Section C Question 3 (10 marks) Smart Toys, Inc ("STI") Unadjusted Trial Balance As at 31 March 2020 Accounts Payable Accounts Receivable Accumulated Depreciation - Building Accumulated Depreciation -Equipment Allowance for Doubtful Accounts Bad Debt Expense Building Cash Depreciation Expense - Building Depreciation Expense - Equipment Dividends Payable Equipment Freight-in Freight-out Insurance Expense Interest Expense Interest Payable Interest Receivable Interest Revenue Long-term Investment Gain/ Loss on Disposal Merchandise Inventory Miscellaneous Expense Notes Payable Notes Receivable Ordinary Share Dividends Distributable Prepaid Insurance Purchase Discounts Purchase Returns and Allowances Purchases Retained Earnings Salaries Expense Salaries Payable Dr $ 271,160 5,474 6,480,000 656,543 660,000 400 500 2,500,000 6,128 650,000 210,000 12,000 193,000 38,500 Cr $ 143,900 496,800 380,000 335,200 100,000 3,717 1,900 112,348 Sales Returns and Allowances 980 Sales Revenue 446,960 4,400,000 Share Capital - Ordinary Share Capital - Preference Share Premium - Ordinary 4,000,000 1,000,000 Share Premium - Preference 200,000 Share Premium - Treasury Supplies 10,140 Supplies Expense Treasury Shares 46,000 Unearned Revenue 120,000 Utilities Expense XXXXXXXX XXXXX The following information is available on 31 March 2020 for preparation of adjusting entries: (a) Electricity incurred for the month amounted to $4,800. (b) All employees worked for the whole month of March. The employees have a total salary of $27,500 for a five-day work week. All employees work a five-day week and are paid every four weeks on the following Wednesday, based on the number of days they have worked in the last four weeks. Last payment day is on 11 March 2020 (Wednesday). STI paid $110,000 ($27,500 x 4) for salary up to 10th March 2020 (Tuesday). Employees are entitled to full pay on public holidays but not on Saturday and Sunday. (c) (i) Building, (ii) equipment and are recorded at historical cost and their estimated useful lives are 45 years and 5 years respectively. No residual value is expected for the building. The building was acquired on 1 May 2016. The company uses straight-line method for all buildings. All the equipment is acquired on 1 January 2017. The company uses unit of activity method to depreciate equipment. The company expects that the salvage value of the equipment is 10% of the purchase cost. The equipment is for packing and the total amount of packing for 5 years are estimated to be 594,000 units. The total packing in March amounted to 9,900 units. (d) Physical count showed that $4,000 of supplies remained on hand. (e) Physical count showed that $788,000 of merchandise inventory remained on hand at 31 March 2020. (f) The prepaid insurance was paid in January 2020 covering a 12-month general insurance from 1 January 2020 to 31 December, 2020. (g) Allowance for bad debt is estimated based on 10% of the closing accounts receivable balance due to dramatical down turn of the economy. (h) Recognize interest expense for the month. (Information of the notes payable: On 13 March 2020, STI purchased $100,000 inventory by signing a 90-day, 5% notes payable.) (i) Recognize interest revenue for the month. (Information of the notes receivable: Queenie Company Limited, a customer, has financial difficulties and unable to pay the outstanding balance of $210,000 due on 16 March 2020. STI has a long-term relationship with Queenie, and agreed to accept a 12%, 60-day notes from the customer to settle the outstanding balance.) Smart Toys, Inc ("STI") is a well establish toys trading company which adopts the periodic system. STI prepares its financial statements on a monthly basis. Required: Journalize the adjusting entries for the information (a) to (i) for the month of March at 31 March 2020. Leave the space blank if no entry is required. All the accounts in the chart of accounts are listed in the Unadjusted Trial Balance provided. No Explanation is required