Assessment 2:

Weighting: 15%

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 1,500,000 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 Interest payable Unearned Sales revenue 200,000 Mortgage 2,300,000 Scholes', Capital 6,500,000 Scholes', 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 on 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 companys building 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 $0.

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

d) Wages earned by the companys employees and NOT paid on December 31, 2018, amounted to $130,000.

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

f) The aging of the accounts receivable schedule on December 31, 2018, indicated that the estimated uncollectible accounts receivable is $120,000. g) Unearned sales revenue earned during December 2018, $100,000.

h) Accrued interest payable on mortgage $120,000

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