Question

Larry Hoover is the owner and operator of Hoover’ s Merchandizing Company and the company has presented the following unadjusted trial balance at the end of their financial year ending December 31, 2016.

Hoover’s Merchandizing Company

Trial Balance as at December 31, 2016

A/C Name	DR $	CR $
Cash	1,500,000
Accounts Receivable	4,580,000
Interest Receivable
Merchandise Inventory	5,400,054
Prepaid Insurance	1,200,000
Furniture and Equipment	6,000,000
Accumulated Depreciation –Furniture/Equipment		1,770,000
Accounts Payable		1,450,000
Sales Commission Payable
Salaries Payable
Unearned Sales Revenue		6,400,054
Larry Hoover, Capital		8,000,000
Larry Hoover, Withdrawal	1,000,000
Sales Revenue Earned		21,668,000
Interest Revenue
Sales Discount	115,000
Sales Returns and Allowances	248,000
Cost of Goods Sold	9,210,000
Travelling Expense	225,000
Sales Commission Expense	2,150,000
Salaries Expense	4,500,000
Rent Expense	1,800,000
Utilities Expense	849,000
Depreciation Expense-Furniture/Equipment
Insurance Expense
Advertising Expense	345,000
General Expense	166,000	__________
Total	39,288,054	39,288,054

The following additional information was made available at December 31, 2016

Interest revenue earned at December 31, 2016 but not yet recorded $250,000.

Insurance prepaid includes an expired amount of $1,000,000 relating to the period January to December 31, 2016.

Furniture and Equipment has an estimated life of ten (10) years and is being depreciated on the straight-line method of depreciation, down to a residual value of $100,000.

Unearned sales revenue still unearned as at December 31, 2016 amounts to $2,400,054.

Salaries expense owing as December 31, 2016 amounts to $450,000

Accrued sales commission expense as at December 31, 2016 amounts to $450,000.

Inventory on hand was $5,500,000 as at December 31, 2016.

Required:

Prepare the necessary adjusting journal entries on December 31, 2016

Prepare Hoover’s Merchandizing Company multiple-step income statement for the year ended December 31, 2016.

Prepare the company’s statement of owner’s equity for the year ended December 31, 2016

Prepare the company’s classified balance sheet at December 31, 2016

Answer 1

Adjusting entry as on Dec 31, 2016