Question 1

The following are the unadjusted balances in the accounts of (Name of Student) Trading Ltd. for the fiscal year ended 9/30/2011

$

Cash 28,750 Accounts receivable 32,900

Prepaid insurance 4,800 Stores supplies 12,400

Inventory 36,000 Stores equipment 32,300

Acc. Depreciation - Stores equipment 9,300 Manufacturing equipment 98,500

Acc. Depreciation - Manufacturing equipment 23,850 Accounts payable 15,430

Notes payable 50,000 Unearned revenue 33,000

Common stock 90,000 Dividends paid 15,000

Retained earnings ? Sales 185,700

Dividend received on investment 6,450 Sales discounts 10,100

Sales returns and allowances 2,095 Purchases 98,000

Purchases returns and allowances 9,250 Transportation-in 3,250

Transportation-out 1,820 Salaries expense 30,425

Rent expense 18,000 Advertising expense 7,600

Utilities expense 5,900

(The company uses a periodic inventory system).

Required:

1. Prepare the adjusting entries to reflect the items below, using a work sheet.

a) Stores supplies still available at the year end is $3,800

b) Expired insurance for the year is $3,600

c) Depreciation expense on store equipment is $2,550 for the year.

d) Depreciation expense for manufacturing equipment is 12.5% of the book balance.

e) A physical check reveal that $21,000 of inventory is in warehouse at fiscal year end.

f) $20,000 of the balance in unearned income was earned in the fiscal year.

g) Interest on notes payable is 12% per annum. The $50,000 note was a bank loan taken on 2/15/2011 to be repaid in full in twelve months.

(You may need to add some more accounts).

2. Prepare closing entries, a multi-step income statement and a statement of retained earnings for the company.

3. Prepare a balance sheet, in classical form, as at 9/30/2011