AP 9-2

a.

Unearned commission revenue should be $5,000.

b.

An account payable of $10,000 was converted to a 3% note payable on November 1. The accounting records have not been adjusted yet, nor has any interest been recorded.

c.

A $10,000 purchase of merchandize inventory on account plus GST has not been recorded.

d.

Warranty expense for the year is estimated at 3% of sales.

e.

Additional unpaid gross salaries amount to $6,000. Deductions from gross pay are as follows:

Employee income taxes

15%

Government employment insurance

2%

Government pension

5%

Union dues

10%

The company matches employee contributions to the government employment insurance and government pension plans on a 2 to 1 basis.

f.

Legal fees related to the 2016 financial statements amounted to $8,000 plus GST have been invoiced but amounts have not yet been recorded.

g.

Payments on the mortgage and finance lease, including interest, were made on December 1. Payments during 2016 will be made as follows:

Interest

Reduction of principal

Total payments

Mortgage (6%)

$11,708

$5,385

$17,093

Finance lease (10%)

3,631

6,520

10,151

h.

It is probable that the company will lose a lawsuit filed against it during the year. The estimated award is $100,000, which likely will be paid in 2017.

i.

Depreciation on the building is calculated on the double-declining balance basis. The useful life at acquisition was twenty years, and residual value $10,000. There were no additions or disposals during the year.

Depreciation on the equipment is calculated on the straight-line basis. The remaining useful life is two years. Residual value is $10,000. There were no additions or disposals during the year.

j.

Audit fees are estimated to be $20,000.

k.

The corporate income tax rate is 30% of income before income taxes. Corporate income tax instalments have been made during the year.