Question

Toronado Ltd. reported the following items in its unadjusted trial balance as of 31 December 20X4 for the 20X4 fiscal year. This trial balance is listed in alphabetical order. Note that this is a partial trial balance and does not include all accounts. Accounts have normal (debit or credit) balances.

Administration expense	$	235,900
Accounts payable		77,000
Accounts receivable		100,000
Allowance for doubtful accounts (credit)		2,200
Cash dividends declared		31,200
Freight-out (delivery to customers)		27,100
Gain on sale of automobile		1,600
Insurance expense		38,880
Interest expense		27,300
Loans receivable, 8%		75,200
Merchandise inventory, 1 January		89,600
Notes payable, 6%		501,200
Purchases		561,700
Salaries and employee benefits		121,300
Sales returns and allowances		42,300
Sales revenues		1,885,000
Selling expense		34,200
Supplies expense		46,100
Supplies inventory		800
Retained earnings, 1 January		568,500
Unearned revenue		32,200
Utilities expense		65,600

Other information:

• The tax rate is 30%, but no tax has yet been recorded.
• Closing merchandise inventory is $76,700. Closing supplies inventory is $1,500.
• The insurance expense represents a payment made on 1 May for a 24-month fire insurance policy.
• Customers owe $53,200 for goods delivered on 31 December; this amount has not yet been recorded.
• All sales are on account, except those that are prepaid.
• Unearned revenue represents all customer deposits received during the year. Of this
   amount, 60% is still unearned at the end of the year.
• Bad debt expense is to be recognized as 1% of total sales.
• Interest on the note payable was last paid and recorded on 31 October.
• The company owes $3,400 in utilities.
• Interest on the loan receivable has not been paid or recorded all year.

Required:
1. Prepare journal entries to reflect the required adjustments. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round "Bad debt expense" and "Income tax expense" to the nearest $100.)      

a. Record the entry to close merchandise inventory.

b. Record the entry to close supplies inventory.

c. Record the prepaid insurance expense.

d. Record the sales on account.

e. Record the deposit received last year which relate to current year sales.

f. Record the bad debt expenses.

g. Record the interest payable.

h. Record the utilities expense.

i. Record the interest revenue.

j. Record the income tax expense.

2. Prepare an SCI based on the adjusted balances. (Do not round your intermediate calculations.

3. Prepare a statement of changes in equity (for retained earnings only) based on the adjusted balances.

Answer 1