Account balances, taken from the ledger of Argot Flooring Limited as of 31 December 20X5, appear below.

* Assume this amount is properly stated after all subsequent adjustments are considered. Additional information:
1. Store supplies were counted at 31 December and found to be valued at $ 5,600.
2. Depreciation of building and equipment is over eight years with an expected salvage value of $ 10,000.
3. Property taxes of $ 3,200 were paid on 1 October 20X5 and relate to the year 1 October 20X5 to 30 September 20X6.
4. The note payable was issued on 1 November 20X5 and has an annual interest rate of 12%. Interest must be paid each 30 October along with $ 30,000 of principal. Interest payable has not been recorded.
5. The note receivable has been outstanding all year. Interest at 10% is collected each 1 June. The note is due 1 June 20X11. Interest receivable has not been recorded.
6. The allowance for doubtful accounts now has a $ 3,000 credit balance. Aging of accounts receivable indicates that $ 76,000 of the accounts are doubtful.
7. Unearned revenue represents an advance payment from a customer; 75% was still unearned at year- end. 

8. At year- end, $ 10,000 (at retail value) of goods were shipped to customers, but the sale was not yet recorded. Correctly, the goods were not included in closing inventory. The revenue must be recorded.

Required:

1. Explain the meaning of GAAP.

2. Identify common objectives of financial reporting.

3. Prepare adjusting journal entries to reflect the additional information provided above.

4. Explain the following (a) through (d), and give an example of an adjusting journal entry in requirement 3 caused by each: a. Time- period assumption b. Continuity assumption c. Accrual concept d. Revenue recognition convention

5. Prepare a multiple- step classified statement of comprehensive income, a statement of changes in equity, and a classified statement of financial position based on the adjusted accounts. There was no change in the common share account during the year. 

6. Assume that accounts have changed (after the entries made in requirement 3) as follows over the period:

Prepare the operating activities section of the SCF using the indirect method of presentation. Begin the SCF with net earnings. Include separate disclosure of cash flows on the face of the SCF for interest paid and received and income taxpaid.

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Accounts payable Accounts receivable Accumulated depreciation, $280,000 Land 398,000 632,000 General operating expenses 338,000 232,000 120,000 3,200 1,042,000 Notes payable building equipment Allowance for doubtful 42.000 Notes receivable 3,000 198,000 204,100 Property tax expense Cost of goods sold Cash Retained earnings, accounts Building and equipment Common shares Dividends declared Deferred tax liability Income tax expense Interest revenue Inventory, 31 December 80,000 116,700 Revenue 334,600 Salaries expense 1 January 20X5 2 806,400 2,632,000 232.000 intentory, 81 Decembe5.000li entry32000 Unearned revenue 32,000 20X5 480,000 Accounts receivable (net) Interest receivable Inventory Store supplies inventory Prepaid property tax Buildings and equipment Accounts payable Interest payable Notes payablıe Deferred tax liability Unearned revenue $41,900 decrease no change 136,000 increase 8,000 decrease no change 40,000 increase 75,000 increase 4,640 increase 232,000 increase 26,400 increase 24,000 increase