SECTION 1, TECHNICAL QUESTIONS:
THE ACCOUNTING CYCLE (28 MARKS = 28 MINUTES)
Andy’s Yard Care Service Company Limited (AYC)
Andy Smith has been operating for 3 years.
The company provides lawn-
mowing, tree trimming and weeding services to private residences in the lower
Andy incorporated the company on January 1
, 2006 and contributed
equipment with a fair market value of $50,000 to the business in exchange for
common shares valued at $10,000 and a $40,000 loan, payable to Andy.
The following is the trial balance for AYC at January 1
Supplies Inventory (1)
Loan Payable (3)
Accumulated Amortization – equipment
Consists of fertilizer and topsoil, used in lawn care.
Contributed to the business January 1, 2006, estimated to have a 5 year
useful life, with no residual value.
Shareholder loan payable bears interest at 10% annually.
Interest on the
loan is paid on June 30
and December 31
Andy does not
anticipate receiving any payments on principal until the business becomes
Prepare journal entries for the information provided below and on the next
page (which covers transactions for the first 3 months of 2009), or explain
why no entry is required.
(Clearly label each account affected, but detailed
explanations for each entry are not required).
CLEARLY STATE ANY
ASSUMPTIONS THAT YOU FEEL ARE NECESSARY.
Prepare any adjusting entries required at March 31
It is not
necessary to prepare an entry to close
iii) Determine the March 31
, 2009 balance for cash, showing your work.