The Pizza and Coffee Company

Trial Balance as of December 31, 2020

A/C Name	Trial Balance
	DR	CR
Cash	560,000
Accounts receivable	3,710,000
Allowance for bad debt		290,000
Merchandise Inventory	2,580,000
Store Supplies	1,300,000
Prepaid Insurance	2,775,000
Prepaid rent	1,000,000
Furniture	2,650,000
Accumulated deprecation-Furniture		2,080,000
Machinery	1,800,000
Accumulated depreciation- Machinery		1,328,141
Accounts payable		630,000
Salary payable
Interest payable
Unearned Sales revenue		800,000
Note Payable, long term		2,500,000
Patty Patterson, Capital		5,200,000
Patty Patterson, Withdrawals	280,000
Sales revenue		22,726,859
Sales discount	1,200,000
Sales returns and allowances	800,000
Cost of goods sold	8,100,000
Salaries expense	7,270,000
Insurance Expense
Utilities Expense	580,000
Rent Expense	950,000
Depreciation Expense Furniture
Depreciation Expense Machinery
Store Supplies Expense
Gain on Disposal of Machinery
Bad-Debt Expense
Interest Expense
	35,555,000	35,555,000

The following additional information is available December 31, 2020:

1. Store Supplies on hand on December 31, 2020, amounted to $255,500.
2. Insurance of $2,775,000 was paid on January 1, 2020, for the 15-months to March 31, 2021
3. Prepaid rent expired December 31, 2020, amounts to $850,000
4. The furniture and fixtures have an estimated useful life of 10 years and is being depreciated on the straight-line method down to a residual value of $50,000.
5. The machinery cost includes two coffee drink machines purchased for $900,000 each by the company on January 1, 2014. The double-declining balance method of depreciation is used to compute the machinerys depreciation charges and their expected useful life is 10 years or 100,000 drinks. In 2014, 5,000 drinks were sold, 6,500 in 2015, 7,800 in 2016, 9,000 in 2017, 11,500 in 2018, 12,800 in 2019 and 15,900 sold in 2020. The residual value on both machines is $96,637 each. On September 1, 2020, the company sold one of the coffee drinks machines for $480,000 cash.
6. Salaries earned by employees and not yet paid amounted to $180,000 on Dec 31, 2020.
7. Accrued interest expense as of December 31, 2020, $98,000.
8. On Dec 31, 2020, $695,000 of the previously unearned sales revenue had been earned
9. The aging of the Accounts Receivable schedule on Dec 31, 2020, indicated that the

Allowance for Bad Debts should be $371,000

10. A physical count of inventory was done on December 31, 2020, after making all the other adjustments and this revealed that there was $2,400,000 worth of inventory on hand at this point.

Other data:

11. The business is expected to make principal payments totalling $400,000 towards the loan during the fiscal year to December 31,2021.

Required:

1. Prepare the necessary adjusting journal entries on Dec 31, 2020.

b. Prepare the Adjusted Trial balance for the period ending December 31, 2020

3. Using the Adjusted trial balance, generate the statements requested by Ready Cash, i.e.
   • A Multiple-step income statement & a Statement of owners equity for the year ended December 31, 2020
   • A Classified balance sheet, in report format, at December 31, 2020.