You have just begun working at Brandybuck. Gamgee & Took a mid-size accounting firm that specializes in small business consulting, New employees are assigned to teams of recent graduates that are mentored by an account manager to help new employees through the steep leaming curve and build a strong team dynamic. After the orientation, paperwork and welcome lunch with the partners you and your team are anxious to get to work and apply all of the accounting theory that you learned in your program. Your account manager, Jenny Lee, has your team's first assignment Your team's first assignment is with a new client, Sophia's Simple Soap Company Lid. whose controller lett during the year due to medical reasons and has not been replaced. The owner's and sole shareholder's nephew created what he calls a comprehensive balance sheet, exhibit A. This document was created from the previous year-end adjusted trial balance that the controller approved right before she left and will form the Starting point for the current year. Unfortunately, the nephew also spilled liquid soap on the computer that contained the financial records and lost all of the current and historical data; there is no back-up file. Therefore, while a separate team lead by Matt Lee, recreates the current-year entries, your team's first deliverable will be to create a set of financial statements for the previous year end, excluding the statement of cash flows that wil be created by the team working on the company's cash budget. Once the statements are completed, your team will also prepare a list of balance sheet accounts that may require adjusting entries by using the form found in appendix B. You may wish to use the nephews creation to recreate the adjusted trial balance as a starting point. Your team's second deliverable wil be to analyze the transactions detailed in appendix Cand create appropriate accounting entries that will be used by the team recreating the current year financial records, please provide an explanation for each entry. Finally, the team's third deliverable will be to answer the president's questions regarding financial accounting. The questions arose during our initial meeting and are summarized in appendix D. When responding to the presidents questions, please keep in mind that she is not a professional accountant and may need more explanation than it your answers were addressed solely to me. Transaction Analysis and Journal Entries (Appendix C): Each transaction is logically analyzed to determine if an accounting entry is required through the application of accounting element definitions and the accounting equation. Required entries are property formatted with a date, the correct accounts and debit/credit amounts. The explanation includes the reason that an entry was or was not required. Explanations are free from abbreviations, slang, spelling, grammar and incorrect word usage errors. 1. On December 22, 2019. Soapy Stuff, a long-time customer, purchased $125.000 worth of products to be shipped to its stores on January 2, 2020. The order was paid in full at the time of booking and the cost of goods sold is 40% of the gross revenue. 2. On December 15, 2019, Sophia, the sole shareholder, director and president, approved a cheque voucher to pay her $50,000 with the explanation owner's drawing 3. On December 31, 2019, an accident in the warehouse damaged $35.000 worth of inventory: the goods are not saleable or salvageable. Sophia instructed the accounting clerk to leave it until next year. 4. On December 01, 2019, the company negotiated a $500,000 line of credit with REC. This is in addition to the current line of credit with CIBC. 5. On December 10, 2019, Bubbles & Beyond purchased $85,000 worth of inventory to be shipped to its stores beginning February 01, 2020. Bubble & Beyond paid for the inventory and requested that Sophia's hold the goods on their behalf due to lack of space in their warehouse during renovations. Bubbles Lee, recreates the current-year entries, your team's first deliverable will be to create a set of financial statements for the previous year end, excluding the statement of cash flows that will be created by the team working on the company's cash budget. Once the statements are completed, your team will also prepare a list of balance sheet accounts that may require adjusting entries by using the form found in appendix B. You may wish to use the nephew's creation to recreate the adjusted trial balance as a starting point. Your team's second deliverable will be to analyze the transactions detailed in appendix Cand create appropriate accounting entries that will be used by the team recreating the current year financial records: please provide an explanation for each entry. Finally, the team's third deliverable will be to answer the president's questions regarding financial accounting. The questions arose during our initial meeting and are summarized in appendix D. When responding to the president's questions, please keep in mind that she is not a professional accountant and may need more explanation than it your answers were addressed solely to me. Transaction Analysis and Journal Entries (Appendix C): Each transaction is logically analyzed to determine if an accounting entry is required through the application of accounting element definitions and the accounting equation. Required entries are properly formatted with a date, the correct accounts and debit/credit amounts. The explanation includes the reason that an entry was or was not required. Explanations are free from abbreviations, slang, spelling, grammar and incorrect word usage errors. 1. On December 22, 2019. Soapy Stuff, a long-time customer, purchased $125,000 worth of products to be shipped to its stores on January 2, 2020. The order was paid in Mull at the time of booking and the cost of goods sold is 40% of the gross revenue 2. On December 15, 2019, Sophia, the sole shareholder, director and president, approved a cheque voucher to pay her $50,000 with the explanation owner's drawing 3. On December 31, 2019, an accident in the warehouse damaged $35,000 worth of inventory, the goods are not saleable or salvageable. Sophia instructed the accounting clerk to leave it until next year 4. On December 01, 2019, the company negotiated a $500,000 line of credit with RBC. This is in addition to the current line of credit with CIBC. 5. On December 10, 2019, Bubbles & Beyond purchased $65,000 worth of inventory to be shipped to its stores beginning February 01, 2020. Bubble & Beyond paid for the inventory and requested that Sophia's hold the goods on their behalf due to lack of space in their warehouse during renovations. Bubbles & Beyond sent Sophia's a copy of the document that covers the held goods under Bubbles insurance policy. Instructions Your response should conform to our firm's communication and presentation guidelines using Arial 12-point font with normal margins. All outside sources should be properly referenced in the American Psychological Association (APA) style. Draft financial statements, for review purposes, may be completed and forwarded in Excel and memos should be created using Microsoft Word. Please send your memos to me for review prior to sending them to the client and Matt's team. Appendix A Sophia's Simple Soap Company Ltd. Statement of income Year Ended December 31, 2018 1,345,000 1,345,000 Revenues Sales revenue Total revenue Expense Cost of goods sold Selling expense Salaries & wages expense Depreciation expense Supplies expense Property tax expense General & administrative expense Total expense Income before income tax 375,000 123,000 250,000 14,000 13,000 36,000 130,000 941,000 404,000 Income tax expense Net income 22,000 382,000 Sophia's Simple Soap Company Ltd. Statement of Changes in Equity Year Ended December 31, 2018 Balance, June 1, 2018 Issued common shares Net income Dividends declared Balance, December 31, 2018 Common Retained Shares Earnings $200,000 $350,000 0 0 0 382,000 0 0 $200,000 732,000 Total Equity $550,000 0 382,000 0 $932,000 Sophia's Simple Soap Company Ltd. Statement of Financial Position December 31, 2018 Assets Current Assets Accounts receivable Interest receivable Notes receivable Inventories Office supplies Prepaid expenses Total Current Assets 132.000 15.000 7000 138.000 3,300 10,000 $ 305,300 Property, Plant, and Equipment Land 800.000 Building Less accumulated depreciation 1,810,000 90,000 910.000 Equipment Less accumulated depreciation 300,000 150,000 150,000 1,860,000 2.165,300 $ Total Property, Plant, and Equipment Total Assets Liabilities and Shareholders' Equity Current liabilities Overdraft Accounts payable Deferred revenue Interest payable Wages payable Current portion of Mortgage payable Total Current Liabilities Non. Current liabilities Mortgage payable 8% Bonds payable, due 2021 Total Non Current liabilities Total liabilities 18.000 23,300 55,000 48,000 13,000 24,000 = 181,300 452,000 600,000 1,052,000 $ 1,233,300 Shareholders' equity Common shares Retained earnings Total shareholders' equity Total liabilities and shareholders' equity 200.000 732,000 932,000 $ 2,165,300 Appendix B Account 1. Dabit Cash Credit Overdraft Explanation of Possible Adjustment In the Financial Position Statement, we can see this account is negative, and it needs to adjust to the credit account (Liabilities). 2. Dabit Expense There is some expense do not show in the Statement of Financial Position, such as Cost of goods sold. Selling expense, Salariss & wages expense, Depreciation expense, Supplies expense, Property tax expense, Income tax expense, and General & administrative expense. Therefore, we need to record those accounts in the Adjust Trial Balance for showing real the state of the company 3. Credit Mortgage payable & Current portion of Mortgage payable The financial position statement needs to add the Current portion of Mortgage payable in the Current liabilities and reduce $24.000 in the Mortgage payable in Non. Current liabilities. This because each year, we need to pay $24.000 on the Mortgage Credit: Common shares During the year, the company did not take place stock share transactions. So, the Common shares Account is not for this year, and we need to adjust it. 5. Credit Bonds payable Debit Bonds expense The company needs to pay interest on the bonds each January 1 St, which account should add in the Statement of Financial Position. You have just begun working at Brandybuck. Gamgee & Took a mid-size accounting firm that specializes in small business consulting, New employees are assigned to teams of recent graduates that are mentored by an account manager to help new employees through the steep leaming curve and build a strong team dynamic. After the orientation, paperwork and welcome lunch with the partners you and your team are anxious to get to work and apply all of the accounting theory that you learned in your program. Your account manager, Jenny Lee, has your team's first assignment Your team's first assignment is with a new client, Sophia's Simple Soap Company Lid. whose controller lett during the year due to medical reasons and has not been replaced. The owner's and sole shareholder's nephew created what he calls a comprehensive balance sheet, exhibit A. This document was created from the previous year-end adjusted trial balance that the controller approved right before she left and will form the Starting point for the current year. Unfortunately, the nephew also spilled liquid soap on the computer that contained the financial records and lost all of the current and historical data; there is no back-up file. Therefore, while a separate team lead by Matt Lee, recreates the current-year entries, your team's first deliverable will be to create a set of financial statements for the previous year end, excluding the statement of cash flows that wil be created by the team working on the company's cash budget. Once the statements are completed, your team will also prepare a list of balance sheet accounts that may require adjusting entries by using the form found in appendix B. You may wish to use the nephews creation to recreate the adjusted trial balance as a starting point. Your team's second deliverable wil be to analyze the transactions detailed in appendix Cand create appropriate accounting entries that will be used by the team recreating the current year financial records, please provide an explanation for each entry. Finally, the team's third deliverable will be to answer the president's questions regarding financial accounting. The questions arose during our initial meeting and are summarized in appendix D. When responding to the presidents questions, please keep in mind that she is not a professional accountant and may need more explanation than it your answers were addressed solely to me. Transaction Analysis and Journal Entries (Appendix C): Each transaction is logically analyzed to determine if an accounting entry is required through the application of accounting element definitions and the accounting equation. Required entries are property formatted with a date, the correct accounts and debit/credit amounts. The explanation includes the reason that an entry was or was not required. Explanations are free from abbreviations, slang, spelling, grammar and incorrect word usage errors. 1. On December 22, 2019. Soapy Stuff, a long-time customer, purchased $125.000 worth of products to be shipped to its stores on January 2, 2020. The order was paid in full at the time of booking and the cost of goods sold is 40% of the gross revenue. 2. On December 15, 2019, Sophia, the sole shareholder, director and president, approved a cheque voucher to pay her $50,000 with the explanation owner's drawing 3. On December 31, 2019, an accident in the warehouse damaged $35.000 worth of inventory: the goods are not saleable or salvageable. Sophia instructed the accounting clerk to leave it until next year. 4. On December 01, 2019, the company negotiated a $500,000 line of credit with REC. This is in addition to the current line of credit with CIBC. 5. On December 10, 2019, Bubbles & Beyond purchased $85,000 worth of inventory to be shipped to its stores beginning February 01, 2020. Bubble & Beyond paid for the inventory and requested that Sophia's hold the goods on their behalf due to lack of space in their warehouse during renovations. Bubbles Lee, recreates the current-year entries, your team's first deliverable will be to create a set of financial statements for the previous year end, excluding the statement of cash flows that will be created by the team working on the company's cash budget. Once the statements are completed, your team will also prepare a list of balance sheet accounts that may require adjusting entries by using the form found in appendix B. You may wish to use the nephew's creation to recreate the adjusted trial balance as a starting point. Your team's second deliverable will be to analyze the transactions detailed in appendix Cand create appropriate accounting entries that will be used by the team recreating the current year financial records: please provide an explanation for each entry. Finally, the team's third deliverable will be to answer the president's questions regarding financial accounting. The questions arose during our initial meeting and are summarized in appendix D. When responding to the president's questions, please keep in mind that she is not a professional accountant and may need more explanation than it your answers were addressed solely to me. Transaction Analysis and Journal Entries (Appendix C): Each transaction is logically analyzed to determine if an accounting entry is required through the application of accounting element definitions and the accounting equation. Required entries are properly formatted with a date, the correct accounts and debit/credit amounts. The explanation includes the reason that an entry was or was not required. Explanations are free from abbreviations, slang, spelling, grammar and incorrect word usage errors. 1. On December 22, 2019. Soapy Stuff, a long-time customer, purchased $125,000 worth of products to be shipped to its stores on January 2, 2020. The order was paid in Mull at the time of booking and the cost of goods sold is 40% of the gross revenue 2. On December 15, 2019, Sophia, the sole shareholder, director and president, approved a cheque voucher to pay her $50,000 with the explanation owner's drawing 3. On December 31, 2019, an accident in the warehouse damaged $35,000 worth of inventory, the goods are not saleable or salvageable. Sophia instructed the accounting clerk to leave it until next year 4. On December 01, 2019, the company negotiated a $500,000 line of credit with RBC. This is in addition to the current line of credit with CIBC. 5. On December 10, 2019, Bubbles & Beyond purchased $65,000 worth of inventory to be shipped to its stores beginning February 01, 2020. Bubble & Beyond paid for the inventory and requested that Sophia's hold the goods on their behalf due to lack of space in their warehouse during renovations. Bubbles & Beyond sent Sophia's a copy of the document that covers the held goods under Bubbles insurance policy. Instructions Your response should conform to our firm's communication and presentation guidelines using Arial 12-point font with normal margins. All outside sources should be properly referenced in the American Psychological Association (APA) style. Draft financial statements, for review purposes, may be completed and forwarded in Excel and memos should be created using Microsoft Word. Please send your memos to me for review prior to sending them to the client and Matt's team. Appendix A Sophia's Simple Soap Company Ltd. Statement of income Year Ended December 31, 2018 1,345,000 1,345,000 Revenues Sales revenue Total revenue Expense Cost of goods sold Selling expense Salaries & wages expense Depreciation expense Supplies expense Property tax expense General & administrative expense Total expense Income before income tax 375,000 123,000 250,000 14,000 13,000 36,000 130,000 941,000 404,000 Income tax expense Net income 22,000 382,000 Sophia's Simple Soap Company Ltd. Statement of Changes in Equity Year Ended December 31, 2018 Balance, June 1, 2018 Issued common shares Net income Dividends declared Balance, December 31, 2018 Common Retained Shares Earnings $200,000 $350,000 0 0 0 382,000 0 0 $200,000 732,000 Total Equity $550,000 0 382,000 0 $932,000 Sophia's Simple Soap Company Ltd. Statement of Financial Position December 31, 2018 Assets Current Assets Accounts receivable Interest receivable Notes receivable Inventories Office supplies Prepaid expenses Total Current Assets 132.000 15.000 7000 138.000 3,300 10,000 $ 305,300 Property, Plant, and Equipment Land 800.000 Building Less accumulated depreciation 1,810,000 90,000 910.000 Equipment Less accumulated depreciation 300,000 150,000 150,000 1,860,000 2.165,300 $ Total Property, Plant, and Equipment Total Assets Liabilities and Shareholders' Equity Current liabilities Overdraft Accounts payable Deferred revenue Interest payable Wages payable Current portion of Mortgage payable Total Current Liabilities Non. Current liabilities Mortgage payable 8% Bonds payable, due 2021 Total Non Current liabilities Total liabilities 18.000 23,300 55,000 48,000 13,000 24,000 = 181,300 452,000 600,000 1,052,000 $ 1,233,300 Shareholders' equity Common shares Retained earnings Total shareholders' equity Total liabilities and shareholders' equity 200.000 732,000 932,000 $ 2,165,300 Appendix B Account 1. Dabit Cash Credit Overdraft Explanation of Possible Adjustment In the Financial Position Statement, we can see this account is negative, and it needs to adjust to the credit account (Liabilities). 2. Dabit Expense There is some expense do not show in the Statement of Financial Position, such as Cost of goods sold. Selling expense, Salariss & wages expense, Depreciation expense, Supplies expense, Property tax expense, Income tax expense, and General & administrative expense. Therefore, we need to record those accounts in the Adjust Trial Balance for showing real the state of the company 3. Credit Mortgage payable & Current portion of Mortgage payable The financial position statement needs to add the Current portion of Mortgage payable in the Current liabilities and reduce $24.000 in the Mortgage payable in Non. Current liabilities. This because each year, we need to pay $24.000 on the Mortgage Credit: Common shares During the year, the company did not take place stock share transactions. So, the Common shares Account is not for this year, and we need to adjust it. 5. Credit Bonds payable Debit Bonds expense The company needs to pay interest on the bonds each January 1 St, which account should add in the Statement of Financial Position