MGAB01H3 Study Guide - Final Guide: Financial Statement, Purch Group, Current Asset
MGAB01H3 Full Course Notes
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I dont know how to interpret adjusting entry questions. If anyone could just guide me in what i should do for each question and if it goes in debits or credit, I know you need all the info but just use hypothetical questions as examples to help me. This is for a project due in 2 days. Thanks!
| DR | CR | |
| Cash | 67,188 | |
| Accounts Receivable | 88,704 | |
| Allowance for Doubtful Accounts | 792 | |
| Interest Receivable | ||
| Merchandise Inventory | 168,300 | |
| Prepaid Insurance | 7,128 | |
| Prepaid Rent | 22,176 | |
| Supplies | 30,096 | |
| Note Receivable | 15,180 | |
| Store Equipment | 270,864 | |
| Accumulated Depreciation - Store Equipment | 29,304 | |
| Accounts Payable | 126,720 | |
| Salaries & Wages Payable | ||
| Interest Payable | ||
| Utilities Payable | ||
| Note Payable (final payment due 2018) | 24,420 | |
| Common Stock | 79,200 | |
| Retained Earnings | 257,400 | |
| Dividends | 31,680 | |
| Sales | 2,557,500 | |
| Sales Returns and Allowances | 15,840 | |
| Sales Discounts | 34,056 | |
| Cost of Goods Sold | 1,888,788 | |
| Salaries & Wages Expense | 430,056 | |
| Depreciation Expense - Store Equipment | ||
| Bad Debt Expense | ||
| Insurance Expense | ||
| Rent Expense | ||
| Supplies Expense | ||
| Utilities Expense | 5,280 | |
| Interest Revenue | ||
| Interest Expense | ||
| 3,075,336 | 3,075,336 | |
| Net Income | ||
The following items should be considered in adjusting the accounts for financial statement preparation:
1. On February 1, 2017 a 12-month insurance policy was purchased. No expense has been recoginized for 2017.
2. Signed a one year lease for rental space on March 1, 2017. By paying for the entire year, the landlord offered a reduced rate.
3. The physical inventory count of Merchandise Inventory indicated an amount of $163,944.
4. Supplies on hand at December 31, 2017 total $1,934.
5. Store Equipment is depreciated on a straight-line basis; residual value is $10,000 with service life of 10 years. The assets were held the entire year.
6. On August 1, issued Carter Supplies a six-month note receivable at a 8.4% annual interest rate.
7. Management estimates 2.7% of its gross accounts receivable to be uncollectible.
8. On September 1, 2017 borrowed funds. The note bears 6.8 % annual interest.
9. Salaries & Wages of $6,470 are accrued and unpaid at December 31, 2017.
10. Accrued utilities totaled $752.
Sendelbach Corporation is a U.S.-based organization with operations throughout the world. One of its subsidiaries is headquartered in Toronto. Although this wholly owned company operates primarily in Canada, it engages in some transactions through a branch in Mexico. Therefore, the subsidiary maintains a ledger denominated in Mexican pesos (Ps) and a general ledger in Canadian dollars (C$). As of December 31, 2017, the subsidiary is preparing financial statements in anticipation of consolidation with the U.S. parent corporation. Both ledgers for the subsidiary are as follows:
| Main OperationâCanada | |||||
| Debit | Credit | ||||
| Accounts payable | C$ | 41,555 | |||
| Accumulated depreciation | 42,000 | ||||
| Buildings and equipment | C$ | 182,000 | |||
| Cash | 41,000 | ||||
| Common stock | 65,000 | ||||
| Cost of goods sold | 218,000 | ||||
| Depreciation expense | 8,400 | ||||
| Dividends, 4/1/17 | 34,000 | ||||
| Gain on sale of equipment, 6/1/17 | 6,500 | ||||
| Inventory | 94,000 | ||||
| Notes payableâdue in 2020 | 84,000 | ||||
| Receivables | 83,000 | ||||
| Retained earnings, 1/1/17 | 150,590 | ||||
| Salary expense | 38,000 | ||||
| Sales | 327,000 | ||||
| Utility expense | 10,500 | ||||
| Branch operation | 7,745 | ||||
| Totals | C$ | 716,645 | C$ | 716,645 | |
| Branch OperationâMexico | |||||
| Debit | Credit | ||||
| Accounts payable | Ps | 67,500 | |||
| Accumulated depreciation | 40,000 | ||||
| Building and equipment | Ps | 55,000 | |||
| Cash | 66,500 | ||||
| Depreciation expense | 3,500 | ||||
| Inventory (beginningâincome statement) | 38,000 | ||||
| Inventory (endingâincome statement) | 35,500 | ||||
| Inventory (endingâbalance sheet) | 35,500 | ||||
| Purchases | 72,000 | ||||
| Receivables | 36,000 | ||||
| Salary expense | 10,500 | ||||
| Sales | 139,000 | ||||
| Main office | 35,000 | ||||
| Totals | Ps | 317,000 | Ps | 317,000 | |
Additional Information
The Canadian subsidiaryâs functional currency is the Canadian dollar, and Sendelbachâs reporting currency is the U.S. dollar. The Canadian and Mexican operations are not viewed as separate accounting entities.
The building and equipment used in the Mexican operation were acquired in 2007 when the currency exchange rate was C$0.21 = Ps 1.
Purchases of inventory were made evenly throughout the fiscal year.
Beginning inventory was acquired evenly throughout 2016; ending inventory was acquired evenly throughout 2017.
The Main Office account on the Mexican records should be considered an equity account. This balance was remeasured into C$7,745 on December 31, 2017.
Currency exchange rates for 1 Ps applicable to the Mexican operation follow:
| Weighted average, 2016 | C$ | 0.26 |
| January 1, 2017 | 0.28 | |
| Weighted average rate for 2017 | 0.30 | |
| December 31, 2017 | 0.31 | |
The December 31, 2016, consolidated balance sheet reported a cumulative translation adjustment with a $51,950 credit (positive) balance.
The subsidiaryâs common stock was issued in 2004 when the exchange rate was $0.44 = C$1.
The subsidiaryâs December 31, 2016, retained earnings balance was C$150,590, an amount that has been translated into U.S.$70,363.
The applicable currency exchange rates for 1 C$ for translation purposes are as follows:
| January 1, 2017 | US$ | 0.70 |
| April 1, 2017 | 0.69 | |
| June 1, 2017 | 0.68 | |
| Weighted average rate for 2017 | 0.67 | |
| December 31, 2017 | 0.65 | |
Remeasure the Mexican operationâs account balances into Canadian dollars. (Note: Back into the beginning net monetary asset or liability position.)
Prepare financial statements (income statement, statement of retained earnings, and balance sheet) for the Canadian subsidiary in its functional currency, Canadian dollars.
Translate the Canadian dollar functional currency financial statements into U.S. dollars so that Sendelbach can prepare consolidated financial statements.
Complete this question by entering your answers in the tabs below.
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Req A
Remeasure the Mexican operationâs account balances into Canadian dollars. (Note: Back into the beginning net monetary asset or liability position.) (Input all amounts as positive values.)
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b. Prepare financial statements (income statement, statement of retained earnings, and balance sheet) for the Canadian subsidiary in its functional currency, Canadian dollars.
c. Translate the Canadian dollar functional currency financial statements into U.S. dollars so that Sendelbach can prepare consolidated financial statements.
(Round U.S. Dollar values to 2 decimal places. Amounts to be deducted and losses should be indicated with a minus sign.)
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