Financial Accounting

Champlain Career Consulting Corporation Accounting Case Study #1

Requirement #1

Adjusted Trial Balance

Champlain Career Consulting Corporation

Adjusted Trial Balance

31-Dec-12

 

Debit

Credit

Cash & Cash Equivalents

$ 115,950

 

Accounts Receivable [net]

$ 81,000

 

Prepaid Insurance

$ 2,000

 

Inventory

$ 4,000

 

Equipment

$ 50,000

 

Accumulated Depreciation

 

$ 25,500

Building

$ 290,000

 

Accumulated Depreciation

 

$ 21,750

Accounts Payable

 

$ 34,500

Salary Payable

 

$ 7,500

Unearned Revenue

 

$ 19,600

Utilities Payable

 

$ 300

Income Taxes Payable

 

$ 9,000

Dividends Payable

 

$ 10,000

Mortgage

 

$ 140,000

Common Shares

 

$ 150,000

Retained Earnings

 

$ 120,000

Consulting Revenue

 

$ 56,500

Book Sales

 

$ 8,250

Cost of Goods Sold

$ 4,000

 

Depreciation expense

$ 15,750

 

Insurance expense

$ 10,000

 

Salary expense

$ 12,000

 

Utilities expense

$ 16,200

 

Interest expense

$ 2,000

 

 

 

 

Totals

$ 602,900

$ 602,900

Income Statement

Champlain Career Consulting Corporation

Income Statement

For the Year Ended December 31, 2012

 

 

Sales:

 

Consulting Revenue

56,500

 

Book Sales

8250

 

Total Sales

64,750

Less: Cost of Goods sold

4000

Gross Profit

60,750

 

 

Operating Expenses

 

Depreciation expense

15,750

 

Insurance expense

10000

 

Salary expense

12000

 

Utilities expense

16,200

 

Total Operating Expenses

53,950

 

 

Income Before Interest Expense

6,800

Interest Expense

2000

 

 

Net Income

 

4,800

Classified Balance Sheet

Champlain Career Consulting Corporation

Classified Balance Sheet

As On December 31, 2012

Assets

Current Assets

Cash & Cash Equivalents

115,950

Accounts Receivable [net]

81,000

Prepaid Insurance

2,000

Inventory

4,000

Total Current Assets

202,950

Fixed Assets

Equipment

50000

Les: Accumulated Depreciation

25500

24500

Building

290000

Les: Accumulated Depreciation

21750

268250

Total Fixed Assets

292750

Total Assets

495,700

Liabilities and Owners Equity

Current Liabilities

Accounts Payable

34,500

Salary Payable

7,500

Unearned Revenue

19,600

Utilities Payable

300

Income Taxes Payable

9,000

Dividends Payable

10,000

Total Current Liabilities

80,900

Noncurrent Liabilities

Mortgage

140,000

Total Noncurrent Liabilities

140,000

Owners Equity

Common Shares

150,000

Retained Earnings

120,000

Net income

4800

Total Owners Equity

274,800

Total Liabilities

495,700

Working

Journal Entries

Dated

Particulars

Debit

Credit

28-Feb-12

Prepaid Insurance

12,000

28-Feb-12

Cash 12,000

(Invoice was paid for insurance policy)

31-Dec-12

Insurance Expense

10,000

31-Dec-12

Prepaid Insurance

10,000

(Insurance expense for the year)

31-Dec-12

Salaries expense

12,000

31-Dec-12

Salaries payable

6,500

31-Dec-12

Cash

5,500

(Salary Expense for the year in which 6500 has not yet been paid)

31-Dec-12

Cash

4,600

31-Dec-12

Unearned Revenue

4,600

($4,600 of consulting services performed in December 2012 was paid for usinggift cards)

20-Dec-12

Cash

6,000

Unearned Revenue - Consult

6,000

(deposit of $6,000 on December 20, 2012 for aconsulting engagement to begin January 15, 2013)

30-Dec-12

Utility Expense

2,700

30-Dec-12

Utility Payable

2,700

(Utility bill was received on December 30, 2012 worth of $2700)

5-Dec-12

Utilities Payable

2,400

5-Dec-12

Cash

2,400

(Utility bill was paid by one of the owner of November 2012)

T-Accounts

Cash

Date

Particulars

L.F.

Amount Dr

Date

Particulars

L.F.

Amount Cr

Balance b/d 107,750

28-Feb-12

Prepaid Insurance

12,000

31-Dec-12

Unearned Revenue

4,600

31-Dec-12

Salaries expense

5,500

20-Dec-12

Unearned Revenue - Consult

6,000

5-Dec-12

Utilities Payable

2,400

Insurance Expense

 

By Balance c/fd

11,590

Total

118,350

Total

19,900 Balance at end

115,950

Insurance Expense

Date

Particulars

L.F.

Amount Dr

Date

Particulars

L.F.

Amount Cr

31-Dec-12

Prepaid Insurance

10,000

 

 

 

Salary Expense

Date

Particulars

L.F.

Amount Dr

Date

Particulars

L.F.

Amount Cr

31-Dec-12

Salaries payable

6,500

 

Cash

5,500

 

 

 

Salary Payable

Date

Particulars

L.F.

Amount Dr

Date

Particulars

L.F.

Amount Cr

31-Dec-12

Salary expense

6,500

Unearned Revenue

Date

Particulars

L.F.

Amount Dr

Date

Particulars

L.F.

Amount Cr

31-Dec-12

Prepaid Insurance

10,000

31-Dec-12

Cash

4,600

 

31-Dec-12

Cash

6,000

 

 

 

 

Utility Expense

Date

Particulars

L.F.

Amount Dr

Date

Particulars

L.F.

Amount Cr

30-Dec-12

Utility payable

2,700

 

 

 

Utility Payable

Date

Particulars

L.F.

Amount Dr

Date

Particulars

L.F.

Amount Cr

5-Dec-12

cash

2,400

31-Dec-12

Salary expense

6,500

Requirement #2: Depreciation methods and Financing Options

(i) Depreciation Method

Company holding assets either depreciate or appreciate in value. When asset value increases with passage of time, this is termed as value appreciation in assets like real estate. When value of an asset decline in the market with passage of time, this termed as depreciation in the value such as equipment, machineries and other technological assets. It is important to re-evaluate the market value of an asset on yearly basis (Steve, Earl, James, 2011).

Depreciation is the method through which the cost of an asset is allocated over its life instead deducting at once for tax purpose. This method is used in small as well as in large business. According to the Internal Revenue Code, the deduction of the deprecation is a reasonable allowance for business assets exhaustion &obsolescence (IFRS, 2013).

There are varieties of depreciation methods, but the main and useful depreciation methods have been as followed:

Straight Line Method

Accelerated depreciation

Unit ...