Name: Date: Unit 2: Summative Assignment (Chapter 4-5) ACCOUNTING TRANSACTIONS ASSIGNMENT
Accounting Cycle and Cases PART A: ACCOUNTING CYCLE OF BONNIE’S BATTING CAGES TOTAL: /60 marks (40 marks K/T) 1. Using the Chapter 5 Assignment Excel template, set up the T-accounts with the balances from
the July 31, 2015 Balance Sheet Located in the 1st tab of the template Excel File (2 marks K)
2. Record the August TRANSACTIONS listed below into each T-account Located in the 2nd tab of the template Excel File (17 marks - T)
3. Then calculate the BALANCE of each account at the end of the August transactions. (4 marks
K)
4. Create a TRIAL BALANCE to make sure your debits = credits.
a) Use the template provided in the 3rd tab of the template Excel File (6 marks K)
5. Create an INCOME STATEMENT for the Month of August.
b) Use the template provided in the 4th tab of the template Excel File (6 marks K)
6. Create a new BALANCE SHEET in REPORT FORM with an Expanded Owner’s equity section
dated August 31, 2015.
c) Use the template provided in the 5th tab of the template Excel File (5 marks K) Transactions for August
1. Bonnie Birch, the owner, invested $40 000 in the business.
2. Took out a $15 000 loan from TD Bank, which was deposited in the business' bank account.
3. Paid $1 500 to Romeyn Properties Ltd. for the monthly rent.
4. Bought office and various sport supplies for $2 000 cash.
5. Purchased $43 000 worth of bats, helmets, and other sports equipment from Cannon Sports on
account. The amount is due in 30 days.
6. Paid $800 cash for the heating bill received today.
7. Bought pitching machines from Ewert Equipment for $12 000 and have 30 days in which to pay.
8. Equipment was repaired for $350 from Ewert Equipment and will be paid for later.
9. Bought $7 800 of miscellaneous sports supplies on account from Sandhu Sporting Goods. Due in 30
days.
10. Sold a one-month membership to the Infield Flyers for $800 on account. Payment to be received in 15
days.
11. Sold a two-month membership to the Remdal Red Sox for $2 200 on account. The bill is due in 30 days.
12. Cash sales for the month amounted to $40 200.
13. Bank charges for services fees and interest amounted to $250, which was taken directly out of the
business' bank account.
14. Paid $2 200 cash for monthly wages.
15. Sold a one-month membership cash for $1 300.
16. Paid the full amount to Ewert Equipment from transaction 8, $350. Name: 17. Owner withdrew $1 000 for personal use. Date: Name: Unit 2: Summative Assignment (Chapter 4-5)
ACCOUNTING TRANSACTIONS ASSIGNMENT
ACCOUNTING CYCLE & CASES PART B: CASES Date: (20 marks - C) CASE 1
The owner and accountant of Arctic Lynx Snowmobile Company were preparing Income Statements for
an important meeting with potential investors. The company badly needed new investment in the
company to develop new snowmobile models for next year.
Two income Statements were available to illustrate last year’s performance:
1 The first income statement, for the six-month period of October1 to March 31, showed a very
healthy profit of $520,000. 2 However the second income statement for the period of April1 to September 30, showed a loss of
$100,000. The owner, eager to please his new investors, argued with his accountant that he should only show the
better income statement. He felt it didn’t matter which time period they chose to measure the health of
the business.
Questions
1. What time period should the business choose to obtain an accurate picture of profitability for the
company?
2. Why was the period from October to March so profitable?
3. Calculate the true profit for last year’s operations.
4. Did the company’s accountant have an obligation to reveal both income statements to the investors?
Explain. What would you have done in this situation? (GAAP)
CASE 2 (answer questions on next page)
Tom Lafleur, a university student living in Alberta started up a new business. He formed the company
Tom’s Tree Service. He trims and cuts down trees. He has been fortunate to secure a contract to cut
down a large number of trees for a local golf course.
Tom estimates that it will take him from early June to the end of August to complete the job. The owners
have agreed to give Tom three progress payments on the dates indicated below. Date Payment Amount June 30
July 31
August 31
Totals $3 000
3 000
4 000
$10 000 Tom’s estimate of
percentage of work
completed for each
month
40%
50%
10%
100% Tom would like to prepare monthly statements but cannot decide on the amount of revenue that should
be recognized for each month of the contract. (note: for the purpose of this case we will ignore expenses). Name: Date: Questions 1. What inaccuracies would exist in the June and July income statements if Tom were to decide to
recognize the full $10 000 in the August income statement?
2. Research (using Google) 4 methods of revenue recognition that would allow Tom to recognize some
revenue on the June and July income statements List each method with a definition below.
a) Method b) Method c) Method d) Method 1:
2:
3:
4: 3. How much revenue would Tom recognize in July using each these 2 methods (researched in question
2)?
a) Method 1: Cash Basis (or similar name) Revenue recognized (recorded) = $
b) Method 2: Work completed (or similar name) Revenue recognized (recorded) = $
c) Which method is preferable? Explain why. Reasoning:

 

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