Assessment 1:

Weighting: 10%

Due Date: March 27th, 2020 @ 11:55 PM ECT

Related Course Objectives:

1. Describe the system of accounting standards and principles to utilize these in the preparation and communication of relevant financial information.

2. Apply the accrual method of accounting and the accounting cycle in preparation of financial statements

3. Prepare a balance sheet and income statement for merchandising and service organizations

4. Apply generally accepted principles when accounting for cash dividends and preparation of journal entries to record the issuance of stock.

Assignment Description and Instructions

Suppose you are a part of a group of students from a prominent university and were sent out as a team to work with a leading merchandising company as a part of a work experience program. The team having been introduced to the general manager was told that the Accountant who normally prepares the financial statements has suddenly resigned and there is no one available to prepare the companys financial statements which are now due. As aspiring university students, you and your group members have expressed an interest in taking on the task. As a group, you are required to collaborate and analyze the problem at hand then apply the accrual basis of accounting in the preparation of the companys financial statements.

Scholes Shoes Ltd, is a retailer of childrens school shoes and they have produced the following Unadjusted Trial Balance:

Scholes Shoes Ltd Unadjusted Trial Balance as at December 31, 2018 A/C Name D R CR Cash 1,000,000 Accounts receivable 450,000 Allowance for bad debt 15,000 Merchandise Inventory 186,000 Store Supplies 120,000 Prepaid Insurance 450,000 Furniture and Fixtures 1,000,000 Accumulated Depreciation - furniture and fixture 360,000 Computer Equipment 600,000 Accumilated Depreciation-Computer Equipment Accounts payable 320,000 Wages payable Unearned Sales revenue 150,000 Note Payable-Long Term 900,000 Scholes', Capital 220,000 Scholes', Withdrawals 95,000 Sales revenue 90,000 Dr & Cr 1.716.000

The following additional information was made available on December 31, 2018

a) Insurance of $450,000 was paid on May 1, 2018 for the 10-months to February 2019

b) The furniture and fixtures have an estimated useful life of 10 years and is being depreciated on the straight-line method down to a residual value of $100,000.

c) The computer equipment was acquired on March 1, 2018 and is being depreciated over 10 years on the double-declining method of depreciation, down to a residue of $60,000.

d) Wages earned by employees NOT yet paid amounted to 15,000 at December 31, 2018.

e) A physical count of inventory at December 31, reveals $180,000 worth of inventory on hand.

f) At December 31, $140,000 of the previously unearned sales revenue had been earned.

h) The ageing of the Accounts Receivable schedule at December 31 indicated that the estimated uncollectible on account receivable should be $45,000

Required:

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

2. Prepare the companys Multiple-step Income Statement for the year ended December 31, 2018.

3. Prepare the companys Statement of Owners Equity for the year ended December 31, 2018

4. Prepare the companys classified Balance Sheet at December 31, 2018

5. Prepare the closing entries

6. Prepare the post-closing trial balance