expense it immediately. Briana doubted if she was supposed to expense this $1,800 immediately or amortize it in one year, but since her expenses were not very high in relation to revenues in the start up year, she felt that her actions were justifiable. In terms of setting up her accounting system Briana decided on the following records: Chart of Accounts General Journal used for all adjusting and oddball entries Sales Journal Disbursements Journal Sales were of two kinds: one time only for special apps or regular payments from customers using her services. Revenues were recognized when the special app was delivered to the client and at month end for clients in long term contracts. Most of the clients paid via credit card. Briana only accepts VISA that charged 3% of sales receipts for its processing services. For those clients paying in cash, for simplicity, Briana recorded those sales when she made the bank deposit of the cash payments in her bank account. Occasionally clients for special apps would not show up at delivery but show up later with plausible sob stories. Briana would take their money for a new updated app adding a $100 processing fee to the new billing. Briana of course had other business expenses that were normal for the business and these are reflected in the cash disbursements journal. At the end of her first month of operations she decided to prepare a complete set of financial statements (September 30th 2015, Balance Sheet, Income Statement and Statement of Retained Earnings... but no Cash Flow Statement). A ten cent per share dividend was declared on September 30th, no other sums were paid or owed to Briana. 8 Required: STEP 1: Prepare the accounting records by doing the following: 1. Set up the Chart of Accounts. 2. Prepare the cash reconciliation for September 30th, 2015. 3. Prepare the General Journal entries for the month of September 2015. Each General Journal entry should have an explanation under it. 4. Post all transactions to the T-accounts. STEP 2: Prepare the financial statements by doing the following: 5. Prepare the Adjusting Journal Entries for September 2015. 6. Post all AJE transactions to the T-accounts. 7. Prepare a trial balance for the month of September 2015. 8. Prepare the Financial Statements in good form for the month of September 2015 including footnotes for a Summary of Significant Accounting Policies and for contingency disclosures only if needed. 9. After preparing the financial statements answer the following questions: Indicate if the net income of the month is in line with Briana's expectations? Make one clear suggestions of how the business can be improved so Briana can achieve and surpass her target. Indicate which is the main risk faced by her business and how she might be able to control it. STEP 3: Submit all the 9 items in one PDF document. 9 Port Hope LAW- Barristers & Solicitors INVOICE To: DIYAppsStore Ltd. From: Perry Mason Terms 15 days Date: September 10, 2015 Re: Professional Services For services rendered in connection with the incorporation of DIYAppsStore Ltd. including but not limited to: Registering the Internet domain name ( www.DIYAppsStore.ca) Various legal advice on these and other matters The amount of $1,500 Port Hope LAW- Barristers & Solicitors INVOICE To: DIYAppsStore Ltd. From: Perry Mason Terms 60 days Date: September 11, 2015 Re: Professional Services For services rendered in connection with the incorporation of DIYAppsStore Ltd. including but not limited to : Filing application for articles of incorporation as a Canada Business Corporation Securing trademark protection on the name DIYAppsStore Filing necessary documents with the Canadian Registrar of Companies Filing appropriate documents as required under the Ontario Directors' Act to name corporate directors Various legal advice on these and other matters The amount of $2,500 COMMERCIAL LEASE AGREEMENT THIS LEASE (this "Lease") dated this 10th day of September, 2015 BETWEEN: Karl Rudolf of 7 Bloor St. E, Toronto, ON Telephone: 416-811-8118 Fax: 416-811-8118 (the "Landlord") OF THE FIRST PART - AND DIYAppsStore Ltd. of 79 Main St., Port Hope, ON (the "Tenant") OF THE SECOND PART - AND Briana Perry of 79 Main St., Port Hope, ON Telephone: 708-338-3883 (the "Guarantor") OF THE THIRD PART IN CONSIDERATION OF the Landlord leasing certain premises to the Tenant, the Tenant leasing those premises from the Landlord and the mutual benefits and obligations set forth in this Lease, the receipt and sufficiency of which consideration is hereby acknowledged, the Parties to this Lease (the "Parties") agree as follows: 1. Definitions 1. When used in this Lease, the following expressions will have the meanings indicated: a. "Additional Rent" means all amounts payable by the Tenant under this Lease except Base Rent, whether or not specifically designated as Additional Rent elsewhere in this Lease; b. "Building" means all buildings, improvements, equipment, fixtures, property and facilities from time to time located at Manulife Center, 55 Bloor Street - Unit 1606 - Toronto ON, as from time to time altered, expanded or reduced by the Landlord in its sole discretion; c. "Common Areas and Facilities" mean: i. those portions of the Building areas, buildings, improvements, facilities, utilities, equipment and installations in or forming part of the Building which from time to time are not designated or intended by the Landlord to be leased to tenants of the Building including, without limitation, exterior weather walls, roofs, entrances and exits, parking areas, driveways, loading docks and area, storage, mechanical and electrical rooms, areas above and below leasable premises and not included within leasable premises, security and alarm equipment, grassed and landscaped areas, retaining walls and maintenance, cleaning and operating equipment serving the Building; and ii. those lands, areas, buildings, improvements, facilities, utilities, equipment and installations which serve or are for the useful benefit of the Building, the tenants of the Building or the Landlord and those having business with them, whether or not located within, adjacent to or near the Building and which are designated from time to time by the Landlord as part of the Common Areas and Facilities; d. "Leasable Area" means with respect to any rentable premises, the area expressed in square feet of all floor space including floor space of mezzanines, if any, determined, calculated and certified by the Landlord and measured from the exterior face of all exterior walls, doors and windows, including walls, doors and windows separating the rentable premises from enclosed Common Areas and Facilities, if any, and from the centre line of all interior walls separating the rentable premises from adjoining rentable premises. There will be no deduction or exclusion for any space occupied by or used for columns, ducts or other structural elements; e. "Premises" means the office space at Manulife Center, 55 Bloor Street - Unit 1606 - Toronto ON. 2. Price and Payment a. The rent for all concepts is of $1,000 per month. September rent will be $500. Security deposit of $1,000 is to be made with cheque that will be returned at the expiration of this contract plus 6% simple interest upon simple inspection of the premises by the landlord. b. The rent is for a special period of 4 (four) months, ending on December 31st, 2015. c. The tenant is responsible for paying Telephone, internet, cable, and parking all other utilities are included in the rent. 3. Signatures Karl Rudolf "Landlord" Briana Perry in representation of DIYAppsStore Ltd. "Tenant" Metro Bank Statement of Account 254 Main St Port Perry ON W7I 1P7 Branch Account 1801-001-15334 Chequing Account Statement Date September 30th, 2015 1801 DIYAppsStore 79 Main St Port Hope, ON Date Description September 1 September 10 September 10 September 11 September 12 September 12 September 21 September 25 September 26 September 30 September 30 DEPOSIT CHEQUE CHEQUE CHEQUE Withdraw of cash CHEQUE DEPOSIT in account CHEQUE Withdraw of cash DEPOSIT Visa DEPOSIT in account Debits Credits 10,000.00 1 2 4 3 565.00 1,000.00 4,179.31 3,000.00 590.00 2,350.00 5 MONTHLY SERVICE CHARGE Interest for overdraft TOTALS Closing balance 900.00 3,000.00 11,523.60 4,130.00 50.00 12.00 13,296.31 Balance 10,000.00 9,435.00 8,435.00 4,255.69 1,255.69 665.69 3,015.69 2,115.69 (884.31) 10,639.29 14,769.29 14,719.29 14,707.29 28,003.60 14,707.29 01 DIYAppsStore 79 Main St. 79 Main St. September 10, 2015 Port Perry W3L 1P3 PAY TO THE ORDER OF 04 DIYAppsStore September 11, 2015 Port Perry W3L 1P3 PAY TO THE Karl Rudolf ORDER OF Five hundred sixty five with ---------------- 00/100 $ 565.00 Staples Four Thousands one hundred seventy nine with 65/100 DOLLARS PER Metro Bank $ 4,179.31 DOLLARS PER Metro Bank 254 Main St. 254 Main St. Port Perry ON Port Perry ON 02 DIYAppsStore 79 Main St. 79 Main St. September 10, 2015 Port Perry W3L 1P3 PAY TO THE ORDER OF 05 DIYAppsStore September 21, 2015 Port Perry W3L 1P3 PAY TO THE Karl Rudolf ORDER OF one thousand with --------------------------- 00/100 $ 1,000.00 Instaprint Nine hundreds with ------------------------ DOLLARS PER Metro Bank 00/100 $ 900.00 DOLLARS PER Metro Bank 254 Main St. 254 Main St. Port Perry ON Port Perry ON 03 DIYAppsStore 79 Main St. 79 Main St. September 10, 2015 Port Perry W3L 1P3 PAY TO THE ORDER OF 06 DIYAppsStore September 21, 2015 Port Perry W3L 1P3 PAY TO THE Riskit ORDER OF Five hundreds ninety with ------------- 00/100 $ 590.00 Port Hope Law One thousand five hundreds with ------- DOLLARS Metro Bank PER 00/100 DOLLARS Metro Bank 254 Main St. 254 Main St. Port Perry ON Port Perry ON PER $ 1,500.00 The RiskIt Insurance Group 120 Main St. Port Perry, ON H6I 1L7 Ask For: INVOICE 12477 ACCT: DIYAppsStore Ltd. Date: September 10th, 2015 John Risk YOUR PREMIUM IS DUE AND PAYABLE ON EFFECTIVE DATE OF POLICY Coverage is cancelled if not paid within 30 days expires on August 31st 2016 EFFECTIVE September 10, 2015 5012-1 PREMIUM $ 590 Note: monthly premium $50, September portion $40 Tenant Coverage, All perils Limit of Liability $2,000,000 TERM POLICY Paid September 10 Cheque # 3 Quantity Price Total Furniture Chairs 4 $ $ $ $ $ $ 50.00 Desks 1 $ 330.00 Filing cabinets 1 $ 150.00 Lighting 8 $ 25.00 Storage cabinet 1 $ 120.00 200.00 330.00 150.00 200.00 120.00 Computing & Telecommunications Desktop computer Monitor & speakers Printer Other accessories $ 1,350.00 $ 700.00 $ 150.00 $ 150.00 Office Supplies Paper and Pads $ 150.00 Pens, correctors, markers $ 80.00 Binders $ 50.00 Labels $ 19.50 Stapler, Puncher $ 41.00 Scissors Value of supplies available at: September 30th $ 300.00 October 301st November 30th December 31st $ 8.00 $ 3,698.50 $ 480.81 $ 4,179.31 Subtotal HST Total NOTE: The products will be delivered at no extra charge at Manulife Center, 55 Bloor St., Toronto ON on September 15th, 2015 between 9am and 12pm. Store 1518 Yonge St, north of Bloor 1-877-360-8500 September 11, 2015 10:16:05 paid with cheque #4 INSTAPRINT Bill To: DIYAppsStore Ltd Invoice # Invoice Date 2015/227 September 14, 2015 Quantity 1,000 2 100 Description Amount Cards with QR code Glossy posters for front windows with QR code Glossy brochures with QR code Payment at ordering (cash on September 14th) $600 $100 $300 -$100 Balance Due $900 Payment conditions: 10% in cash when ordering, the rest at time of delivery Please make cheque payable to: InstaPrint 98 Main St. Port Perry, ON M7Z 1W9 Paid September 25 Cheque # 5 Delivery: the materials will be ready to pickup on September 21st, 2015. Cost HST Total $ $ $ 885 115 1,000 Cards and Brochures available by September 30th: Cards: an amount equal to the last 3 digits of your student number Brochures: 75 (seventy five) BelTel your communication partner Account Summary for DIYAppsStore Ltd. September 30th 2015 Account # 3144950/1 Previous amount due - New Account Payment Received - Thank you $0.00 0.00 Current charges - per details below Total Amount Due $340.00 $340.00 pre-authorized payment October 4, 2015 1% per month, plus a $50 collection fee, will be charged if insufficient funds at payment date Current Charges - Detail Equipment - cell phone - $ 282.50 Monthly Basic Service Charges for September : Extra fees for 416-869-5555 Business Voicemessaging & Call Display package System access fee 911 access $ 19.99 $7.00 $7.50 $1.22 $15.72 Long Distance Charges for September $21.79 ( details not included in project documents) Total Charges - Amount due HST included in the bill HST phone HST services $39.12 $32.50 $6.62 $340.00 Disbursement Journal Month DIYAppsStore Date September 2015 Details of Services September 10 Rent (cheque 1) Security Deposit Rent (cheque 2) Insurance (cheque 3) Web site development (paid to Briana) September 11 Staples (cheque 4) September 11 10 GO tickets Port Perry - Union Station September 14 Instaprint - deposit September 21 Instaprint-cards & brochures (cheque 5) September 21 Payments of all lunches at Manulife Center September 22 Lawer's fees (cheque 6) September 28 GO monthly pass for February September 30 Payment to apps developers September 30 Payment of all lunches al Manulife Center ----------------------------------------------Total Disbursements Month paid with cheque cash disbursements Amount $ $ $ $ $ $ $ $ $ $ $ $ $ 565.00 1,000.00 590.00 1,800.00 4,179.31 97.00 100.00 900.00 150.00 1,500.00 330.00 3,000.00 120.00 ----------$ 14,331.31 $ 8,734.31 $ 5,597.00 HST paid 65.00 480.81 11.50 103.50 ----------660.81 VISA Statement of Account 2 Bay St. Toronto ON M1A 2G2 Merchant Account PP 664/001 Transaction Date 1 2 3 4 5 September 14 September 16 September 16 September 19 September 30 11 September 30 12 September 30 Total VISA Fee September Statement Date September 30, 2015 DIYAppsStore 79 Main St. Port Perry ON Transaction code 4 Digits Amount 41566/001 - 1 41566/001 - 2 41566/001 - 3 41566/001 - 4 41566/001 - 5 9968 7235 8297 7570 6215 2,500.00 50.00 50.00 50.00 4,700.00 41566/001 - 59 41566/001 - 60 7124 9037 50.00 2,500.00 Total Merchant Fee Net to be deposited Total 3% $ 11,880.00 (356.40) 11,523.60 Sales Journal Date DIYAppsStore Ltd. Project Pet grooming #1 Church #8 Weding #5 Model #3 Church #5 Piannist #2 Acct Services #2 Dentist #4 Pharmacy #1 Reunion party #1 Dentist #5 Municipality #1 Week of September 1 to 7th, 2015 Details of Client/Services Amount Pet Smart Ltd / order special app Update of events / monthly subscr. Benny Lin / delivered special app John Lindo / order special app Update of events / monthly subscr. Update of concert / monthly subscr. LA Acct. / new monthly subsc LA Acct. / new monthly subsc LA Acct. / new monthly subsc Lucy Brome / delivered special app LA Acct. / new monthly subsc Port Hope / delivered special app 2,500 50 50 50 2,300 50 4,700 Total for the week 9,700 00 Sales Summary Week Sep 1 to 7th, 2015 Account 1801-001-15334 Account Name: DIYAppsStore Particulars September 3 September 4 $ 50 00 $ 2,300 00 Metro Bank Current Account Deposit Account 1801-001-15334 Date Sep 1 to 7th, 2015 Account Name: DIYAppsStore x 5 x 10 x 20 x 50 x 100 Coin Total CDN Cash 2,350 00 Total CDN Cheques Total Credit Card Subtotal 2,350 00 Foreign Cash Foreign Cheques Bank Use Only Total Deposited By Briana Hope Total $ 2,350 00 2,350 00 DIYAppsStore List of Developers Developer Card (card front) Developer Card (card back) Contact and Financial Management date Name Ace Stone Jacky Nguyen Martin Monrow Penny Right Alain Stittle Elaine Wood Qiong Ho Phone # Skills: Address email iOS Contacted re apps developed Date phone/email Android Comments Animation Graphic art Video editing Sound editing Musinc sequencer Account Balance: Date App Hypermedia editing Hours Payment Evaluation Web development Game development Professionalism: Project management Reliability Specifications Documentation Timeliness Good humor Briana's Comments initials Project: Client / Project Card (card front) Client/Project Card (card back) Contact and Financial Management date Name Phone # Skill required for App Address email iOS Contacted Android phone/email Date Comments Animation Graphic art Video editing Sound editing Musinc sequencer Account Balance: Date Request Hypermedia editing Hours App Payment Account Received Balance Comments Web development Game development Easiness of Client/project Complex project Frequent changes Narrow scope Fast response Clear guidelines Trouble shooting Briana's initials Comments