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Assignment #2 Business Administration 285 Assignment #2 Winter 2021 - Business Administration 285 Assignment #2 Winter 2021 Task #1 Loan: On Apr 1, 2021 SOF received a bank loan of $30,000 from Conexus Credit Union. On Apr 5, 2021 SOF spent $40,000 to purchase a new point of sale systems (POS) for a total cost of $40,000. The POS system will be used to scan groceries upon the customer purchasing them. The POS system will have a 5-year useful life. The interest rate on the loan from Conexus is 7% (compounded only on the loan principle outstanding). The loan is for 3 years and will be paid back evenly over 3 years. As part of the financing SOF only needs to make the required loan payments each year on Mar 31. Each loan payment will be for $10,000 plus any interest owing. Required: a) Journal Entries: • Prepare the required journal entries for each of the following dates relating to both the asset and the loan: · Apr 1, 2021 · Apr 5, 2021 · Dec 31, 2021 · Mar 31, 2022 · Dec 31, 2022 · Mar 31, 2023 · Dec 31, 2023 · Mar 31, 2024 You must show all supporting calculations. b) Financial Statements: • What will the NBV of the equipment be on the Dec 31, 2024 statement of financial position? Task #2 - Ratios: For Save of Foods Inc., please calculate and explain the following ratios for 2021 and 2020: 1) Current 2) Debt as a % of Assets 3) Equity as a % of Assets 4) Gross profit margin 5) Profit margin 6) Accounts receivable turnover 7) Accounts receivable turnover - Day in accounts receivable 8) Inventory turnover 9) Inventory turnover - Day in inventory Notes: Account Value Notes 2021 2020 2019 Sales - Cash basis 120,000 115,000 110,000 Customers pay SOF immediately with cash. Sales - On account 5,000 3,000 2,000 Customers are given 30 days to pay SOF. Sales - Total 125,000 118,000 112,000 Round as follows: o Percentage · 95.44% = 94.4% · 95.45% = 94.5% Do not show percentages as “0.30”, show as 30% o Numbers · 95.44 = 94.4 · 95.45 = 94.5 Task #3 Accounts Receivable - Direct Write-off Method: Save of Food Inc. had the following events occur in 2020 and 2021 in relation to accounts receivable. Notes: · Assume that all months are 30 days long. · Assume that the allowance for doubtful accounts was at balance of $0 on Dec 1, 2020. · On Dec 1, 2020 SOF made the following sales on account: Customer Sale Date Amount ($) Browns Social House Dec 1, 2020 200 Extreme Pita Dec 1, 2020 100 Regina Pho Dec 1, 2020 60 o THESE SALES HAVE ALREADY HAD THERE INITIAL ACCOUNTING RECORDED. · SOF already had made previous sales on account that were still outstanding as of Dec 1, 2020. Customer Sale Date Amount ($) Joey Nov 1, 2020 400 Milu Nov 1, 2020 100 Regina Pho Oct 1, 2020 40 o THESE SALES HAVE ALREADY HAD THERE INITIAL ACCOUNTING RECORDED. Events: · Dec 28, 2020 - SOF feels that there is a chance that the $400 of A/R from Joey could not be collected. This is due to the customer not being happy with the product(s) they purchased; however, they are not able to return food after 10 days. · Dec 30, 2020 - SOF updates its allowance for doubtful accounts (if needed). · Jan 10, 2021 - SOF is notified that Joey will not be paying their $400 of A/R. Based upon this notification SOF decided to officially write off the $400 of A/R. · Jan 30, 2021 - SOF updates its allowance for doubtful accounts. · Feb 15, 2021 - SOF receives the following cheques: Customer Sale Date Cheque Amount ($) Browns Social House Dec 1, 2020 180 Extreme Pita Dec 1, 2020 100 Regina Pho Dec 1, 2020 60 Joey Nov 1, 2020 150 Milu Nov 1, 2020 - Regina Pho Oct 1, 2020 40 No other indications of not paying have been received from customers. · Feb 30, 2021 - SOF updates its allowance for doubtful accounts (if needed). Required: a) Journal Entries: · Journal Entries - Prepare the required journal entries for the above dates using the “Direct Write-Off” method. b) Financial Statements: · What will the NBV of the Accounts Receivable be on the Dec 31, 2020 statement of financial position? c) Financial Statements: · What will the NBV of the Accounts Receivable be on the Dec 31, 2021 statement of financial position? Task #4 Accounts Receivable - Allowance Method: Save of Food Inc. had the following events occur in 2020 and 2021 in relation to accounts receivable. Notes: · Assume that all months are 30 days long. · Assume that the allowance for doubtful accounts was at balance of $0 on Dec 1, 2020. · On Dec 1, 2020 SOF made the following sales on account: Customer Sale Date Amount ($) Browns Social House Dec 1, 2020 200 Extreme Pita Dec 1, 2020 100 Regina Pho Dec 1, 2020 60 · THESE SALES HAVE ALREADY HAD THERE INITIAL ACCOUNTING RECORDED. · SOF already had made previous sales on account that were still outstanding as of Dec 1, 2020. Customer Sale Date Amount ($) Joey Nov 1, 2020 400 Milu Nov 1, 2020 100 Regina Pho Oct 1, 2020 40 · THESE SALES HAVE ALREADY HAD THERE INITIAL ACCOUNTING RECORDED. Events: · Dec 28, 2020 - SOF feels that there is a chance that the $400 of A/R from Joey could not be collected. This is due to the customer not being happy with the product(s) they purchased; however, they are not able to return food after 10 days. · Dec 30, 2020 - SOF updates its allowance for doubtful accounts (if needed). · Jan 10, 2021 - SOF is notified that Joey will not be paying their $400 of A/R. Based upon this notification SOF decided to officially write off the $400 of A/R. · Jan 30, 2021 - SOF updates its allowance for doubtful accounts. · Feb 15, 2021 - SOF receives the following cheques: Customer Sale Date Cheque Amount ($) Browns Social House Dec 1, 2020 180 Extreme Pita Dec 1, 2020 100 Regina Pho Dec 1, 2020 60 Joey Nov 1, 2020 150 Milu Nov 1, 2020 - Regina Pho Oct 1, 2020 40 No other indications of not paying have been received from customers. · Feb 30, 2021 - SOF updates its allowance for doubtful accounts (if needed). Required: a) Journal Entries: · Journal Entries - Prepare the required journal entries for the above dates using the “Allowance” method. b) Financial Statements: · What will the NBV of the Accounts Receivable be on the Dec 31, 2020 statement of financial position? c) Financial Statements: · What will the NBV of the Accounts Receivable be on the Dec 31, 2021 statement of financial position? 1 2 1