Tommys Pro Golf Shop LLC Meet Tom. Tom Buchanan has decided to open a merchandise outlet at the Al Ain Equestrian, Shooting and Golf Club. The shop will sell golf shirts, shoes, clubs and other items that golfers would be interested in purchasing. Tom is married with a little daughter and he and his wife are expecting a wee lad in the next few months. He decided to incorporate the business instead of operating as a sole proprietor. He planned to invest 250,000 AED in his new business. Start-up Investment Tom had to pay 2,000 AED to the government in order to incorporate his business. That cost is an asset called Organization Costs and will be depreciated over the first five years of the business. The Al Ain Golf club will give Tom a five year lease for 200 square metres of space in the club at a monthly cost of 4,000 aed.. Tom would have to put in the light fixtures and tile the floor to make the space ready for use as a merchandise shop. These costs of 60,000 AED are called leasehold improvement costs and are asset to the business which normally is depreciated over the time of the lease i.e. five years. Next, Tom had to purchase shelving, clothing racks, display cases and a front desk for 20,000 AED. These costs are also an asset and are called Furniture and Fixtures. Also a cash register and computer were purchased for 12,000 (use the account Office Equipment). Finally, Tom approached the suppliers of golf clothing and equipment. He estimated that he would need to have 150,000 of inventory in his new business to meet the needs of his customers. He purchased ten sets of golf clubs; 100 golf shirts of various sizes and colors; 25 pairs of golf shorts (different sizes and colours); a range of golf shoes. golf gloves and other golfing items such as golf balls and tees. Tom would have to pay the suppliers for this inventory to open his business. For future purchase from the same suppliers, the suppliers agreed to give him an account with them on terms of 2/10, n/30 and delivery terms of FOB shipping. To be safe and be sure not to run out of money, Tom decided to borrow 30,000 AED from the local bank. Required: 1) What are the advantages and disadvantages of incorporating the business rather than being a sole proprietor? 2) What would be Toms Opening Balance sheet? (Open the excel spreadsheet and in the general journal record the initial transactions Tom completed before starting his business. Then open the asset ledger accounts and post the transactions to the ledger. Then produce the opening Balance sheet). Anticipated Monthly Expenses In addition to the monthly rent of 4,000, Tom estimated that his utility costs would be 500 AED for the month. Tom planned to hire two employees to help operate the business. Each employee would be paid 600 AED for one 40 hour week. Tom will take a monthly salary 0f 10,000. First month Transactions Oct 1. The business paid the first month rent to the golf club of 4,000. 1. The business purchased a one year insurance policy for 12,000 cash. 1. Tom interviewed three people for the job of store clerk and decided to hire two of them to start the next day. 1. Sold merchandise for 2,000 cash, the merchandise cost Tom 1,500. 2. Sold two sets of golf clubs on account to Frasers Golf Academy for 4,000 2/10 n/30. Cost of clubs was 2,500. 3. Purchased merchandise from Lyman Company for 8,000, terms 2/10, n/30. FOB shipping. 4. Paid freight costs of 400 on merchandise purchased from Lyman. 5. Purchased office equipment on account for 3000. 6. Returned some of Oct 3 merchandise to Lyman Company, which cost 1,600. 7. Paid the office staff 1,200. 8. Sold merchandise for 5,500 cash, the merchandise cost Tom 3,200. 9. Purchased advertising on account from the local newspaper 500. 10. Sold merchandise for 6,000 cash, the merchandise cost Tom 4,400. 11. Paid the amount due to Lyman Company in full. 12. Fraser paid his bill taking the discount. 13. Purchased merchandise on account fro Golf World at a cost of 12,200; terms 2/10, n/30, FOB shipping. 14. Paid freight costs on the merchandise 460 cash. 14. Paid the office staff 1,200 15. Sold merchandise for 7,500, the merchandise cost Tom 4,200. 16. Customer returned merchandise for 800 cash, cost of merchandise was 300. 17. Sold merchandise to Fraser for 4,800, terms 2/10, n/30, Cost of the merchandise was 1,400. 18. Returned merchandise purchased on Oct 13 from Golf World 2,000. 19. Sold merchandise for 5,500 cash, the merchandise cost Tom 3,200. 20. Paid the office staff 1,200 21. Paid for merchandise purchased Oct 13 from Golf World. 22. Purchased merchandise from Lyman Company for 18,000, terms 2/10, n/30. 23. Paid freight costs of 600 on merchandise purchased from Lyman. 24. Sold merchandise for 3,600, the merchandise cost Tom 1,500. 25. Customer returned merchandise for 400 cash, cost of merchandise was 150. 26. Sold merchandise to Fraser for 1,800, terms 2/10, n/30, Cost of the merchandise was 600. 27. Returned merchandise purchased from Lyman. 2,000. 28. Sold merchandise for 5,500, the merchandise cost Tom 3,200. 29. Paid the office staff 1,200 30. Monthly managers salary 10,000 was paid. 31. Paid a dividend of 1,000 31.Paid Lyman in full. Required: Open the spreadsheet, journalise the above transactions, post to the ledger and take a trail balance. Adjusting the Records At the end of the month there are some transactions that have not been recorded in the journal and posted to the ledger. For example: 1. One month of insurance has expired. 2. Monthly depreciation: a. on leasehold improvements was 1000 b. on organization costs was 50 c. on furniture and fixtures was 300 d. on office equipment 500 3. Salary owed to the office staff at the end of the month was 400. Required: Open the worksheet, enter the trial balance and record the adjusting entries in the worksheet then complete the adjusted trial balance. If it balances then record the entries in the journal, post to the ledger and compare the account balances with the balances in the worksheet. Finally present an Income statement, shareholders equity statement & balance sheet for the month of October, 2015.