Mike Right is the owner and operator of Right’ s Merchandizing Company and the c
ID: 2548213 • Letter: M
Question
Mike Right is the owner and operator of Right’ s Merchandizing Company and the company has presented the following unadjusted trial balance at the end of their financial year ending December 31, 2016.
Right’s Merchandizing Company
Trial Balance as at December 31, 2016
A/C Name
DR $
CR $
Cash
1,500,000
Accounts Receivable
4,580,000
Interest Receivable
Merchandise Inventory
5,400,054
Prepaid Insurance
1,200,000
Furniture and Equipment
6,000,000
Accumulated Depreciation –Furniture/Equipment
1,770,000
Accounts Payable
1,450,000
Sales Commission Payable
Salaries Payable
Unearned Sales Revenue
6,400,054
Mike Right, Capital
8,000,000
Mike Right, Withdrawal
1,000,000
Sales Revenue Earned
21,668,000
Interest Revenue
Sales Discount
115,000
Sales Returns and Allowances
248,000
Cost of Goods Sold
9,210,000
Travelling Expense
225,000
Sales Commission Expense
2,150,000
Salaries Expense
4,500,000
Rent Expense
1,800,000
Utilities Expense
849,000
Depreciation Expense-Furniture/Equipment
Insurance Expense
Advertising Expense
345,000
General Expense
166,000
__________
Total
39,288,054
39,288,054
The following additional information was made available at December 31, 2016
Interest revenue earned at December 31, 2016 but not yet recorded $250,000.
Insurance prepaid includes an expired amount of $1,000,000 relating to the period January to December 31, 2016.
Furniture and Equipment has an estimated life of ten (10) years and is being depreciated on the straight-line method of depreciation, down to a residual value of $100,000.
Unearned sales revenue still unearned as at December 31, 2016 amounts to $2,400,054.
Salaries expense owing as December 31, 2016 amounts to $450,000
Accrued sales commission expense as at December 31, 2016 amounts to $450,000.
Inventory on hand was $5,500,000 as at December 31, 2016.
Required:
Prepare the necessary adjusting journal entries on December 31, 2016
Prepare Right’s Merchandizing Company multiple-step income statement for the year ended December 31, 2016.
Prepare the company’s statement of owner’s equity for the year ended December 31, 2016
Prepare the company’s classified balance sheet at December 31, 2016
A/C Name
DR $
CR $
Cash
1,500,000
Accounts Receivable
4,580,000
Interest Receivable
Merchandise Inventory
5,400,054
Prepaid Insurance
1,200,000
Furniture and Equipment
6,000,000
Accumulated Depreciation –Furniture/Equipment
1,770,000
Accounts Payable
1,450,000
Sales Commission Payable
Salaries Payable
Unearned Sales Revenue
6,400,054
Mike Right, Capital
8,000,000
Mike Right, Withdrawal
1,000,000
Sales Revenue Earned
21,668,000
Interest Revenue
Sales Discount
115,000
Sales Returns and Allowances
248,000
Cost of Goods Sold
9,210,000
Travelling Expense
225,000
Sales Commission Expense
2,150,000
Salaries Expense
4,500,000
Rent Expense
1,800,000
Utilities Expense
849,000
Depreciation Expense-Furniture/Equipment
Insurance Expense
Advertising Expense
345,000
General Expense
166,000
__________
Total
39,288,054
39,288,054
Explanation / Answer
1)
2)
Right’s Merchandizing Company
multiple-step income statement
for the year ended December 31, 2016.
3)
statement of owner’s equity
for the year ended December 31, 2016
4)
Balance sheet
as on December 31, 2016
Date Account Debit credit December 31, 2016 a Interest Receivable 250000 Interest revenue 250000 b Insurance expense 1,000,000 Prepaid Insurance 1000000 c Depreciation expense 590,000 Accumulated Depreciation –Furniture/Equipment 590,000 d Unearned sales revenue 4,000,000 sales revenue 4,000,000 [revenue earned6400054-2400054] e salaries expense 450000 salaries payable 450000 f sales commission 450000 Sales Commission Payable 450000 g Merchandise inventory 99946 Accounts payable 99946 [Inventory purchased 5,500,000- 5,400,054]