The problem to be resolved: 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 Ready Hospital Supplies General Journal as at June 30, 2020 Date Particulars Debit Credit 2020 30-Jun Supplies Expense $33,000 Supplies $33,000 30-Jun Insurance expense $24,000 Prepaid expense $24,000 30-Jun Rent expense $94,500 Prepaid expense $94,500 30-Jun Depreciation expense- Furniture and fixtures $64,000 Accumulated Depreciation $64,000 30-Jun Depreciation expense- $21,000 Accumulated Depreciation $21,000 30-Jun Salaries Expense $14,000 Salaries payable $14,000 30-Jun Interest Expense $9,000 Accrued Expense $9,000 30-Jun Cash $48,000 Unearned revenue $48,000 30-Jun Allowance for doubtful accounts $19,500 Accounts Receivable $19,500 Prepare the General Legder for the account on June 30, 2020.

The problem to be resolved: 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 Ready Hospital Supplies General Journal as at June 30, 2020 Date Particulars Debit Credit 2020 30-Jun Supplies Expense $33,000 Supplies $33,000 30-Jun Insurance expense $24,000 Prepaid expense $24,000 30-Jun Rent expense $94,500 Prepaid expense $94,500 30-Jun Depreciation expense- Furniture and fixtures $64,000 Accumulated Depreciation $64,000 30-Jun Depreciation expense- $21,000 Accumulated Depreciation $21,000 30-Jun Salaries Expense $14,000 Salaries payable $14,000 30-Jun Interest Expense $9,000 Accrued Expense $9,000 30-Jun Cash $48,000 Unearned revenue $48,000 30-Jun Allowance for doubtful accounts $19,500 Accounts Receivable $19,500 Prepare the General Legder for the account on June 30, 2020.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter18: The Management Of Accounts Receivable And Inventories

Section: Chapter Questions

Problem 8P

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The problem to be resolved:

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

Ready Hospital Supplies
General Journal as at June 30, 2020
Date	Particulars	Debit	Credit
2020
30-Jun	Supplies Expense	$33,000
	Supplies		$33,000

30-Jun	Insurance expense	$24,000
	Prepaid expense		$24,000

30-Jun	Rent expense	$94,500
	Prepaid expense		$94,500

30-Jun	Depreciation expense- Furniture and fixtures	$64,000
	Accumulated Depreciation		$64,000

30-Jun	Depreciation expense-	$21,000
	Accumulated Depreciation		$21,000

30-Jun	Salaries Expense	$14,000
	Salaries payable		$14,000

30-Jun	Interest Expense	$9,000
	Accrued Expense		$9,000

30-Jun	Cash	$48,000
	Unearned revenue		$48,000

30-Jun	Allowance for doubtful accounts	$19,500
	Accounts Receivable		$19,500

Prepare the General Legder for the account on June 30, 2020.

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