ACCT 2211 – Intermediate Accounting II: Winter 2024 Assignment THE COMPANY: Aylmer

ACCT 2211 – Intermediate Accounting II: Winter 2024 Assignment

THE COMPANY:

Aylmer Industries Inc. (Aylmer) has been in business since 2021. Aylmer has two main business segments. This first segment is the construction of large-scale projects. In 2023, Aylmer had two large construction projects in process. The other segment is the purchase and sale of small machines needed for the construction industry.

There are 250,000 common shares outstanding of this publicly traded company. Since Aylmer is a publicly traded company, it follows IFRS.

There are no preferred shares outstanding.

The trial balance at December 31, 2023 and December 31, 2022 are provided for comparison purposes on the tab “Trial Balance” in the excel file. Use this excel worksheet to post journal entries required, to ensure that you remain in balance. The worksheet should also be used to provide a basis of preparing the financial statements at December 31, 2023.

Ignore income taxes for this project.

Aylmer posted transactions throughout the year and the trial balance in excel was prepared. Aylmer’s fiscal year-end is December 31st. As a year-end review, management of Aylmer discovered that the following items have NOT been recorded and are NOT reflected in the trial balance provided at December 31, 2023:

Analyze and review the following items (a – n) and determine the appropriate journal entry. Record the journal entry in the excel file labelled “journal entries”. Use the various tabs in the excel file to record calculations and support for your journal entries.

TRANSACTIONS NOT INCLUDED IN THE TRIAL BALANCE:

Calculate bad debt

On December 31, after many attempts at collecting the outstanding balance of Copper Gallery, the controller decided to write off that balance.

Aylmer calculates bad debt on trade receivables only, not on project receivables. Bad debt is estimated to be:

0-30 days 1%

31 – 60 days 5%

61 – 90 days 7.5%

91 – 120 days 10%

Over 120 days 15%

In the excel spreadsheet, see the tab labelled “Trade Accounts Receivable Detail” to perform any necessary calculations. Be sure to write off the balance of Copper Gallery referenced above before doing these calculations.

FV-NI Investments

At December 31, 2023; the fair value of the short-term investments were:

Redemption Corp $12.63 per share

ALM Corp $23.98 per share

In the excel spreadsheet, see the tab “FV-NI Investments” to perform any necessary calculations.

Prepaid Insurance

The prepaid amount on the trial balance consists of a payment made to State Farm Insurance on October 1, 2023. The policy lasts 18 months.

Inventory – LCM

The company has the policy of stating all inventory on hand at the lower of cost and net realizable value. The company uses the direct method for any adjustments to inventory.

NOTE – on the income statement use “Cost of Goods Sold” from the trial balance – do not calculate the cost of goods sold.

In the excel spreadsheet, see the tab “Inventory Detail” to perform any necessary calculations.

Record Depreciation on assets

Depreciate the fixed assets according to the schedule. Depreciation is calculated on an annual basis.

In the excel spreadsheet, see the tab “Fixed Asset Details” to perform any necessary calculations

Trade a vehicle

On December 31, 2023 (after depreciation was recorded); the company traded the Toro lawn mower which was acquired on February 1, 2021 (asset #2021-02) for a 2014 Ford F150. In addition to the trade, the company paid $6,000 cash for the new truck. The fair value of the Toro lawn mower on this date was $18,000. Assume that this transaction HAS commercial substance. Once this new asset is purchased, do not depreciate it since it was purchased on the last day of the year.

In the excel spreadsheet, see the tab “Fixed Asset Details” to perform any necessary calculations; and update the schedule as needed.

Investments –FV-OCI

On December 31, 2023, the fair value per share of Hub Cap Company was $11.25 per share. Aylmer decided to sell its shares in Hub Cap Company at that time (sale was not recorded on the trial balance). Hint: after you record the sale, be sure to close the gain or loss on sale to retained earnings similar to how the sale was accounted for in TR11-7 in class.

In the excel spreadsheet, see the tab “FV-OCI Investments” to perform any necessary calculations.

Bank Loan

The loan for $8,000,000 was borrowed at January 1, 2023. Interest on the bank loan is 2.75% annually. Interest has to be paid every January 2, so the first interest payment is due January 2, 2024. No principal payments were made during the year. Of the bank loan, $2,000,000 is due June 30, 2024 with the remainder due June 30, 2029.

Notes Payable

This is a short-term note. The company borrowed money from JRT Investments on October 31, 2023 for 3 months. The principle, along with interest is to be repaid on January 31, 2024. The interest rate is 1.5%.

Long-term contracts

The company uses the percentage of completion method for recording long-term contracts. The company has two long-term contracts with details below provided for one of the projects.

Project 1- Downtown Hotel & Shopping Centre

Contract price is $20,000,000.

Expected completion date is in 2025

In the excel spreadsheet, see the tab “Revenue Recognition” to perform any necessary calculations related to the revenue earned on this project. The other project has already been accounted for properly and the accounting for Project 1’s outstanding billings is already reflected in the unadjusted trial balance.

Accrue wages

Employees work Monday to Friday and employees are paid weekly. December 31, 2023 is a Thursday. Assume that hourly employees work 8 hours per day and that there are 52 weeks a year for salaried employees.

In the excel spreadsheet, see the tab “Payroll Details” to perform any necessary calculations.

Intangible Assets

Amortize the intangibles according to the schedule. Amortization is recorded on an annual basis. In the excel spreadsheet, see the tab “Intangible Assets” to perform any necessary calculations

Dividends

On December 31, 2023 a dividend of $0.70 was declared to shareholders of record on January 10, 2023 to be paid January 29, 2024.

Taxes To be ignored for this project

REQUIRED:

See the excel spreadsheet – all information should be recorded using the excel template. Update tabs in excel as needed – SHOW ALL WORK.

Prepare journal entries for the above transactions.

Post transactions to the worksheet and complete the worksheet.

Prepare:

Classified Statement of Financial Position

Multi-step income statement

Statement of Retained Earnings

Notes to the financial statements (for the assets section of the Statement of Financial Position ONLY).

Notes should include any reconciliation schedules or detailed schedules for assets.

OTHER IMPORTANT INFORMATION

Round financial statements to the nearest dollar.

Show ALL calculations.

While the project needs to be submitted individually, you are encouraged to collaborate with your classmates. Some of the transactions will require you to refer to your pre-requisite course content.

DUE DATES: Submissions should be uploaded into the appropriate DC Connect drop box as per the following schedule:

Submission

File Name

Due 11:59pm on:

Marks Available

Journal entries and supporting schedules

Last Name_First Name_Journal Entries

Thursday March 28th

59

Trial balance (columns H & I of the worksheet)

Last Name_First Name_Trial Balance

Thursday April 4th

24

Financial statements (as well as columns J-M on the worksheet)

Last Name_First Name_Financial Statements

Thursday April 11th

60

There are 143 potential points to this project and accounts for 5% of your final grade.

Late assignments will be subject to penalties as detailed in the course outline. This project will take some time so plan accordingly.

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