Assignment - Accounting Cycle Yellow Dog Company (YDC) is wholesale distributor in British Columbia. YDC has a December 31 year- end. The company is planning a major expansion next year that will require bank financing. You have been provided the following information: Yellow Dog Company Unadjusted Trial Balance December 31, 2023 Dr Cr Cash $ 165,185 Accounts receivable 125,000 Inventory 130,000 Office equipment 180,000 Accumulated depreciation - Office equipment 110,000 Trucks 220,000 Accumulated depreciation - Trucks 80,000 Accounts payable Unearned sales revenue 27,000 25,000 Note payable 130,000 Common shares 160,000 Retained earnings 105,000 Sales revenue 1,635,000 Cost of goods sold 790,000 Insurance expense 16,000 Wage and salary expense 194,000 Income tax expense 31,915 Marketing expense 145,000 Communications expense 75,000 Rent expense 113,000 Supplies expense 10,000 Other operating expenses 73,000 Interest expense 3,900 $2,272,000 $2,272,000 Question 1 (continued) 1. YDC purchased an insurance policy April 1, 2023. The term of the policy was one year. The company's accountant debited insurance expense and credited cash on April 1. No adjustments have been recorded since that date. 2. No depreciation expense has been recorded for the year. Both the office equipment and the truck are depreciated using the straight-line depreciation method. The useful life of the office equipment is 10 years, and no residual value is expected. The useful life of the trucks is 8 years, and the company expects to sell the trucks at that time for $15,000. 3. Occasionally, YDC receives advances from customers for specialized products. At year-end, $15,000 of these products had been delivered to customers. No adjustment was made during the year. The cost of these goods sold was $9,000. 4. When reviewing the invoices received from suppliers and service providers in January 2024, the accountant found an invoice from Acres Maintenance Company for repair work done in December 2023 in the amount of $8,000. The invoice had not been recorded at year end. Repairs and maintenance work are usually recorded as other operating expenses. 5. On October 1, YDC launched a social media marketing campaign. On that date, YDC signed a six- month contract with Orien Analytics. Orien Analytics agreed to organize and run the marketing campaign. The total cost of the contract was $30,000, payable in two amounts. The first payment of $15,000 was due on January 10, 2024, and the balance was due at the end of the contract. The campaign started on November 1, 2023 and continued through the end of the year and into 2024. YDC was very pleased with the initial results of the marketing campaign. 6. The note payable arose from the purchase of long-term assets. The note is due on June 30, 2026. Interest is paid annually on June 30th. The annual rate of interest is 6%. 7. The Board of Directors of YDC declared a dividend of $35,000 on December 31, 2023. The dividend will be paid on January 31, 2024. 8. Supplies on hand at December 31, 2023, are $3,000. 9. YDC issued shares during the year with a value of $50,000. The journal entry was correctly recorded as a debit to cash and a credit to common shares for $50,000. Required: 1. Prepare any adjusting or correcting journal entries for the above-noted items. Show your work. 2. Prepare the adjusted trial balance. A template is provided in the Excel file. 3. Prepare the following financial statements: a. Statement of Income for the year ending December 31, 2023 b. Statement of Changes in Shareholders' Equity for the year ending December 31, 2023 c. Statement of Financial Position as at December 31, 2023 4. Prepare the closing entries for the year ended December 31, 2023. 5. YDC sales revenue declined by 10% in 2023, compared to 2022, which put pressure on its gross margin, which was 52% in 2022. Two of YDC's suppliers have expressed concern about the liquidity of YDC in light of current economic conditions and are concerned about future profitability of YDC. Management of YDC wants to assure the suppliers that the short-term liquidity position is acceptable and that it expects sales revenue to increase by 10% in 2024 and gross margin to be approximately 50%. Comment on YDC's liquidity. Using YDC's financial statements that you have competed for 2023, comment of the prospect of higher net income in 2024. How does the format of the income statement help you analyze future profitability?