Suppose you are a part of a group of students from a prominent university and were sent out as a team to work with a leading merchandizing company as a part of a work experience program. The team having been introduced to the general manger was told that the Accountant who normally prepares the financial statements has suddenly resigned and there is no one available to prepare the company’s financial statements which are now due. As aspiring university students, you have expressed an interest in taking on the task. You are required to analyse the problem at hand then apply the accrual basis of accounting in the preparation of the company’s financial statements.
Suppose you are a part of a group of students from a prominent university and were sent out as a team to work with a leading merchandizing company as a part of a work experience program. The team having been introduced to the general manger was told that the Accountant who normally prepares the financial statements has suddenly resigned and there is no one available to prepare the company’s financial statements which are now due. As aspiring university students, you have expressed an interest in taking on the task. You are required to analyse the problem at hand then apply the accrual basis of accounting in the preparation of the company’s financial statements.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Suppose you are a part of a group of students from a prominent university and were sent out as a team to work with a leading merchandizing company as a part of a work experience program. The team having been introduced to the general manger was told that the Accountant who normally prepares the financial statements has suddenly resigned and there is no one available to prepare the company’s financial statements which are now due. As aspiring university students, you have expressed an interest in taking on the task. You are required to analyse the problem at hand then apply the accrual basis of accounting in the preparation of the company’s financial statements.
![(i)
Insurance of $450,000 was paid on May 1, 2018 for the 10-months to February 2019.
(ii)
The furniture and fixtures have an estimated useful life of 10 years and is being depreciated
on the straight-line method down to a residual value of $100,000.
(iii)
The computer equipment was acquired on March 1, 2018 and is being depreciated over 10
years on the double-declining method of depreciation, down to a residue of $60,000.
(iv)
Wages earned by employees NOT yet paid amounted to 15,000 at December 31, 2018.
(v)
A physical count of inventory at December 31, reveals $180,000 worth of inventory on hand.
(vi)
At December 31, $140,000 of the previously unearned sales revenue had been earned.
(vii)
The aging of the Accounts Receivable schedule at December 31 indicated that the estimated
uncollectible on account receivable should be $45,000.
REQUIRED:
a)
Prepare the necessary adjusting journal entries on December 31. [Narrations are not required]
b)
Prepare Columbus Ltd multiple-step income statement for the year ended December 31, 2018.
c)
Prepare Columbus Ltd statement of owner's equity for the year ended December 31, 2018.
d)
Prepare Columbus Ltd classified balance sheet at December 31, 2018.
e)
Prepare the closing entries
f)
Prepare the post-closing trial balance](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F6a3f2e7d-5cb8-4afa-9389-12614fdb6539%2F8a2ba702-5f87-4a95-927d-51403744a157%2F5epcxob_processed.jpeg&w=3840&q=75)
Transcribed Image Text:(i)
Insurance of $450,000 was paid on May 1, 2018 for the 10-months to February 2019.
(ii)
The furniture and fixtures have an estimated useful life of 10 years and is being depreciated
on the straight-line method down to a residual value of $100,000.
(iii)
The computer equipment was acquired on March 1, 2018 and is being depreciated over 10
years on the double-declining method of depreciation, down to a residue of $60,000.
(iv)
Wages earned by employees NOT yet paid amounted to 15,000 at December 31, 2018.
(v)
A physical count of inventory at December 31, reveals $180,000 worth of inventory on hand.
(vi)
At December 31, $140,000 of the previously unearned sales revenue had been earned.
(vii)
The aging of the Accounts Receivable schedule at December 31 indicated that the estimated
uncollectible on account receivable should be $45,000.
REQUIRED:
a)
Prepare the necessary adjusting journal entries on December 31. [Narrations are not required]
b)
Prepare Columbus Ltd multiple-step income statement for the year ended December 31, 2018.
c)
Prepare Columbus Ltd statement of owner's equity for the year ended December 31, 2018.
d)
Prepare Columbus Ltd classified balance sheet at December 31, 2018.
e)
Prepare the closing entries
f)
Prepare the post-closing trial balance
Transcribed Image Text:The following trial balance was extracted from the books of Columbus Ltd at December 31, the end of
the company's financial year. The company is owned by John Columbus and is in the business of buying
and farming supplies.
Trial Balance as at December 31, 2018
Trial Balance
A/C Name
DR
CR
Cash
1,000,000
450,000
Accounts receivable
Allowance for bad debt
Merchandise Inventory
Store Supplies
Prepaid Insurance
Furniture and Fixtures
Accumulated depreciation -Furniture and Fixtures
Computer Equipment
Accumulated depreciation Computer Equipment
|Accounts payable
Wages payable
Unearned Sales revenue
15,000
186,000
120,000
450,000
1,000,000
360,000
600,000
320,000
Notes Payable, Long Term
John Columbus, Capital
John Columbus, Withdrawals
150,000
900,000
2,200,000
95,000
Sales revenue
1,761,000
Sales discount
Sales returns and allowances
Cost of goods sold
Wages Expense
Insurance Expense
Depreciation Expense - Furniture and Fixtures
Depreciation Expense -Computer Equipment
Store Supplies Expense
Utilities Expense
Bad Debt Expense
Interest Expense
120,000
95,000
650,000
450,000
180,000
40,000
180,000
90,000
Total
5,706,000
5,706,000
The following additional information is available at December 31, 2018:
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