Munchies Convenience Store Ltd. is a small retailer operated by a number of shareholders from a First Nations community. It reports under IFRS at the request of the creditor holding the note payable. The company’s post-closing trial balance at December 31, 2020, the end of its fiscal year, is presented below:
| MUNCHIES Convenience Store LTD. Post-Closing Trial Balance December 31, 2020 |
||||
| Debit | Credit | |||
| Cash | $5,500 | |||
| Accounts receivable | 132,000 | |||
| Allowance for doubtful accounts | $8,800 | |||
| Inventory | 66,000 | |||
| Estimated inventory returns | 1,100 | |||
| Prepaid insurance | 13,200 | |||
| Equipment | 198,000 | |||
| Accumulated depreciation | 88,000 | |||
| Accounts payable | 74,800 | |||
| Employee income tax payable | 7,480 | |||
| CPP payable | 3,520 | |||
| EI payable | 1,320 | |||
| Refund liability | 3,300 | |||
| Dividends payable | 5,500 | |||
| Notes payable (due 2023) | 132,000 | |||
| Common shares | 55,000 | |||
| Retained earnings | 36,080 | |||
| $415,800 | $415,800 | |||
The company had the following transactions during January 2021. When recording these transactions, use the item number listed instead of the date. The company records adjusting entries on a monthly basis.
| 1. | Paid off accounts payable of $60,500. | |
| 2. | Purchased inventory costing $29,700 on credit. | |
| 3. | Sold inventory that cost $33,000 on credit for $112,200. However, $2,200 of the amount sold is expected to be refunded due to returns and the cost of the inventory expected to be returned is $880. | |
| 4. | Collected accounts receivable amounting to $119,900. | |
| 5. | Wrote off $5,500 of uncollectible accounts receivable. | |
| 6. | Received inventory returns from customers and reduced accounts receivable from these customers for $3,080. The inventory that these customers returned was in excellent condition and had a cost of $990. | |
| 7. | Paid all salary-related liabilities outstanding at the beginning of January. | |
| 8. | Paid salaries to employees, who earned a total of $44,000 of gross pay less employee income tax, CPP, and EI of $7,920, $2,244, and $713, respectively. Withholdings will be remitted in February. | |
| 9. | Recorded employee benefits expense relating to the employer’s share of CPP of $2,244 and EI of $998. | |
| 10. | Paid rent of $9,900. | |
| 11. | Paid dividends owing on payment date at the beginning of the month. | |
| 12. | Expired $1,100 of prepaid insurance. | |
| 13. | Paid monthly interest on the 4%, $132,000 note payable. | |
| 14. | Sold equipment at the end of January for $15,400 cash. The equipment had a cost of $22,000 and a carrying amount of $13,200. | |
| 15. | Purchased new equipment at the end of the month costing $11,000 by issuing common shares. | |
| 16. | Incurred depreciation on equipment on a straight-line basis. The equipment has a useful life of six years and no residual value. | |
| 17. | Estimated at the end of January that $4,620 of accounts receivable was uncollectible. | |
| 18. | Estimated that income tax incurred in January amounted to $4,400. This amount will be paid next month. |
Prepare T accounts and enter the December 31 balances.
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