Question

scholes shoes ltd is a retailer for kids school shoes and they have produced the following unadjusted trial balance:

Scholes shoes ltd

trial balance as at December 31, 2018

Account Name	Debit	Credit
cash	1,500,000
accounts receivable	1,200,000
allowance for bad debt		100,000
merchandise inventory	400,000
store supplies	90,000
prepaid insurance	1,600,000
building	10,000,000
accumulated depreciation building		3,000,000
fixtures and fittings	1,200,000
accumulated depreciation fixtures and fittings		240,000
accounts payable		900,000
wages payable
mortgage		2,500,000
scholes capital		6,500,000
scholars withdrawals	150,000
sales revenue		7,305,000
sales discount	65,000
sales returns and allowances	130,000
cost of goods sold	3,000,000
wages expense	870,000
insurance expense
depreciation expense building
depreciation expense fixtures and fittings
supplies expense	70,000
utilities expense	180,000
bad debt expense
travelling expense	65,000
interest expense	25,000
	20,545,000	20,545,000

the following additional information was made available at December 31, 2018

a) insurance of $1,600,000 was paid on January 1, 2018 for the period January 2018 to April 2019

b) The company building has an estimated life of (10) years and is being depreciated on the straight-line method of depreciation, down to a residual value of $0

c) The fixtures and fittings are being depreciated over (10) years on the double-declining method of depreciation, down to a residue of $128,849

d) Wages earned by the company's employees and not paid at December 31, 2018 amounted to $130,000

e) A physical count of inventory at December 31, 2018, reveals $405,000 worth of inventory on hand

f) the aging of the accounts receivable schedule at December 31, 2018 indicated that the estimated uncollectible on accounts receivable is $120,000

Required:

1) Prepare the necessary adjusting entries on December 31, 2018

2) Prepare the company's Multiple-step Income Statement for the year ended December 31, 2018

3) Prepare the company's Statement of Owner's Equity for the year ended December 31, 2018

4) Prepare the company's classified Balance Sheet at December 31, 2018

Answer 1