Question AP1-1, #2 and #3

AP1-1 Preparing a Statement of Earnings and a Statement of Financial Position (@P1-1) 101-1 Assume that you are the controller of McClaren Corporation. At June 30, 2021, the end of the first year of operations, the following financial data for the company are available: Cash $13.150 Receivables from customers (all considered collectible) 9.500 Inventory of merchandise (based on physical count and priced at cost) 57.000 Equipment used in the business 36,000 Payables to suppliers of merchandise 31,500 Salary payable for 2021 (on June 30, 2021, this was owed to an employee, but the amount was not paid until July 7, 2021) 1.500 Total sales revenue 90,000 60,500 Expenses, including the cost of the merchandise sold (excluding income taxes) Income taxes expense (at 30% of pretax earnings); all paid during 2021 ? Contributed capital, 5,000 shares outstanding 2 No dividends were declared or paid during 2021. Required (show computations): 1. Prepare a summarized statement of earnings for the year ended June 30, 2021. 2. Prepare a statement of changes in equity for the year ended June 30, 2021. 3. Prepare a statement of financial position as at June 30, 2021. 4. How would a creditor make use of the information on receivables from customers and the payables to suppliers of merchandise? AP1-2 Analyzing a Student's Business, and Preparing a Statement of Earnings and a Statement of Financial Position (CP1-2) 101-1 While pursuing his undergraduate studies, Bruno Clarke needed earn sufficient money for the coming academic year. Unable to obtain a job with a reasonable salary, he decided to try the lawn care business for three months during the summer. After a survey of the market potential, Bruno bought a used pick-up truck on June 1 for $3,000. On each door he painted "Bruno's Lawn Service, Tel: 555-9623." He also spent $1,800 for mowers, trimmers, and tools. To acquire these items, he borrowed $5,000 cash by signing a note payable, promising to pay the $5,000 plus interest of $150 at the end of the three months (ending August 31). At the end of the summer, Bruno realized that he had done a lot of work, and his bank account looked good. This fact prompted Page 39 him to become concerned about how much profit the business had earned. A review of the cheque stubs showed the following: bank deposits of collections from customers totalled $25,200. The following cheques had been written: gas, oil, and lubrication, $1,840; mower repair, $150; helpers, $9,500; payroll taxes, $400; truck repairs, $410; payment for assistance in preparing payroll tax forms, $50; insurance, $240; telephone. $210; miscellaneous supplies used, $160: and $5,150 to pay off the note, including interest (on August 31). A notebook kept in the truck, plus some unpaid bills, reflected that customers still owed him $1,250 for lawn services rendered and that he owed $200 for gas and oil (credit card charges). He estimated that the cost for use of the truck and the other equipment (depreciation) for three months amounted to $1,000. Required: 1. Prepare a quarterly statement of earnings for Bruno's Lawn Service for the months of June, July, and August 2020. Use the following main captions: revenues from services, expenses, and net earnings. Because this is a sole proprietorship, the company will not be subject to income tax. 2. Prepare a statement of financial position for Bruno's Lawn Service as at August 31, 2020. Bruno's business is a proprietorship with one equity item: Bruno Clarke, capital, 3. Do you see a need for one or more additional financial reports for this business for 2020 and thereafter? Explain. 4. As an owner, how can Bruno use the information conveyed by both the statement of earnings and the statement of financial position to decide whether or not to apply for a bank loan, payable in one year