Questioned Bl (continued) (3) On 31 December 2017, the company delivered $48,000 goods previously ordered by customers who had paid the amount in November. (4) The equipment is being depreciated over an estimated useful life of 7 years using straight-line method with no residual value. (5) The company signed a 9-month insurance contract on 1 September 2017 with effective on the same date. (6) The company borrowed $200,000 by signing a 3-year notes payable on 1 April 2017. The company pays the monthly interests at the end of the next month. No entries had been made in this financial year except receipt of loan amount. (7) On 31 December 2017, a customer returned $10,000 of defective leather products, with gross profit rate of 35%, to Martina Company. The accountant mistakenly recorded this transaction by using periodic inventory system. Required: Prepare the necessary journal entries so as to bring the financial records of Martina Company up-to-date as of 31 December 2017. If the item above does not require any necessary entry, state "No entry" and no explanation is required. (15 marks) (b) Prepare the partial Income Statement of Martina Company showing the gross profit for the year ended 31 December 2017. (3 marks) Question B1 Martina Company is engaged in purchase and sales of lenther products. The company adjusts its accounts monthly closes its accounts annually on 31 December and adopts a perpetual inventory system. The unadjusted trial balance of Martina Company at 31 December 2017 was shown as follows: Credit S Martina Company Unadjusted Trial Balance 31 December 2017 Debit S Cash 90.000 Supplies 7,500 Unexpired insurance 60,000 Accounts receivables 447,600 Inventory 420,150 Equipment 1,470,000 Accumulated depreciation - Equipment 6% Notes payable (due on 31 Mar 2020) Accounts payable Unearned revenue Income taxes payable Share capital Retained earnings Sales revenue Sales returns 45,000 Cost of goods sold 1,700,000 Salaries expense 551,500 Depreciation expense - Equipment 192,500 Insurance expense 107,000 Selling expense 92,000 Income taxes expense 187,500 5,370,750 577,500 200,000 144,750 100,000 187,500 525,000 216.000 3,420,000 5,370,750 Information on adjusting items: (1) Supplies on hand on 31 December amounted to $5,000. (2) Estimated income taxes expense for the year amounted to $220,000, which will be paid in March 2018