Frenette Ltd. Accounting Midterm - Statement of Financial Position - October 31, 2024 PDF

## Frenette Ltd. - Statement of Financial Position - October 31, 2024 ### Assets **Current Assets** * Cash: $6,600 * Trading Investments: $2,000 * Accounts Receivable: $7,000 * Inventory: $4,000 * Supplies: $2,100 * Prepaid Insurance: $400 * **Total Current Assets:** $22,100 **Long-Term Invest...

## Frenette Ltd. - Statement of Financial Position - October 31, 2024 ### Assets **Current Assets** * Cash: $6,600 * Trading Investments: $2,000 * Accounts Receivable: $7,000 * Inventory: $4,000 * Supplies: $2,100 * Prepaid Insurance: $400 * **Total Current Assets:** $22,100 **Long-Term Investments:** $7,200 **Property, Plant, and Equipment** * Land: $75,000 * Buildings: $40,000 * Less: Accumulated Depreciation: $15,000 * Equipment: $24,000 * Less: Accumulated Depreciation: $5,000 * **Total Property, Plant, and Equipment:** $119,000 **Intangible Assets** * Patents: $23,000   * Less: Accumulated Amortization: $3,000 * **Total Intangible Assets:** $20,000 **Goodwill:** $13,100 **Total Assets:** $181,400 ### Liabilities and Shareholders' Equity **Current Liabilities** * Accounts Payable: $2,100 * Salaries Payable: $1,600 * Interest Payable: $450 * Deferred Revenue: $900 * Current Portion of Bank Loan Payable: $2,000 * Current Portion of Mortgage Payable: $6,000 * **Total Current Liabilities:** $13,050 **Non-Current Liabilities** * Bank Loan Payable: $19,000 * Mortgage Payable: $25,300 * **Total Non-Current Liabilities:** $44, 300 **Total Liabilities:** $57,350 **Shareholders' Equity** * Common Shares: $74,000 * Retained Earnings: $50,050 * **Total Shareholders' Equity:** $124,050 **Total Liabilities and Shareholders' Equity:** $181,400 ## Basic Accounting Equation **Assets = Liabilities + Shareholders' Equity** --- ## Sierra Corporation - Financial Statements - Month Ended October 31, 2024 ### Statement of Income * **Revenues** * Service Revenue: $20,600 * **Expenses** * Salaries expense: $5,600 * Supplies expense: $1,500 * Rent expense: $900 * Depreciation expense: $83 * Insurance expense: $50 * Interest expense: $25 * **Total Expenses:** $8,158 * **Income Before Income Tax:** $12,442 * **Income Tax Expense:** $1,800 * **Net Income:** $10,642 ### Statement of Changes in Equity | Account | Common Shares | Retained Earnings | Total Equity | |---------|----------|----------|----------| | Balance, October 1 | $0 | $0 | $0 | | Net Income | | $10,642 | 10,642 | | Dividends Declared | | ($500) | ($500) | | Issued Common Shares | $10,000 | | $10,000 | | Balance, October 31 | $**10,000** | $**10,142** | $**20,142** | ### Statement of Financial Position #### Assets * **Current Assets** * Cash: $11,400 * Accounts Receivable: $11,200 * Supplies: $1,000 * Prepaid Insurance: $550 * **Total Current Assets:** $24,150 * **Property, Plant, and Equipment** * Equipment: $5,000 * Less: Accumulated Depreciation: $83 * **Total Property, Plant, and Equipment:** $4,917 * **Total Assets:** $29,067 #### Liabilities and Shareholders' Equity * **Liabilities** * **Current Liabilities** * Accounts Payable: $1,500 * Salaries Payable: $1,600 * Interest Payable: $25 * Deferred Revenue: $800 * Bank Loan Payable: $5,000 * **Total Current Liabilities:** $8,925 * **Shareholders' Equity** * Common Shares: $10,000 * Retained Earnings: $10,142 * **Total Shareholders' Equity:** $20,142 * **Total Liabilities and Shareholders' Equity:** $29,067 --- # Illustration 5.1 - Operating Cycles for Service and Merchandising Companies <br> **Service Company** * The Service Company performs services *for cash or on account* for customers * This company may then *receive cash* from customers that purchased services *on account*. * The company will pay cash to employees performing services. <br> **Merchandising Company** * The Merchandising Company *purchases merchandise* for cash or on account (typically from wholesalers). * This company *receives cash* from customers that purchased merchandise on account. * The merchandising company *holds merchandise* in stores or warehouses that are ready for sale. * The company *pays for merchandise* that was purchased on account. <br> **Key terms:** * **Retailers:** Companies that sell directly to consumers * **Wholesalers:** Companies that sell merchandise to retailers. * **Manufacturers:** Produce goods for sale to wholesalers or directly to retailers. **Inventory - A merchandising company's inventory can be classified in three ways:** * **Raw Materials:** Goods awaiting production * **Work in Process:** Inventory that is currently in production * **Finished Goods:** Inventory ready for sale <br> **Operating Cycle:** * The time between cash being spent to buy inventory (or provide a service) and receiving cash from customers. <br> **Comparisons** * The operating cycles for service companies and merchandising companies are similar but the merchandising operating cycle is longer because it includes the time between purchasing the inventory (from wholesalers) and selling the inventory (to customers).