Tors Party & Rentals (TPR) is a party and novelty store located just north of Windsor. TPR is a private company, and was founded in 2008 by Amanda Harkings. TPR sells all kinds of party needs, from balloons to loot bags, and from gift wrap to food items. TPR also sells party supplies for special holiday occasions and huge sporting events. TPR has a party room on location that can be booked for parties and other special events. TPR has a December 31 year end and operates by using a fairly simple accounting structure. Jessica Altooze has been the bookkeeper for TPR since it opened in 2008 and has been diligent in recording the journal entries and preparing the year-end financial statements.In November 2020, Jessica won the lottery and immediately retired from the bookkeeping business and moved to South Carolina. This left Amanda on her own and without any real skills in accounting. Amanda immediately asked her auditor for someone with an accounting background to help her and you were hired as a result.

TPR had one major creditor at the beginning of 2020. One of the major banks loaned TPR $500,000 for ongoing operating costs. The outstanding portion of the loan was $400,000 at the beginning of the year. The bank requires TPR to maintain a current ratio of 1.8:1 or the loan may become immediately repayable. It also requires TPR to have a debt to total asset ratio of no greater than 55%. It is now early January 2021 and you have an unadjusted trial balance (Exhibit I). Not all 2020 year-end journal entries have been made yet, but any unrecorded adjusting journal entries can be found in Exhibit II.

	Debit	Credit
Cash	$ 49,000
Accounts receivable	$ 2,300
Merchandise inventory	$ 312,000
Prepaid insurance	$ 2,200
Prepaid advertising	$ 1,000
Cash register machines	$ 8,300
Accumulated depreciationCash register machines		$ 4,400
Equipment	$ 324,000
Accumulated depreciationEquipment		$ 88,000
Accounts payable		$ 18,000
Salaries payable
Accrued liabilities		$ -
Unearned revenue		$ 1,100
Interest payable
Dividend payable		$ -
Income taxes payable
Loan payableBalloon machine		$ 30,000
Long-term loanBuilding		$ 385,000
Common shares		$ 35,000
Retained earnings		$ 42,300
Sales revenue		$1,036,000
Room rental revenue		$ 43,000
Cost of goods sold	$ 502,000
Hydroelectricity expense	$ 83,000
Telephone expense	$ 23,000
Interest expense	$ 15,000
Salary expense	$ 318,000
Insurance expense	$ 10,500
Supplies expense	$ 8,300
Advertising expense	$ 3,200
Depreciation expense (all assets)	$ -
Miscellaneous expense	$ 21,000
Legal expense
Income tax expense
Dividends
	$1,682,800	$1,682,800

1- Use the information in the case to prepare necessary adjusting journal entries at December 31, 2020.

2-Post the entries from questions 1 to the T-accounts provided and calculate the ending balance in each account.

3-Prepare an adjusted trial balance (pre-closing) at December 31, 2020

4-Based on your ending balances, prepare necessary closing journal entries at December 31, 2020

5-Prepare the income statement for 2020

6-Prepare the statement of retained earnings for 2020

7-Prepare a classified balance sheet at December 31, 2020