You are working on the preparation and analysis of the financial statements of Bata Footware Ltd., a privately owned company for the year ended October 31, 2020.

Bata is a wholesale company that purchases a wide variety of footware from manufacturers in Canada, the US and Australia and distributes them to retail shoe stores in Alberta. Bata was started by three siblings in Alberta in 2011 and they own 90% of the common shares, shared equally. The remaining 10% is owned by their retired father who does not participate in the day-to-day running of the business.

On November 1, 2019, the company expanded its operations by acquiring a state-of-the-art distribution warehouse in Red Deer for $2 million. Up to then they rented a small warehouse in Okotoks. The expansion was financed in part by issuing a bond with par value of $1,000,000 with 10 year maturity to private investors at a 7% coupon interest rate. The investors had an expected a return of 9% for this business. Semi-annual interest payments are made on May 1 and November 1 each year.

Also, on November 1, 2019, an additional $800,000 loan at 4% interest was borrowed over 10 years from Alberta Bank. Annual fixed principal plus interest payments are to be made on November 1 each year. The bank may demand repayment of the loan at any time.

In May 2020, the owners hired a new sales manager to spearhead a sales drive into Saskatchewan. As of October 31 2020 she has been successful in adding $950,000 to the company sales revenue in the 2020 fiscal year. Her budget target was $540,000 for the six months to October 31, 2020. She is remunerated by a monthly cash salary and a bonus of 10% of total sales, paid every three months. She was paid $30,000 in August 2020 for her first three months sales.

In October 2020 the father decided to retire from the business. He stated that he would not sell his shares to any outsider and wanted them re-purchased and cancelled by the company. On the15th of October 2020 he was paid $90,000 for his shares. This was recorded as:

DR Common shares receivable -Dad $90,000

CR Cash $90,000

The unadjusted trial balance for the year ended October 31, 2020 is provided in an excel spreadsheet Bata Unadjusted Trial Balance on Blackboard (the 2019 Income Statement and Balance Sheet is also provided in sheet 2)

INSTRUCTIONS AND REQUIREMENTS (PLEASE READ CAREFULLY)

PART A SPREADSHEET SETUP AND SHEET LABELLING

REQUIRED:

1. Download the excel spreadsheet Bata Unadjusted Trial Balance from Blackboard and save the file as Bata Year End. Using Sheet 1 Student Worksheet prepare a complete worksheet using the appropriate format.
2. Label Sheet 3 Journal Entries, and based on the information in the case and the additional information provided record the appropriate adjusting and correcting entries in general journal format. Additional information is provided in Exhibit 1.
3. Label Sheet 4 Bank Reconciliation Statement and in this sheet you will reconcile the company cash account to the Bank Statement balance provided in Exhibit 1.
4. Label Sheet 5 Financial Statements and in this sheet you will prepare the 2020 Income Statement, Balance Sheet and Cash Flow Statement using the indirect method. You will present the 2019 comparatives with the 2019 statements.
5. Label Sheet 6 Financial Statement Analysis Calculations and workings. Here you will present the entire set of ratio and other relevant calculations used in your analysis.

PART B - ACCOUNTS PREPARATION

REQUIRED:

1. In the Worksheet tab prepare a worksheet using the format already shown on the excel spreadsheet.

When preparing your worksheet, try to link directly to your adjusting journal entries so that if later you need to correct an entry, Excel will automatically correct your worksheet.

Your instructor must be able to trace your journal entries to your worksheet so do not combine adjusting entries on your worksheet, create additional adjusting entry columns where necessary.

2. In the Journal Entries tab record the appropriate adjusting (and correcting) entries in general journal format based on the information in the case and the additional information provided in Exhibit 1. Show calculations where relevant.

3. Prepare a bank reconciliation at October 31, 2020 to support your adjusted year-end cash balance and record the appropriate adjusting journal entries.

4. In the Financial Statements tab you will prepare the 2020 Income Statement, Statement of Retained earnings, Balance Sheet and Cash Flow Statement (using the indirect method). Try to link the numbers in your Income Statement and Balance Sheet directly to the appropriate columns in the worksheet. Also, try to link the cash flow statement to the worksheet, other financial statements and/or any other calculations as appropriate. Dont forget to also present the 2019 comparatives with the 2020 statements.

5. Financial Statement Analysis tab: refer to chapter 18 of your textbook (Weygandt et al) and the Ratio handout sheet to assist you in your analysis.

1. Calculate two each of the liquidity, profitability and solvency ratios for 2020 that you consider relevant, along with 2019 comparatives. Make sure that calculations are consistent from year to year.
2. Prepare a vertical and horizontal analysis of the Income Statement and Balance Sheet. .

NOTE: a maximum of two ratios per category will be graded.

Additional Information for adjusting and correcting entries and the financial statements:

1. The inventory count on October 31, 2020 included $10,000 of damaged footware and was not saleable. This inventory is included in the inventory reported on the unadjusted trial balance and no adjustment was made in the accounts.
2. The company received $35,000 of slippers on November 14, 2020, that had been shipped by the supplier October 29, 2020, FOB destination. This inventory is included in the inventory reported on the unadjusted trial balance as the bookkeeper had received an invoice on October 29 and recorded it immediately.
3. On June 1, 2020 the company renewed its annual insurance policy for $15,000. The full amount was paid and expensed on that date.
4. During the year the company sold old office and storage equipment from the rented warehouse with an original cost of $70,000. This was the only sale of property, plant & equipment during the year and it was recorded correctly.
5. The depreciation for 2020 has been calculated correctly and is as follows:

Buildings $80,000

Warehouse equipment - $25,000

Office and selling equipment $13,500

6. The balance on the October 31, 2020 bank statement was $16,879 overdraft. Included in the statement are the following items that have not yet been recorded in the cash account:

1. An NSF customer returned cheque for $1,500, plus a $50 admin fee.
2. A debit memo of $720 for bank service charges and overdraft fees.
3. An EFT deposit of $3,150 was received from Top Notch Shoes Ltd.

Deposits of $5,000 were made into the bank account on October 30 but it did not appear on the October 31 bank statement. After comparing the cheques recorded in the books with the cheques listed in the bank statement, it was determined that cheques for $ 12,541 were still outstanding.

7. It is estimated that 3% of the accounts receivable may not be collected.
8. A common share dividend of $3 per share was declared on October 10, 2020 for shares held on November 10, 2020. Dividends will be paid on November 15, 2020.
9. The companys tax rate is 15%.
10. Little Rock prepares annual adjusting entries and does not use reversing entries. All sales and purchases are made on account.

I have posted the whole entire question now, basically i just need help with Part A number 2, the journal entries.

Team Project Winter 2021 BATA FOOTWARE LTD. Ltd. Worksheet At October 31, 2020 Adjusting Entries DEBIT Adjusted Trial Balance DEBIT CREDIT Income Statement DEBIT Balance Sheet DEBIT CREDIT CREDIT CREDIT Cash Accounts receivable Prepaid insurance Inventory Buildings Warehouse equipment Accumulated depreciation Office and storage equipment Accumulated depreciation Accounts payable Bonds payable Bank loan Common shares Common Shares receivable - Dad Retained earnings Sales Cost of goods sold Insurance expense Sales and warehouse salaries Sales bonus Office and administrative expenses Distribution & warehouse expenses Gain on sale of office equipment Interest expense Unadjusted Trial Balance DEBIT CREDIT $25,300 $885,500 $8,200 $628,800 $2,000,000 $751,000 $154,200 $320,000 $30,000 $535,382 $869,921 $800,000 $500,000 $90,000 $1,036,847 $6,707,000 $3,831,350 $15,000 $833,000 $30,000 $210,000 $1,022,800 $2,000 $35,000 $10,660,650 $10,660,650 Team Project Winter 2021 BATA FOOTWARE LTD. Ltd. Worksheet At October 31, 2020 Adjusting Entries DEBIT Adjusted Trial Balance DEBIT CREDIT Income Statement DEBIT Balance Sheet DEBIT CREDIT CREDIT CREDIT Cash Accounts receivable Prepaid insurance Inventory Buildings Warehouse equipment Accumulated depreciation Office and storage equipment Accumulated depreciation Accounts payable Bonds payable Bank loan Common shares Common Shares receivable - Dad Retained earnings Sales Cost of goods sold Insurance expense Sales and warehouse salaries Sales bonus Office and administrative expenses Distribution & warehouse expenses Gain on sale of office equipment Interest expense Unadjusted Trial Balance DEBIT CREDIT $25,300 $885,500 $8,200 $628,800 $2,000,000 $751,000 $154,200 $320,000 $30,000 $535,382 $869,921 $800,000 $500,000 $90,000 $1,036,847 $6,707,000 $3,831,350 $15,000 $833,000 $30,000 $210,000 $1,022,800 $2,000 $35,000 $10,660,650 $10,660,650