THE FASHION RACK The Fashion Rack is a retail merchandising business that sells trendy clothing at discounted prices. The business is owned and managed by Cady Heron who started the business on April 1, 2021. The Fashion Rack has a monthly accounting period. The employees are paid at the end of the month. The firm uses a general journal to record all its transactions. The business also maintains a general ledger for posting and determining of monthly account balances. The Chart of Accounts is shown below. THE FASHION RACK Chart of Accounts ASSETS REVENUES/CONTRA-REVENUES Cash Sales Accounts Receivable Sales Returns and Allowances Allowance for Doubtful Accounts Sales Discounts Merchandise Inventory Store Supplies COST OF SALES Prepaid Advertising Expense Purchases Prepaid Insurance Expense Freight-In Prepaid Interest Expense Purchase Returns and Allowances Equipment Purchase Discounts Accumulated Depreciation - Equipment Furniture EXPENSES* Accumulated Depreciation - Furniture Freight-Out Advertising Expense LIABLITIES Store Supplies Expense Accounts Payable Insurance Expense Notes Payable Janitorial Services Expense Utilities Payable Rent Expense Salaries Expenses OWNER'S EQUITY Utilities Expense Heron, Capital Depreciation Expense - Equipment Heron, Drawing Depreciation Expense Furniture Income Summary Doubtful Accounts Expense Interest Expense Interest Expense * Should be properly classified as to Distribution Expense and Administrative Expense in the functional form income statement and its notes.PART I - INSTRUCTIONS IN ACCOMPLISHING THE GROUP BUSINESS CASE STEP 1a - Using the EXCEL spreadsheet, enter YOUR OUTPUT for the following parts of the business case on the following Excel sheets (submit all 6 parts later as a single Excel file) - 85 % Sheet 1 - Journalizing (no peso signs) Sheet 2 - Worksheet (no peso signs) Sheet 3 - Functional-form Income Statement with notes and Statement of Changes in Equity (put peso signs) Sheet 4 - Report-form Statement of Financial Position with notes (put peso signs) Sheet 5 - Adjusting Entries, Closing Entries, and Reversing Entries (no peso signs) Sheet 6 - Post-Closing Trial Balance (put peso signs) STEP 1b - To be submitted as a Portable Document File (PDF) together with the single Excel file - 15% Analysis of Business Operations (See Part II on page 6) STEP 2 - Journalize the following transactions of the entity for the whole month of October 2021 using Excel Sheet 1. Explanation for each entry is NOT required. Just provide one blank line after each completed journal entry. Please refer to the Chart of Accounts for the correct account to use. October 2021 1 Issued a check for P44,000 to Properties Management, Inc. for the October rent. 2 Signed a three-month radio advertising contract with Cable Station for P51,000 and issued a check to pay the full amount. 3 Received P20,678 from Erin Quinn, a credit customer, in full payment of her account amounting to P21,100. The customer paid in full within the discount period. 4 Issued a check for P76,734 to A. Fashion Statement, a creditor, as full payment of its account with a balance of P78,300. The full payment was within the discount period. 5 Sold merchandise on account to Alex Wilder for P30,000, on terms 2/10, 1/15, n/30. Trade discounts of 20%% and 10%% were given to Alex Wilder. Paid freight of P500. 6 Bought for cash store supplies worth P10,500 from ABC Supply. - next page -B 10 13 14 15 10 I? 18 19 20 21 23 25 26 28 29 30 31 Received the amount of P16.830 from Miguel Diaz. a credit customer, in payment of his account with a balance of PI 1000. The customer paid in full within the discount period. Received a cash refund from ABC Supply for returning defective store supplies worlh H.500. Issued a credit memo to Alex 1Wilder amounting to H.000 for defective merchandise returned by him. Sold merchandise on account to Jane Hopper for P20.500 on terms 2(10. n,-'30. Purchased merchandise on account from Unique Styles for P413200 on terms 2115. nf30. Paid freight of Pl.000. Sold merchandise for cash. P318.000. Purchased merchandise from A. Fashion Statement for P?0.000 on terms 20% down payment. balance 2.110. nf30. Paid freight of P2.000. Cady Heron withdrew the following for personal use: P20.000 cash; store supplies. P2.000: and merchandise worth PI0.0-00. Received credit memo amounting to P1000 from Unique Styles as a price reduction for merchandise delivered with wrong specications. Received P5.000 from .lane Hopper as partial payment of her account. Collected the account of Alex Wilder in full. Issued a check for P15.000 as partial payment of account with Unique Styles. Collected the account of Jane Hopper in full. Issued a check for P10.000 to A-Plus Janitors for Cctoberjanitorial services. Paid in full account with A. Fashion Statement. Issued a checkfor P50.000 to Classy Trends representing partial settlement of account. Paid in full account with Unique Styles. Paid the salaries of the store manager and two store assistants. P40.000. Sold merchandise for cash. P160400. - next page - STEP 3 - You are NOT required do any posting process anymore. Your teacher has done it for you to save on time. Your job now is to enter the following TRIAL BALANCE of the entity to your Worksheet, on Excel Sheet 2. The worksheet contains five (5) sections with debit and credit columns for each section: Trial Balance. Adjustments, Adjusted Trial Balance, Income Statement, and Statement of Financial Position. The figures below are entered on the worksheet under the Trial Balance section (use the first two columns of the worksheet). Trial Balance Accounts Debit Credit Cash 727,952 Accounts Receivable 24,000 Allowance for Doubtful Accounts 4,200 Merchandise Inventory 889,960 Store Supplies 48,000 Prepaid Insurance Expense 84,000 Prepaid Advertising Expense 51,000 Equipment 200,000 Accumulated Depreciation - Equipment 18,000 Furniture 300,000 Accumulated Depreciation - Furniture 30,000 Accounts Payable 54,700 Heron, Capital 1,939,860 Heron, Drawing 32,000 Sales 520,500 Sales Discounts 1,158 Sales Returns and Allowances 6,000 Purchases 108,200 Purchase Discounts 3510 Purchase Returns and Allowances 7,000 Freight-In 3,000 Freight-Out 500 Rent Expense 44,000 Janitorial Services Expense 10,000 Salaries Expense 48,000 TOTAL 2,577,770 2,577,770 - next page -STEP 4 - Prepare the formal adjusting entries based on the information below, using the first two columns of your Excel Sheet 5. By now, you should already know how to format the columns of the Excel spreadsheet for your general journal. (a) On October 31, the firm received its utilities bill for the month of October amounting to P14,300. This remains unpaid at month-end. Record an adjustment for the utilities for the month of October. (b) On October 31, an inventory of the store supplies showed that items costing P27,400 were on hand. Record an adjustment for the cost of supplies that were used in October. (c) On September 30, 2021, the firm purchased a six-month insurance policy for P84,000. Record an adjustment for the expired insurance in October. (d) On October 1, 2021, the firm signed a three-month advertising contract for P51,000 with a local cable telvision station and paid the full amount in advance. Record an adjustment for the used advertising for October. (e) On April 1, 2021, the firm purchased an equipment for P200,000. The equipment was estimated to have a useful life of five years and a salvage value of 10%% of cost. Record an adjustment for depreciation on the equipment for October. (f) On April 1, 2021, the firm purchased furniture for P300,000. The furniture was estimated to have a useful life of five years with no salvage value. Record an adjustment for depreciation on the furniture for October. (g) The Allowance for Doubtful Accounts is to be increased by 1/2 of 1% of accounts receivable. Record an adjustment for the expected loss from uncollectible accounts for the month of October. (h) Based on a physical count, ending inventory was determined to be P648, 160. STEP 5- Enter the computed amounts of adjustments under the next two columns of the Worksheet (Adjustments section) as your debits and credits. (This will be explained later during our discussion on how to prepare the worksheet.) STEP 6 - Extend the amounts to the remaining three (3) sections of the Worksheet: Adjusted Trial Balance, Income Statement, and Statement of Financial Position. (This step will also be explained when I will discuss worksheet preparation.) - next page -STEP 7 - After completing the Worksheet, you can prepare now the three (3) financial statements using Excel Sheet 3 for the Functional-form Income Statement with its notes and the Statement of Changes in Equity. Use Excel Sheet 4 for the report-form Statement of Financial Position with its notes. STEP 8 - After all the three financial statements have been prepared, the end-of- period journal entries must now be prepared and entered in Excel Sheet 5 where the adjusting entries have already been entered previously. The closing entries are obtained from the Income Statement section of the worksheet and entered below the adjusting entries. Only letter (a) of the adjusting entries needs to be reversed and this lone reversing entry is entered below the closing entries. STEP 9 - The Post-Closing Trial Balance is prepared and entered in Excel Sheet 6. PART II - ANALYZING THE RESULTS OF OPERATIONS BASED ON THE COMPLETED FINANCIAL STATEMENTS OF THE FASHION RACK (15%%) This is the most important part of your GROUP business case. You are to ANALYZE the results of operations of the firm based on the figures presented on the two basic financial statements-the functional-form Income Statement and report-form Statement of Financial Position. Using Microsoft Word (to be saved as PDF before submitting), please develop a one-page, two-paragraph report on the firm's business operations, closely following the guidelines below: First Paragraph: Describe the specific business of the firm, the type of clients that it caters to, and its credit policies. Explain the result of the firm's operations for the month ended October 31, 2021 by referring to the Income Statement. Second Paragraph: If you were Cady Heron, will you be satisfied with the results of your business operations? Explain your positive or negative response. Is there a need to improve the firm's performance? If yes, what strategies should be adopted by Cady Heron? Cite at least three (3) practical strategies that the owner can undertake under the present situation. You may also refer to the Statement of Financial Position or better still, you may conduct research thru the internet on the topic, How to Improve the Performance of a Business Entity. NOTE: I expect the report to be simple, straightforward, and COHERENT. Please observe good English grammar and correct spelling