Question

Task: You are employed to Peter Pan Ltd a company owned by Peter Pantry, a merchandiser involved in the business of selling baking utensils and equipment. On January 1st, 2018 you were appointed to the position of Chief Financial Officer which made you responsible for the maintenance of the company’s accounting records, internal control and preparation of the financial statements. The following trial balance was extracted from the books of Peter Pan Ltd, at June 30, the end of the company’s fiscal year.

Peter Pan Ltd Trial Balance as at June 30, 2018

A/C Name	DR $	CR$
Cash	440,000
Accounts receivable	530,000
Allowance for bad debts		40,000
Merchandise Inventory	320,000
Store Supplies	10,000
Prepaid rent	280,000
Furniture & Equipment	600,000
Accumulated Depreciation- Furniture & Equipment		120,000
Accounts Payable		145,000
Wages payable
Notes payable-Long Term		510,000
Unearned Sales Revenue		260,000
Peter Party, Capital		1,900,000
Peter Party, Withdrawal	75,000
Sales Revenue Earned		1,095,000
Cost of goods sold	645,000
wages Expense	525,000
Rent Expense	210,000
Utilities Expense	230,000
Depreciation Expense-Furniture & Equipment
Store Supplies Expense	160,000
Bad Debt Expense
Interest Expense	45,000
Total	4,070,000	4,070,00

The following additional information is available at June 30, 2018:

(i) Eight (8) months’ rent amounting to $280,000 was PAID IN ADVANCE on January 1, 2018

(ii) The Furniture and equipment is being depreciated over 10 years on the double-declining balance method of depreciation, down to a residue of $80,000.

(iii) Wages earned by employees NOT yet paid amounted to $35,000 at June 30, 2018.

(iv) A physical count of inventory at June 30, 2018, reveals $290,000 worth of inventory on hand.

(v) On January 1, 2018 the company received $260,000 IN ADVANCE for sales to be provided evenly from January 1, 2018, through October 31, 2018. None of the revenue from this client has been recorded.

(vi) The aging of the Accounts Receivable schedule at June 30, 2018 indicated that the Allowance for Bad-Debts should be $65,000.

Required:

a) Prepare the necessary adjusting journal entries on June 30, 2018. [Narrations are not required]

b) Prepare the company’s multiple-step income statement for the year ended June 30, 2018.

c) Prepare the company’s statement of owner’s equity for the year ended June 30, 2018.

d) Prepare the company’s classified balance sheet as at June 30, 2018.

Answer 1