This is a very long and tough accounting cycle question.
So, if you can
handle this question you are in excellent shape.
The format of your midterm will be roughly as follows:
Technical questions (Accounting Cycle
And/or Preparation of F/S)
2 Theory questions
20 Multiple Choice questions
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 mainland.
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 better