Velvet Turtle Company purchases t1-shirts from the suppliers and sells them through the Company's website. The Company adjusts its accounts monthly, closes is accounts annaly on 31 December and adopts a periedic inventers wstem. The unadjusted trial balance of Velver Turtle Company at 31 December 2019 was as follous: Vevet Turtle Company Unadjusted Trial Balance 31 December 2019 Debit Credit 67625 Cash Accounts receivable Inventory (as at January 2019) Prepaid insurance Office supplies Fixtures and equipment Accumulated depreciation : fixtures and equipment Accounts payable 6% Note pavable Salaries payable Uncamed revenue Interest payable Income tax payable Ordinary shares capital, S3 par value Retained earnings Sales revenue Sales returns and allowance II5,475 39.750 105.000 1e.000 36,250 16.900 75,000 3.000 12.000 750 90,000 300.000 266300 2.525.000 156.000 Purchases 821.250 6250 242.000 Supplies expense Rent expense Depreciation expense Interest expense Insurance expense Salaries expense Advertising espense Income tax espense 6250 750 75,000 657,750 I8K.000 103.600 Total Page 3 of 15 The following transactions'adjusting entries have not yet been recondediadjusted as at 31 December 2019: (1) On 1 June 2019 Velvet Turtle pre-paid a one-year insurance peolicy, effective on 1 July 2019 (2) All salaries that Velvet Turtle owed to its staff were paid out on 3I December 2019. (3) In December 2019, the Velvet Turtle promotes its business by placing advertisement through a web platform. The advertising fee of S50,000 will be puaid on 15 January 2020. Velvet Turtle purchases supplies of S1,000 on account in December 2019. Office supplies on hand as at 31 Decomber 2019 was $300. (4) (5) Recently, a customer has serious skin allergy after wearing the thits of Velvet Turtle and is suing Velvet Tunle for compensation of S500,000. Velvet Tuntle's Lawyer regards the claim as remote and it is considered as the liability of the manufacturer. On 31 December 2019, Velvet Turtle delivered S5,000 of thits that were previously paid by the customer and recorded as uncamed revenue. On the same day the Company received another S2,000 in advance for t-shirts to be delivered nest month (6) On I October 2019, the Company borrowed S75,000 from Hungry Tiger Company by signing a six months' notes payable at 6% iterest per annum. The entire note will be due for payment next March but interest were paid quarterly ie at the end of every three months. The payment has not yet been recorded. (7) (8) Velvet Turtle estimates that the income taxes expense for the entire year is $ 100,800. The amount will be due in March 2020. Velvet Turtle uses straight-line depreciation method. Estimated useful life of the fixtures and equipment is 8 years and estimated residual value is $10,000. Depreciation expense of the fixtures and equipment is only adjusted up to the end of May. Required (a) Prepare the necessary journal entries to update the financial records of Velvet Turtle Company as of 31 December 2019. If any item above does not require adjusting entry, state No entry" and short explanation is required. (23 marks) (b) On 31 December 2019, closing inventory was determined at $48,500 by a year-end stock take. Prepare the Income Statement of Velvet Turtle Company showing the captions with figures of net sales, gross profit, profit before tax and profit after tax for the year ended 31 December 2019. (12 marks)