Assignment Solutions on Liverpool Case Study Financial Statement

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Assignment Details:-

  • Topic / Subject: Assignment
  • Reference Style: Refresing Style


  1. Erin Danielle. the bookkeeper for Liverpool Company Ltd., has been trying to gel the statement of financial position to balance correctly. The company’s statement of financial position is shown below.
Statement of Financial Position
For the Month Ended December 31,2017
Assets Liabilities
_     Zedes Equipment L22.500 Share capital—ordinary (23.000
—       tee*                   Cash – 9.000 Accounts receivable                    (6.000)
Supplies 2.000 Retained earnings (2.000)
?US°                          Accounts payable

· – Teect

(8.000) Notes payable 10,500
L25.500 (25.500



Explain to Erin Danielle in a memo why the original statement of financial position is incorrect, and what should be dorie to corm; it.

  1. Lucy and Nick Lars, local golf ;tars, opened the Chip•Shot Driving Range Company Ltd. on March 1, 2017. They invested L20,000 cash and received ordinary shares in exchange for their investment. A caddy shack was constructed for cash at a cost of £6,000. and £800 was spent on golf balls and golf clubs.


The Lars leased five acres of land at a cost of L1,000 per month and paid the first month’s rent. During the first month, advertising costs totaled £750, of which L150 was unpaid at March 31, and L400 was paid to members of the high school golf team for retrieving golf balls. All revenues from customers were deposited in the company’s bank account. On March 15. Lucy and Nick received a dividend of L800. A £100 utility bill was received on March 31 but was not paid. On March 31, the balance in the company’s bank account was LI5,100. Lucy and Nick thought they had a pretty good first month of operations. But, their estimates of profitability ranged from a loss of £4,900 to net income of £1,650.



With the class divided into groups, answer the following.

  1. )lo• could the Lars have concluded that the business operated at a loss of L4,900? Was this a valid basis on which to determine net income?
  2. How could the Lars have concluded that the business operated at a net income of £1,650? (Mu: Prepare a statement of financial position at March 31.) Was this a valid basis on which to

determine net income?

  • Without preparing an income statement, determine the actual net income for March

What was the revenue earned in March?


Mei-ling Lee spent much of her childhood learning the art of cookie-making from her grandmother. They passed many happy hours mastering every type of cookie imaginable one later creating new recipes that were both healthy and delicious. Now at the start of her second year in college. Mci-ling is investigating various possibilities for starting her own business as part of the requirements of the entrepreneurship program in which she is enrolled. A long-time friend insists that Mci-ling has to somehow include cookies in her business plan. especially her famous green tea creations. After a series of brainstorming sessions. Mei-ling settles on idea of operating a cookie-making school.


She will start on a part-time basis and offer her services in people’s homes. Now that she has started thinking about it, the possibilities seem endless. During the fall, she will concentrate on holiday cookies. She will offer individual lessons 11.s end group sessions (which will probably be more entertainment than education for the participants). Mei-ling also decides to include children in her target market. The first difficult .decision is coming up with the perfect name for her business. In the end, she settles on Matcha Creations” and then moves on to more important issues.



a) What form of business organization—proprietorship. partnership, or corporation do you recommend that Mei-ling use for her business? Discuss the benefits and weaknesses of each form and give the reasons for your choice.

b) Will Niel-ling need accounting information? If yes, what information will she need and why? How often will she need this information?

c) Identify specific asset, liability, and equity accounts that Matcha Creations will likely use to record its business transactions.

d) Should Mei-ling open a separate bank account for the business? Why or why not?


  1. Mandy Arnold opened a law office, Mandy Arnold, Attorney at Law Ltd., on July 1, 2017. On July 31, the statement of financial position showed Cash £4,000, Accounts Receivable £1,500, Supplies 8500, Equipment £5,000, Accounts Payable £4,200, Share Capital—Ordinary £6,000, and Retained Earnings £800. During August, the following transactions occurred.


  1. Collected £1,400 of accounts receivable due from clients.
  2. Paid £2,700 cash for accounts payable due.
  3. Recognized revenue of £7,900 of which E3,000 is collected in cash and the balance is due in September.
  4. Purchased additional office equipment for £1,000, paying £400 in cash and the balance on account.
  5. Paid salaries f3,000, rent for August £900, and advertising expenses £350.
  6. Declared and paid a £450 cash dividend.
  7. Received £2,000 from Standard Federal Bank; the money was borrowed on a 4-month note payable.
  8. Incurred utility expenses for month on account £210.



a) Prepare a tabular analysis of the August transactions beginning with July 31 The column headings should be as follows: Cash + Accounts Receivable + Supplies + Equipment = Notes Payable + Accounts Payable + Share Capital + Retained Earnings s Revenues • Expenses • Dividends.

b) Prime an income statement for August, a retained earnings statement for August, and a statement of financial position at August 31, 2017.


  1. The Wilson Theater Ltd., owned by Tegan Wilson, will begin operations in March. The Wilson will be unique in that it will show only triple features of sequential theme movies. As of March I, the ledger of Wilson showed No. 101 Cash £7,000. No. 140 Land £22,000, No. 145 Buildings (concession stand, projection room, ticket booth, and screen) £10,000, No. 157 Equipment £8,000, No. 201 Accounts Payable £7,000. and No. 311 Share Capital—Ordinary £40,000. During the month of March. the following events and transactions occurred.


Mar. 2 Rented the three Indiana Jones movies to be show for the first 3 weeks of March. The film rental was £3,500; £1,000 was paid in cash and £2,500 will be paid on March 10.

3. Ordered the Lord of the Rings movies to be shown the last 10 days of March. It will cost £240 per night.

9. Received £4,000 cash from admissions.

10. Paid balance due on Indiana Jones movies rental and E1,600 on March 1 accounts payable.

11. Wilson Theater contracted with M. Brewer to operate the concession stand. Brewer is to pay 15% of gross concession receipts (payable monthly) for the right to operate the concession stand.

12. Paid advertising expenses £450.

20. Received £4,400 cash from customers for admissions.

20. Received the Lord of Rings movies and paid the rental fee of £2,400.

31. Paid salaries of £2,500.

31. Received statement from M. Brewer showing gross receipts from concessions of £3,000 and the balance due to Wilson Theater of £450 (£3,000 x 15%) for March. Brewer paid one-half the balance due and will remit the remainder on April 5.

31. Received £9,000 cash from customers for admissions.

In addition to the accounts identified above, the chart of accounts includes No. 112 Accounts Receivable, No. 400 Service Revenue, No. 429 Rent Revenue, No. 610 Advertising Expense, No. 729 Rent Expense, and No. 726 Salaries and Wages Expense.



a) Enter the beginning balances in the ledger. Insert a check mark in the reference

column of the ledger for the beginning balance.

b) Journalize the March transactions.

c) Post the March journal entries to the ledger. Assume that all entries are posted from

post I of the journal.

d) Prepare a Mal balance on March 31, 2017.


  1. Joey Cuono started his own consulting Ann, Cuono Company SpA on June 1,2017. The trial

balance at June 30 is shown below



Dial Balance

Acc. No.        June 30, 2017                                   Debit              Credit

101 Cash E 6.200
112 Accounts Receivable 6.000
126 Supplies 1.600
130 Prepaid Insurance 3.000
157 Equipment 14.400
201 Accounts Payable 6 4.700
209 Unearned Service Revenue 4.000
311 Share Capital—Ordinary 20.000
400 Service Revenue 7.900
726 Salaries and Wages Expense 4,400
729 Rent Expense 1.000
06.600 06.600

In addition to those accounts listed on the trial balance, the chart of accounts for Cuono Company SpA also contains the following accounts and account numbers: No. 158 Accumulated Depreciation—Equipment, No. 212 Salaries and Wages Payable, No. 631 Supplies Expense, No. 711 Depreciation Expense, No. 722 Insurance Expense, and No. 732 Utilities Expense. Other data:


1. Supplies on hand at June 30 are €340.

2. A utility bill for €185 has not been recorded and will not be paid until next month.

3. The insurance policy is for a year.

4. €2,500 of unearned service revenue is recorded for services performed at the end of the

5. Salaries of E1,600 are accrued at June 30.

6. The equipment has a 4•year life with no residual value. It is being depreciated at €300 per month for 48 months.

7. Invoices representing 62,400 of services performed during the month have not been recorded as of June 30.



a) Prepare the adjusting entries for the month of June. Use J3 as the page number for your journal.

b) check the totals from the trial balance as beginning account balances and place a check mark in the posting reference column. Post the adjusting entries to the ledger account.

C) Prepare an adjusted trial balance at June 30.2017.


  1. Information related to Duffy Co., Ltd. is presented below.


  1. On April 5, purchased merchandise from Thomas Company, Ltd. for E25.000. terms 2n 0, neV30, FOB shipping point.
  2. On April 6, paid freight costs of E900 on merchandise purchased from Thomas.
  3. O April 7, purchased equipment on account for E26,000.
  4. On April 8, returned damaged merchandise to Thomas and was granted a £2,600 credit for returned merchandise.
  5. On April 15, paid the amount due to Thomas in full.



a) Prepare the journal entries to record these transactions on the books of Duffy Co., Ltd. under a perpetual inventory system.

b) Assume that Duffy Co., Ltd. paid the balance due to Thomas Company. Ltd. on May 4 instead of April 15. Prepare the journal entry to record this payment.


  1. On September I. Moreau Office Supply SA had an inventory of 30 calculators at a cost of E22 each. The company uses a perpetual inventory system. During September, the following transactions occurred.


Sept. 6 Purchased with cash 90 calculators at E20 each from Roux Co. SA, terms 2/10, rt/30.

  1. Paid freight of €180 on calculators purchased from Roux Co.
  2. Returned 3 calculators to Roux Co. for E66 credit (including freight) because they did not meet specifications.
  3. Sold 28 calculators costing €22 (including freight) for E33 each to Village Book Store, terms n/30.
  4. Granted credit of €33 to Village Book Store for the return of one calculator that was not ordered.
  5. Sold 40 calculators costing €22 for €35 each to l holiday Card Shop, terms n/30. Instructions Journalize the September transactions.


  1. On June 10, York Company Ltd. purchased £7,600 of merchandise from Bianchi Company, FOB shipping point, terms 2/10, n/30. York pays the freight costs of £400 on June I I. Damaged goods totaling £300 are returned to Bianchi for credit on June 12. The fair value of these goods is £70. On June 19. York pays Bianchi Company in full, less the purchase discount. Both companies use a perpetual inventory system.


Mar actions

a) Prepare separate entries for each transaction on the books of York Company. Ltd.

b) Prepare separate entries for each transaction for Bianchi Company. The merchandise

purchased by York on June 10 had cost Bianchi £4,300.

  1. Vree Distributing Company plc completed the following merchandising transactions in the

month of April. At the beginning of April, the ledger of Vrce showed Cash of €8,000 and

Share Capital— ordinary of €8,000.

Apr. 2. Purchased merchandise on account from Walker Supply Co. €6,200. tenns 1/10. W30.

  1. Sold merchandise on account €5,500, FOB destination, terms 1/10, n/30. The
    cost of the merchandise sold was €3,400. S. Paid €240 freight on April 4 sale.
  2. Received credit from Walker Supply Co. for merchandise returned €500. 1 I. Paid Walker Supply Co. in full, less discount.
  3. Received collections in full, less discounts, from customers billed on April 4.
  4. Purchased merchandise for cash €3,800.
  5. Received refund from supplier for returned goods on cash purchase of April 14, €500.
  6. Purchased merchandise from Benjamin Distributors €4,500, FOB shipping point, terms 2/10. n/30.
  7. Paid freight on April 18 purchase €160.
  8. Sold merchandise for cash €7,400. The merchandise sold had a cost of €4,120.
  9. Purchased merchandise for cash €2,300.
  10. Paid Benjamin Distributors in full, less discount.
  11. Made refunds to cash customers for defective merchandise €90. The returned merchandise had a fair value of €30.
  12. Sold merchandise on account €3,400, terms n/30. The cost of the merchandise sold was €1,900.


Vree Distributing Company’s chart of accounts includes the following: No. 101 Cash, No. 112 Accounts Receivable, No. 120 Inventory. No. 201 Accounts Payable, No. 311 Share Capital—Ordinary, No. 401 Sales Revenue, No. 412 Sales Returns and Allowances, No. 414 Sales Discounts, No. 505 Cost of Goods Sold, and No. 644 Freight•Out.



  • Journalize the transactions using a perpetual inventory system.
  • Enter the beginning cash and share capital—ordinary balances, and post the transactions. (Well for the journal reference.)
  • Prepare the income statement through gross profit for the month of April 2017.


  1. On May 31, 2017, Terrell Ltd. had a cash balance per books of £6.781.50. The bank statement from Home Town Bank on that date showed a balance of 16.824.60. A comparison of the statement with the Cash account revealed the following facts.


1. statement included a debit memo of £60 for the priming of additional company checks.

  1. Cash sales of 0136.15 on May 12 were deposited in the bank The cash receipts journal entry and the deposit slip were incorrectly made for £886.15. The bank credited Terrell Company for the correct amount.
  2. Outstanding checks at May 31 totaled £276.25. Deposits in transit were £1,916.15.
  3. On May 18, the company issued check No. 1181 for £685 to Barry Dietz on account. The cheek, which cleared the bank in May, was incorrectly journalized and posted by Terrell for £658.
  4. A £3.000 note receivable was collected by the bank for Terrell on May 31 plus £80 The bank charged a collection fee of £20. No interest has been accrued on the note.
  5. Included with the cancelled checks was a check issued by Bridges plc to Jon Newton for £600 that was incorrectly charged to Terrell by the bank.
  6. On May 31, the bank statement showed an NSF charge of £640 for a check issued by

Sandy Grifton, a customer, to Terrell on account.



a) Prepare the bank reconciliation at May 31, 2017.

b) Prepare the necessary adjusting entries for Terrell at May 31, 2017


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