Question 6 At June 30, 2021, the end of its most recent fiscal year, Assiniboine Consultants Ltd.'s post-closing trial balance was as follows: Debit Credit Cash $15,230 Accounts receivable 1,200 Supplies 690 Accounts payable $ 400 Income tax payable Deferred revenue 500 1,120 Common shares Retained earnings 3,600 11,500 $17,120 $17,120 The company underwent a major expansion in July. New staff was hired and more financing was obtained. Assiniboine conducted the following transactions during July 2021. July 3 Issued $10,000 of common shares for cash. 4 Purchased insurance coverage for a year, $3,600. 5 Paid the first two (July and August 2021) months' rent for an annual lease of office space for $4,000 per month. (Hint: Use the Prepaid Rent account.) 6 Purchased $3,800 of supplies for cash. 6 Purchased equipment, paying $4,000 cash and signing a two-year bank loan for $20,000. The equipment has a four- year useful life. The bank loan has a 6% interest rate, which is payable on the first day of each following month. 10 Visited client offices and agreed on the terms of a consulting project. Assiniboine will invoice the client, Bummer Productions Ltd., on the 19th of each month for work performed. 12 Collected $1,200 on account from Spilly Brothers Ltd. This client was invoiced in June when the service was provided. 13 Completed services for Moostar Inc. This client paid $1,120 in advance last month. All services relating to this payment are now completed. (Hint: Use the Fees Earned account.) 16 Paid salaries for the first half of the month, $11,000. 17 Paid a utility bill of $400. This related to June utilities that were accrued at the end of June. 18 Met with a new client, Butz Technologies. Received $12,000 cash in advance for future work to be performed. 19 Invoiced Bummer Productions for $28,000 of consulting fees provided on account. (Hint: Use the Fees Earned account.) 20 Received an invoice for legal advice, $2,200. The amount is not due until August 20. (Hint: Use the Professional Fees Expense account.) 23 Completed the first phase of the project for Butz Technologies Ltd. Recognized $10,000 of revenue from the cash advance previously received (see July 18 transaction). 25 Paid $500 income tax payable owing at the end of June, in addition to $1,200 for the July income tax instalment. 27 Received $15,000 cash from Bummer Productions in partial payment of the invoice issued on July 19. 30 Declared and paid a $5,000 dividend. Assiniboine Consultants records adjustments monthly. Adjustment data for the month of July are as follows: 1.Expiry of insurance coverage (see July 4 transaction) 2. Adjustment of prepaid rent (see July 5 transaction) 3.Supplies used, $1,250 (see July 6 transaction) 4. Equipment depreciation, using the straight-line method of depreciation (see July 6 transaction) 5.Accrual of interest on bank loan (see July 6 transaction) 6.Salaries for the second half of July, $11,000, to be paid on August 1 7.Estimated utilities expense for July, $800 (invoice to be received in August) 3 Required a. Record the above transactions. b. Set up T accounts, enter any opening balances, and post the general journal entries prepared in part (a). c. Prepare a trial balance at July 31. d. Record and post the July adjusting journal entries. e. Prepare a (1) statement of income, (2) statement of changes in equity, and (3) statement of financial position. f. Prepare and post the closing journal entries, assuming Assiniboine closes its books monthly. g. Assiniboine needs to maintain a current ratio of 2:1 in order to maintain its financial standing with its bankers. Calculate the current ratio. Has it achieved the 2-to-1 benchmark? Question 7 On December 31, 2021, Wodka Ltd. prepared a statement of income and statement of financial position, but failed to take into account three adjusting journal entries. Before correcting this omission, the statement of income reported net income of $90,000 and the statement of financial position reported total assets $170,000, total liabilities $70,000, and total shareholders' equity $100,000. Information about the three missing adjusting entries is as follows: 1. Salaries owed amounting to $10,000 for the last two days worked in December were not accrued. The next payroll will be in January. 2. Rent of $8,000 was received for two months in advance on December 1. The entire amount was credited to Deferred Revenue when received. 3. Depreciation of $9,000 was not recorded. Required Complete the following table to correct the financial statement amounts shown. (Indicate deductions with parentheses.) Incorrect balances Adjustments: 1. Salaries 2. Rent 3. Depreciation Correct balance Total Shareholders' Net Income $90,000 Total Assets $170,000 Total Liabilities $70,000 Equity $100,000 4