Part 1 - Answer the following question Question 1 (40 marks) A The following working paper shows the unadjusted and the adjusted trial balance for Farah Company as of December 31, 2019. Unadjusted Adjusted Trial Balance Trial Balance Cash $ 47,640 $ 47,640 Accrued reveme 14,000 22.000 Prepaid instance (Prepayments) 0 2.000 Office equipment 84.000 84.000 Accum. Depreciation Office equip $ 14.000 $ 20.000 Accounts payable 9.100 9.100 Interest payable (Accrual) 0 1.000 Salaries payable (Accrual) 0 7.000 Long-term notes payable 52.000 52.000 Farah. Capital 40.000 40.000 Faral. Withdrawals 5.000 5.000 Consulting fees eamed (Revemes) 123.240 131.240 Depreciation expense-Office equip .0 6.000 67,000 74.000 Interest expense 1.200 2.200 Insurance expense 5000 3.000 14.500 14.500 Sahries expense Rent expense Required: 1- Prepare the adjusting entries that have been made in Farah Company (11 Marks) 2-Explain the differences between the adjusting entries and other journal entries. Also, explain why adjusting entries are needed. (3 Marks) 3- Prepare Farah's income statement for the year ended December 31, 2019. (2.75 Marks) 4- Prepare Farah's balance sheet as at December 31, 2019. (2.75 Marks) B-The following information pertains to Nour Company: 1- Equipment was purchased on July 1, 2018 for $140,000. It is useful life is 5 years and it can be sold after the 5 years for $20,000. 2- Building was purchased on January 1, 2018 for $200,000. It is useful life is 20 years and depreciated on a reducing balance rate of 10%. 3- Furniture was purchased on April 1, 2017 for $80,000. Its salvage value is $20,000 and depreciated on a straight-line balance rate of 20%. 4- On December 31, 2019 the balance of Receivables was $110,000 and the balance of Allowance of irrecoverable receivables was $14,000. Before adjusting the accounts, Nour finds that receivables of $10,000 need to be written off as irrecoverable, and the allowance for receivables is to be set at ten percent of the remaining outstanding receivables as at 31 December 2019. B124 THE-Final (V1) Page 2 of 5 Fall 2020/2021 Required: 1- Prepare the necessary adjusting entries in Nour Company at the end of its fiscal year, Dec 31, 2019. Show your calculations 2. Prepare a partial income statement and a partial balance sheet for the year ended December 31.2019 to show the effect of the adjusting entries on these statements (Show you computations) (16.5 marks) C-What will be the effect on the financial statements if the adjusting entry for an accrued expense is recorded twice at the end of the year? (4 marks)
