Question 1 (15 minutes - 14 Marks) MacDonald Farm Consulting (MFC) is a small consulting company. Mr. MacDonald, the owner, uses a simple accounting software package during the year to record the company's transactions. At the end of the year, he delivers his records to you, his accountant to complete the company's financial statements. The following is the unadjusted trial balance for the December 31, 2019 fiscal year end provided by Mr. MacDonald. MacDonald Farm Consulting Unadjusted Trial Balance At December 31, 2019 Account Titles Debit Credit Cash $ 62,600 Accounts Receivable $43.000 Supplies $ 10.200 Vehicles $ 54,000 Accumulated Depreciation, Vehicles $ 27.000 Other Long Term Assets $ 5.700 Accounts Payable $ 17,300 Deferred Revenue $ 18.000 Notes Payable 15 year, 6x) $40.000 Share Capital $ 56,000 Retained Earnings $ 10.400 Consusting Revenue $ 117,000 Wage Expense $ 74 500 Supplies Expense $18.200 Utilities Expense $ 16.300 Interest Expense 1.200 Depreciation Expense $ $285,200 $285 700 Additional Information (1.) The year-end count of supplies determined that there are $4,200 worth of supplies on hand (2.3 MEC pays wages on a biweekly basis (ie, 10 working days) at 5500/day. The last payment for wages was on December 27, 2019. There are two remaining working days in December (the 30 and 31"). (3.) The Deferred Revenue balance includes amounts the clients prepaid for six different consulting projects ($3,000 cach). Four projects were completed in December, while the remaining two are scheduled to be completed in January 2020. (4.)The Note Payable was signed March 1, 2019 and 52,400 of interest is to be paid twice a year on August 31" and Feb 28 (5.) MFC invoiced $7,500 to customers for work completed in December but hasn't yet received payment from the customer. (6.) Vehicles are being depreciated at 56,000 per year. Required: Prepare necessary adjusting journal entries in the space provided below (excluding the entry for income tax) based on the information provided above. Show all calculations. (14 marks) T-accounts are not required, but maybe helpful. Adjusting Journal Entries 1. no journal entry 2. (dr) Wages Expense $5,000 (cc) Waged payable 5,000 3. (dr) Deferred Revenue $18,000 (c) Accounts recieveable 12.000 (er) Accounts payable 6.000 4. no journal entry 5. no journal entry 6. (dr) Depreciation expense $6,000 (et) Accumulated Depreciation 6,000 (a) A business has a corporate income tax rate of 40%. It has made no tax payments for the year 2019. The taxes have to be paid at the end of the first quarter of 2020. Based on the following accounting data for the year-end December 31, 2019, provide the adjusting entry for income taxes for December 31, 2019. Show all calculations (3.5 marks) Revenues Rent Expense Interest Expense Wages Expense Depreciation Expense Dividends S1,135,000 $340,000 $57,000 $230,000 $256,000 $34,000 Revenue 1135000 Expenses Rent 340,000 Interest 57,000 Wages 230000 Depreciation 256000 883000 1,135000 - 883,000 = 252,000 x 40% - $ 100,800 in income tax Adjusted Journal entry (dt) income Tax Expense (er) income tax payable 100,800 100,800 (b) Use the following information as of December 31, 2018 to calculate the amounts of cash and retained carnings for ATC Inc. The company's total assets are $36,000. This company doesn't have any other accounts. Show all calculations (3.5 marks) Accounts Payable $ 2.500 Accounts Receivable 8,000 Accumulated Depreciation-F&F 6,000 Cash ? Contributed Capital 9,500 Supplies 1,000 Furniture and Equipment 22,000 Deferred Revenue 3,000 Retained Earnings ? Accounts receivable 8,000 Supplies 1,000 Furniture and equipment 22,000 Accumulated Depreciation -F&F_16,000) Total assets = 25,000 (needs to equal 36,00) 25,000-36,000 = 11,000 Cash is equal to $11,000 Accounts payable 7,500 Contributied capital 9,500 = 17,000 (36,000-17,000. = 19,000) Retained earnings are - 19,000 (assets need to equal liabilities) Question 3 (5 minutes - 4 Marks) i In your own words, explain the meaning of depreciation expense and accumulated depreciation. How do they differ? Depreciation expense is an income statement item showing the amount a company's assets become cheaper in one accounting period. Accumulated depreciation is a balance sheet item and it shows the amount a company's assets become cheaper in a whole year. ii. What type of account is accumulated depreciation? Accumulated depreciation is a contra asset account, meaning it is on the balance sheet with a credit balance iii. Why is the accumulated depreciation account necessary? it is necessary as you are able to see the balance of assets between the years balance and the balance of that single period