Submission information:

Your assignment submission must include both an Excel spreadsheet (electronically submitted) using the template provided and a printed report of your Excel spreadsheet. The printed report will be marked for ease of readability, good formatting, proper content (showing your work), stapled, all names are properly spelled out with student numbers etc. You must also submit your Excel spreadsheet through Blackboard.

Please consult the marking rubric for this assignment posted in Blackboard.

• Management has been going over the list of accounts receivable for possible accounts that are not collectible. One account for $700 must be written off. In the past, 5% of the balance of all accounts receivable has been the basis of an estimate for the required balance in the allowance for doubtful accounts. Management feels that this estimate should be followed for 2017.
• After doing a count of supplies on hand, management determined that $400 of supplies remained unused at December 31, 2017.
• The account balance in Prepaid Insurance of $4,000 represents the annual cost of the renewal of all of Erskine's insurance policies that expire in one year. The policies' coverage started April 1, 2017.
• FV-NI Investments are long-term investments. The fair value of the portfolio of investments was $22,500 at December 31, 2017.
• In January 2017, some old equipment was sold for proceeds of $300 cash. The entry made when depositing the cash was debit Cash, credit Gain on Disposal of Equipment. The original cost of the equipment was $4,300 and the accumulated depreciation was $4,200 up to the date of sale.
• The depreciation expense for the remaining equipment was calculated to be $7,200 for the 2017 fiscal year.
• The notes receivable from customers are due October 31, 2020, and bear interest at 5%, with interest paid semi-annually. The last interest collected related to the notes was for the six months ended October 31, 2017.
• Bank loans are demand bank loans for working capital needs and vary in amount as the needs arise. The bank advised that the interest charge for December 2017 that will go through on the January 2018 bank statement is in the amount of $200.
• Unpaid salaries and wages at December 31, 2017, totalled $790. These will be paid as part of the first payroll of 2018.
• After some analysis, management informs the accountant that the Unearned Revenue account should have a balance of $1,000.
• Erskine is being sued by one of its former clients for $50,000 for giving bad advice and instructions. Upon discussion with legal counsel, it has been agreed that it will likely take $5,000 to settle this dispute out of court. The settlement is expected to occur in 2019. No entry has yet been recorded.
• The accountant is told that a sublet lease arrangement for some excess office space has been negotiated and signed. It will provide Erskine with rent revenue starting on February 1, 2018, at a rate of $400 per month.
• Erskine has been making income tax instalments as required by the Canada Revenue Agency. All instalment payments have been debited to the Income Taxes Payable account.
• After recording all of the necessary adjustments and posting to the general ledger, the accountant prepared the tax returns, and determined that a tax rate of 25% needed to be applied to the income before income tax amount. The necessary adjusting entry for taxes has not yet been recorded. Show your calculations of income taxes at the bottom of your Adjusted Trial Balance.
• The cash is shown net of a bank overdraft of $8,000. The bank overdraft relates to a bank account held at a different bank from the account with the cash balance.

See next page for instructions

Instructions

ALL WORK MUST BE DONE IN EXCEL SPREADSHEET TEMPLATE PROVIDED.

• Prepare all necessary adjusting and correcting entries required based on the information given, up to item 13. If no entry is required, write "no entry".
• Use the "General Journal" tab in the template provided. Show all calculations directly below the adjusting entry.
• Using the tab labelled "Adjusted Trial Balance", enter the amounts from the unadjusted trial balance in your Excel spreadsheet. Using cell-referencing, post the journal entries in adjustment columns to arrive at an adjusted trial balance.
• Using the adjusted trial balance columns of your worksheet, calculate the amount of income before income taxes. Use the information provided in item 14 to record income tax expense for the year in the General Journal tab.
• You will need to update your Adjusted Trial Balance.
• Prepare a single-step statement of income, a statement of retained earnings, and a statement of financial position for 2017.
• All data must be cell-referenced to your adjusted trial balance.
• At the last minute, the accountant revealed that the company has disposed of its software development division. You are asked to prepare a revised Income Statement for the year ended December 31, 2017 using the additional information below regarding the operations of the software development division. This information is already been included in the amounts listed in the unadjusted trial balance at December 31, 2017. The gain on the sale of the assets related to equipment in the discontinued division. Before its disposal, the division reported the following for 2017:

Service Revenue $42,000

Rent expense 6,000

Salaries and wages expense 15,000

Depreciation of division equipment 1,000

Assume that in February 2018, Erskine approaches its bank for another bank loan, based on its statement of financial position as at December 31, 2017. Your manager would like you to restate the statement of financial position and not show the bank overdraft. He tells you that: "this account normally has a positive balance and the overdraft has already been repaid by now, so why bother showing it." The terms of the new bank loan would require that Erskine maintain a current ratio of 2.0. As Erskine's bank manager, discuss the importance of the presentation of the bank overdraft in the statement of financial position as at December 31, 2017. Is this an ethical dilemma? What should you do?