Prepare the necessary adjusting journal entries on June 30, 2020.                   [Narrations are not required]                                          Prepare the Adjusted Trial balance for the period ending June 30, 2020.       Using the Adjusted trial balance, generate the statements requested by MNB, i.e.   A Multiple-step income statement & a Statement of owner’s equity for the year ended June 30, 2020   d) A Classified balance sheet, in report format, at June 30, 2020.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Ready Hospital Supplies (RHS) trades in the buying and selling of supplies primarily targeting hospitals and private medical practitioners. During the COVID-19 pandemic, the business has experienced a rapid increase in demand and RHS is faced with the need for additional financing. You and your group members are the accounting associate supporting the credit request to Millionaire National Bank (MNB). The corporate banking head at MNB is requesting a full set of financial statements to ensure that granting the loan would be financially feasible during a period when many similar businesses are facing delinquency and foreclosures. Your head of finance has furnished you with the latest trial balance for RHS, along with other information relevant to the year under review and you are tasked to prepare the documents requested by MNB. Below is the trial balance which was extracted from the books of the business on June 30, the end of the company’s financial year. As a group, you are required to collaborate and analyse the problem at hand then apply the accrual basis of accounting in the preparation of the company’s financial statements. 















Ready Hospital Supplies 

Trial Balance as at June 30, 2020

 

    Dr $

      Cr $

Cash

127,000

 

Accounts Receivable

151,000

 

Allowance for Bad-Debts

 

12,500

Merchandise Inventory

187,500

 

Store Supplies

58,000

 

Prepaid Insurance

72,000

 

Prepaid Rent

56,000

 

Furniture & Fixtures

800,000

 

Accumulated Depreciation: Furniture & Fixtures

 

256,000

Computer Equipment

450,000

 

Accumulated Depreciation: Computer Equipment

   

Accounts Payable

 

133,500

Salaries Payable

   

Interest Payable

 

27,000

Unearned Sales Revenue

 

82,000

Long-Term Loan

 

360,000

Eva Ready, Capital

 

898,500

Eva Ready, Withdrawals

104,000

 

Sales Revenue 

 

1,043,000

Sales Discount

7,000

 

Sales Returns & Allowances

5,500

 

Cost of Goods Sold

403,000

 

Salaries Expense

165,000

 

Insurance Expense

   

Utilities Expense

87,500

 

Rent Expense

126,000

 

Depreciation Expense – Furniture & Fixtures

   

Depreciation Expense – Computer Equipment

   

Store Supplies Expense

   

Gain on Disposal of Old Computer Equipment

 

14,000

Bad-Debt Expense

   

Interest Expense

_     27,000

________

    Total

2,826,500

2,826,500

               







The following additional information is available at June 30, 2020:

 

 

  • Store Supplies on hand at June 30, 2020 amounted to $25,000.
  • Insurance of $72,000 was paid on May 1, 2020 for the 6-months  to October 31, 2020
  • Rent was paid on March 31, 2020 for the 4-months to July 31, 2020.
  • 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 $160,000.    
  • The computer equipment was acquired on March 31, 2020 and is being depreciated

 

      over 5 years on the double-declining balance method of depreciation, down to  

      a residue of $30,000     

 

  • Salaries earned by employees not yet paid amounted to $14,000 at June 30, 2020.
  • Accrued interest expense as of June 30, 2020, $9,000. 
  • At June 30, 2020, $48,000 of the previously unearned sales revenue had been earned
  • The aging of the Accounts Receivable schedule at June 30, 2020 indicated that the 

 

    Allowance for Bad Debts should be $19,500

 

  • After making all other adjustments, a physical count of inventory was done, which 

 

    reveals that there was $186,000 worth of inventory on hand at June 30,2020

Other data:

(xi)    The business is expected to make principal payments totalling $90,000 towards the 

    loan during the fiscal year to June 30 ,2021

Required:

 

 

  • Prepare the necessary adjusting journal entries on June 30, 2020. 

 

               [Narrations are not required]                                       

 

  • Prepare the Adjusted Trial balance for the period ending June 30, 2020.

 

 

 

  • Using the Adjusted trial balance, generate the statements requested by MNB, i.e.

 

  • A Multiple-step income statement & a Statement of owner’s equity for the year ended June 30, 2020

 

  1. d) A Classified balance sheet, in report format, at June 30, 2020.

   

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