Roma Inc., a merchandising company, has begun its business since 1 Jan. 2017.

The selected information from the accounting records on 1 Jan. 2021 is as follows.

The account of Retained Earnings has a credit balance of $267,000.

The company uses a perpetual inventory system and LIFO for its inventory, reporting the

beginning inventory as follows:

700 units at a unit cost of $82 (purchased on 7 Dec. 2020)

400 units at a unit cost of $84 (purchased on 22 Dec. 2020)

The information of stock-related accounts:

Preferred Stock: 9% cumulative, $7 par value, 10,000 shared authorized,

8,000 shares issued and outstanding

$56,000

Additional Paid in Capital, Preferred Stock

Common Stock: $3 par value, 50,000 shares authorized, 30,000 shares

issued and outstanding

Additional Paid in Capital, Common Stock

$24,000

$90,000

$150.000

The following transactions occurred during the 1s quarter of 2021 (1 Jan - 31 Mar).

1 Jan

Purchased a factory and machines for $176,200 and signed a promissory note for the

purchase. The appraisal values are: $96,000 for the factory and $24,000 for the

machines. The company also paid $2,260 for installation of machines.

1 Jan

5 Jan

10 Jan

25 Jan

2 Feb

5 Feb

10 Feb

15 Feb

25 Feb

2 Mar

5 Mar

Received $8,600 for a sale of an equipment. This equipment was purchased on 1 July

2017 for $19,800. The units-of-production method is used for this equipment. The

company expected to use this equipment a total of 14,000 hours, with a residual value

of $1,800. It was used 1,600 hours in 2017; 2,900 hours in 2018; 3,000 hours in 2019

and 2,600 hours in 2020.

Purchased 400 units of inventory from Ora Inc. at a unit cost of $86 by cash.

Issued 8,000 shares of common stock at a price of $12 per share.

Sold 480 units of inventory to Mett Inc. at a unit selling price of $190 by cash.

Wrote off a $4,100 customer's account balance, using the allowance method

Purchased 600 units of inventory from Elon Inc. at a unit cost of $88 on credit terms

4/30, n/90.

Purchased 5,000 shares of its own common stock for $14 per share.

Return 250 units of inventory purchased on 5 Feb to Elon Inc. for a full credit refund.

Sold 800 units of inventory to Venus Inc. at a unit selling price of $195 on credit terms

6/20, n/90.

Paid for the credit purchase on 5 Feb.

Venus Inc. returned 300 units of inventory purchased on 25 Feb for a full credit refund.

Each unit has an original unit cost of $88

10 Mar

15 Mar

25 Mar

Declared dividends of $30,000 to be paid in Jun. 2021. The company did not declare

dividends in 2020.

Paid $27,156 of operating expenses.

Sold 2,500 of its treasury shares at $17 per share.

Additional information for adjustments

1. For the machines purchased on 1 Jan. 2021, the company uses the double declining balance method.

They are expected to be used for 4 years, with the residual value of $1,700. To depreciate the factory

purchased on 1 Jan. 2021, the company uses the straight-line method over 20 years, with a residual

value of $16.960.

2. The company uses the Aging of Accounts Receivable method to estimate bad debts. The company

has the following information of the past-due receivables amounts as at 31 March 2021

Customer

KSA

LLY

Amount (S)

20.200

Due Date

21.500

25 Feb. 2021

19 Dec. 2020

Based on past experiences, a manager has estimated the rates of bad debt losses as follows:

Not yet

Number of Days Past-due

due

1 - 30

31 - 60

> 60

Estimated Uncollectible%

2%

8%

18%

38%

The account of Allowance for Doubtful Accounts has a $6,224 credit balance on 1 Jan. 2021.

Instructions:

Prepare journal entries to record the transactions during the 1" quarter of 2021. (50 marks)

2.

Prepare adjusting entries to record the depreciation expenses incurred during the I' quarter of

2021. (5 marks).

3.

4

Prepare an adjusting entry to record the estimated bad debts on 31 March 2021. (6 marks).

Prepare the section of Stockholders' Equity to be reported on Balance Sheet as at

31 March 2021 (14 marks).

Part 1: Journal entries, adjusting entries, calculation and the section of Stockholders' Equity (75 marks) Roma Inc., a merchandising company, has begun its business since 1 Jan. 2017. The selected information from the accounting records on 1Jan.2021 is as follows. - The account of Retained Earnings has a credit balance of \$267,000. - The company uses a perpetual inventory system and LIFO for its inventory, reporting the beginning inventory as follows: 700 units at a unit cost of $82 (purchased on 7 Dec. 2020) 400 units at a unit cost of $84 (purchased on 22 Dec. 2020) - The information of stock-related accounts: Additional information for adjustments 1. For the machines purchased on 1 Jan. 2021, the company uses the double declining balance method. They are expected to be used for 4 years, with the residual value of $1,700. To depreciate the factory purchased on 1 Jan. 2021, the company uses the straight-line method over 20 years, with a residual value of $16,960. 2. The company uses the Aging of Accounts Receivable method to estimate bad debts. The company has the following information of the past-due receivables amounts as at 31 March 2021. Based on past experiences, a manager has estimated the rates of bad debt losses as follows: The account of Allowance for Doubtful Accounts has a \$6,224 credit balance on 1 Jan. 2021. Instructions: 1. Prepare journal entries to record the transactions during the 1st quarter of 2021 . (50 marks) 2. Prepare adjusting entries to record the depreciation expenses incurred during the 1st quarter of 2021. (5 marks). 3. Prepare an adjusting entry to record the estimated bad debts on 31 March 2021. (6 marks). 4. Prepare the section of Stockholders' Equity to be reported on Balance Sheet as at 31 March 2021 (14 marks). Part 1: Journal entries, adjusting entries, calculation and the section of Stockholders' Equity (75 marks) Roma Inc., a merchandising company, has begun its business since 1 Jan. 2017. The selected information from the accounting records on 1Jan.2021 is as follows. - The account of Retained Earnings has a credit balance of \$267,000. - The company uses a perpetual inventory system and LIFO for its inventory, reporting the beginning inventory as follows: 700 units at a unit cost of $82 (purchased on 7 Dec. 2020) 400 units at a unit cost of $84 (purchased on 22 Dec. 2020) - The information of stock-related accounts: Additional information for adjustments 1. For the machines purchased on 1 Jan. 2021, the company uses the double declining balance method. They are expected to be used for 4 years, with the residual value of $1,700. To depreciate the factory purchased on 1 Jan. 2021, the company uses the straight-line method over 20 years, with a residual value of $16,960. 2. The company uses the Aging of Accounts Receivable method to estimate bad debts. The company has the following information of the past-due receivables amounts as at 31 March 2021. Based on past experiences, a manager has estimated the rates of bad debt losses as follows: The account of Allowance for Doubtful Accounts has a \$6,224 credit balance on 1 Jan. 2021. Instructions: 1. Prepare journal entries to record the transactions during the 1st quarter of 2021 . (50 marks) 2. Prepare adjusting entries to record the depreciation expenses incurred during the 1st quarter of 2021. (5 marks). 3. Prepare an adjusting entry to record the estimated bad debts on 31 March 2021. (6 marks). 4. Prepare the section of Stockholders' Equity to be reported on Balance Sheet as at 31 March 2021 (14 marks)