SOLUTION: AFA100 Introductory Financial Accounting | My Assignment Tutor

Case Assignment AFA100 Introductory Financial Accounting, Winter 2021 15% of course grade. 7.5% for case submission and 7.5% for D2L quiz. D2L file submission (financial statements & memo) is due on April 9, 2021 at 11:59 pm. D2L quiz is available April 10 8 am to April 11 at 11:59 pm. Instructions: This assignment is to be completed on an individual basis; group work is NOT permitted. Prepare the financial statements (Excel) and memo (Word) required and upload them in to D2L under “Assignments”. Include your journal entries on a separate tab in the same Excel file as the financial statements. Therefore, you will be uploading only 2 files: 1 Excel and 1 Word. AND Answer the quiz questions on D2L related to your financial statements, journal entries and memo. You have one opportunity to complete the 30-minute timed quiz. To submit the financial statements and memo go to “Assessment” in the top D2L menu bar and then “Assignments”. Click on the “Case Assignment Submission” link to submit. Your assignment quiz will be automatically graded on D2L and your grade will be released to you via D2L after the quiz deadline. You can rely on this being your grade onthe quiz unless you are contacted regarding academic dishonesty. Your financial statements and memo will be checked for plagiarism and manually graded and returned to you separately. Round numbers to the nearest whole amount (e.g., round $125.43 to $125). Round ratios/percentages to the nearest whole percent (e.g., round 12.58% to13%). Instructors will not answer any questions pertaining to the content of the case assignment prior the deadline. DO NOT WAIT UNTIL THE LAST MINUTE to complete and submit. Please recognize the fact that you may have technical difficulties or other unexpected items when attempting to complete the D2L quiz or submit the assignment. THERE IS NO EXTRA TIME BEYOND THE STATED DEADLINE for technical issues experienced. The Baker’s Talent Inc. (TBTI) In 1967 Gabriel Bisset moved with his wife, Antoinette, from a rural town in France to the growing city of Toronto, Canada. They dreamed about their future in Canada, becoming accustomed to the Canadian lifestyle and culture, and hoped their move would result in more opportunities for their children and grandchildren. In 1968 Gabriel opened a small bakery on College Street named The Baker’s Talent Inc. (TBTI). He specialized in traditional French desserts including tarts, pastries, macarons, and crème brulèe. By the ’90s TBTI was well-known across the city. Gabriel and Antoinette were grateful for their success as immigrants in Toronto. It is now March 15, 2021 and Gabriel is nearing retirement. He has taken a step back from the business. His daughter, Estelle, has been heavily involved in TBTI for several years and is going to take over. Estelle does all the accounting and is also a talented baker. The 2020 December 31 year-end statements need to be finalized. Exhibit 1 includes an unadjusted trial balance at December 31, 2020. Exhibit 2 includes information on 2020 transactions which require analysis and recording using Accounting Standards for Private Enterprises (ASPE). Required: Adopt the role of Estelle Bisset and do the following: Prepare the journal entries, with appropriate journal entry descriptions, for 2020, including any required year-end adjusting entries. The company prepares annual adjusting entries. Prepare the Statement of Financial Position, the Statement of Retained Earnings, and the Statement of Earnings for 2020. Prepare a professional memo to Estelle Bisset outlining 2 internal control weaknesses. Include an explanation of what can go wrong as a result of each weakness, and recommended changes. Use the format provided below.Consult the course textbook page 331-338 for guidance on internal controls.See page 4 below for internal control guidance. Required Memo Format TO:FROM:DATE:RE:Internal Control weakness 1 Description of weakness Explanation of what can go wrong as a result of the weakness Recommended changeInternal Control weakness 2 Description of weakness Explanation of what can go wrong as a result of the weakness Recommended change Consult the course textbook page 331-338 for guidance on internal control. What are control weaknesses? Control weaknesses may relate to the control of cash or any other assets that a company has. Companies should have internal controls in place to protect their assets. Controls may also relate to processes and procedures of a company. When internal controls are missing or weak, a company is said to have an “internal control weakness”. Example of internal control weakness for a toy manufacturer: Description of weakness: The back door to the company’s warehouse where inventory is stored is kept open and unlocked throughout the day, every day. Explanation of what can go wrong as a result of the weakness: Outsiders/unauthorized people can get into the warehouse and steal inventory Recommended change: Ensure the back door is kept locked at all times and provide entry only to authorized people such as employees and delivery personnel. Example internal control weakness for a farming business: Description of weakness: Farm employees are allowed one free bucket of strawberries per week during strawberry season. Employees can pick strawberries from the field and fill a bucket themselves. Explanation of what can go wrong as a result of the weakness: Farm employees may take more strawberries than only one bucket a week which will result in the farm giving away more free strawberries than it intended and this will reduce profit for the business. Recommended change: Implement a system that farm employees must sign off a master list when they have taken their one free bucket of strawberries a week. A manager should monitor the list as well as watch for employees who appear to be taking a bucket of strawberries when they have already signed off on the master list and should be reprimanded if found doing so. You may be able to think of alternate implications and recommendations for the internal control weaknesses above; that’s fine as there is not only one right answer. There are several control weaknesses in the TBTI case. Find any 2 and use the same format as above to explain each one separately. Exhibit 1 The Baker’s Talent Inc. Unadjusted Trial Balance, December 31, 2020 Account nameDebit CAD$Credit CAD$Cash423,177Accounts receivable137,000Prepaid insurance5,400Inventory149,000Machinery53,000Accumulated depreciation – Machinery25,864Furniture and Fixtures123,000Accumulated depreciation – Furniture and Fixtures30,750Computer equipment4,650Accounts payable45,000Dividends payable10,000Contributed capital75,000Retained earnings140,386Revenue2,630,000Purchases606,800Salaries and wages expense1,281,913Advertising expense16,000Repairs and maintenance18,370Rent expense96,000Laundry expense18,250Utilities expense14,440Administrative expense10,000$2,957,000$2,957,000 Exhibit 2 Additional information During the year, TBTI paid parking rental fees via automatic e-transfer from the bank account. The payroll clerk had set up the automatic e-transfer via online banking in early 2020. There were 12 instalments made in the amount of $250 each. The December bank reconciliation reflects the total payment made as a reconciling item on the book side. Bank reconciliations are prepared by Estelle on an annual basis. In the prior year TBTI had paid the entire year’s insurance policy upfront which expired as of December 31, 2020. The insurance premium for 2021 is $5,600. TBTI renewed and paid half the 2021 insurance premium on December 21, 2020. The information below relates to capital assets. Ensure you consider item #4 below regarding repairs and maintenance before preparing any capital asset calculations. Date of purchaseDepreciation methodSpecial notesMachineryJanuary 1, 2017Double declining Estimated useful life 10 yearsBakery fixturesJanuary 1, 2018Straight line Estimated useful life 8 yearsAs of January 1, 2020 Estelle believes the Bakery fixtures have a remaining useful life of 5 yearsComputer EquipmentMay 1, 2020Double declining Estimated useful life 5 years The breakdown for repairs and maintenance expense per the trial balance is as follows: (you need to consider if all these items should in fact be classified as repairs and maintenance) Machinery – new part (increases efficiency of machinery) – Jan 1, 2020$5,900Cleaning of kitchen equipment – June 12, 2020$660Annual pesticide control$2,000Dishwasher draining problem – part time labour to fix – July 3, 2020$320Anti-rust spray for machinery – March 15, 2020$490Large refrigerator purchased – Jan 1, 20209,000Total$18,370 Inventory is valued using weighted average and a periodic inventory system is maintained. Estelle has already applied weighted average to food inventory after doing a physical count on December 31, 2020 before closing for New Year’s Eve. Estelle records inventory at net realizable value on an item-by-item basis for financial reporting. Food inventoryCostNet realizable valueRaw ingredients – wet$45,000$43,000Raw ingredients – dry$72,000$68,000Finished goods – refrigerated and non-refrigerated desserts ready for sale$3,200$3,200Total120,200114,200 The following information regarding payroll needs to be considered in preparing year-end financial statements (ignore payroll taxes): EmployeePay ratePay frequencyEstelle BissetAnnual 108,00015th of the month (for prior month) In November 2020 TBTI was approached about catering a 35th birthday. TBTI would prepare individual boxes of French desserts for the host to pick up and deliver to attendees’ homes in advance of the Zoom 35th birthday party on May 5, 2021. A formal agreement was signed on November 31, 2020 with a $1,000 deposit paid. The full amount paid was credited to Revenue on November 31, 2020. Estelle has reviewed the Accounts Receivable balance and notes that about 70% relates to corporate receivables from catering events. Normally TBTI collects virtually all of its outstanding receivables. Due to the unusual economic conditions in 2020, Estelle fears this year might be different. Estelle estimates fifteen percent of the non-corporate receivables might not be collectible. Forty percent of the corporate receivables have been outstanding 90 days and ten percent of the corporate receivables have been outstanding for over 120 days. Estelle believes fifteen percent of the over 120 day corporate receivables might not be collectible and ten percent of over 90 day corporate receivables might not be collectible. TBTI’s payroll clerk is a very hard worker who has not taken vacation in 2019 or 2020. In 2020 the payroll clerk worked from home. Employees do not typically report payroll errors, so Estelle does not need to monitor the payroll clerk closely. TBTIpays corporate taxes at 15%.