Question

Question #02: a) “Multiple-step income statement and Classified balance sheet are widely used by medium and large companies”. Do you think so? Justify your opinion. [02] b) Adjusting entries are required every time a company prepares financial statements. What are the reasons behind it? [02] c) The adjusted balances of Mahira Department Store's worksheet for the year ended November 30, 2019, are as follows: Mahira Department Store Trial Balance November 30, 2019 Account Titles Dr. Cr. Account Titles Dr. Cr. (Tk.) (Tk.) (Tk.) (Tk.) Cash 1,10,000 Inventory 20.000 Accounts receivable 40,000 Utilities Expenses 6,000 Accounts payable 25,000 Advertising Expenses 15,000 Equipment 2,60,000 Prepaid insurance 18,000 Accumulated 45,000 Salaries and wages 20,000 depreciation-equipment expense Furniture 97,000 Sales revenue 4,56,700 Accumulated 20,000 Sales returns and 8.000 depreciation-furniture allowance Cost of goods sold 2,75,500 Sales discount 4,000 Mortgage payable 35,000 Owner's capital 3,05,500 Depreciation expense 9,000 Owner's drawings 17,000 Repair expense 2,000 Sales commission 5,700 expense Interest expense 5,000 Sales commission 9.000 payable Interest revenue 6,000 Gain on sales of assets 10,000 Additional information: . Insurance expires at the rate of Tk. 500 per month. Sales revenue earned but unrecorded at November 30 totals Tk. 30,000 Advertising expenses of Tk. 4,750 are accrued and unpaid at November 30. . Instructions: Prepare a multiple-step income statement for the year ended November 30, 2019. [03] Prepare a classified balance sheet at November 30, 2019. [03] ii.

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Answer 1

Mahira Department Store Adjusting Enteries Date Particulars a. Insurance Expense Prepaid Insurance Debit in Tk Credit in Tk. 6000 6000 Debit in Tk Credit in Tk. 110000 40000 20000 18000 b. 30000 Accounts Receivable Sales Revenue 30000 260000 C. 4750 45000 Advertising Expense Accounts Payable 47 97000 20000 25000 9000 35000 305500 456700 Adjusted Trial Balance For the Month ended November 30 Particulars Cash Accounts Receivable Inventory Prepaid Insurance Equipment Accumulated Depreciation - Equipment Furniture Accumulated Depreciation - Furniture Accounts Payable Sales Commission Payable Mortgage Payable Owner's Capital Owner's Drawings Sales Revenue Sales Returns and Allowances Sales Discount Cost of goods sold Salaries and Wages Expense Sales Commission Depreciation Expense Repair Expense Utilites Expense Advertising Expense Interest Expense Gain on sale of assets Interest Revenue Totals 17000 -8000 -4000 456700 444700 -275500 Statement of Income For the Month ended November 30 Sales Revenue Sales Returns and Allowances Sales Discount Net Sales Cost of goods sold Gross Profit Operating Expense: Salaries and Wages Expense Sales Commission Depreciation Expense Repair Expense Utilites Expense Advertising Expense Operating Income Non Operating items: Interest Expense Gain on sale of assets Interest Revenue Net Income 169200 20000 5700 9000 2000 6000 8000 4000 275500 20000 5700 9000 2000 6000 15000 5000 15000 57700 111500 10000 6000 -5000 912200 912200 10000 6000 11000 122500 Statement of Owner's Equity For the Month ended November 30 Owner's Capital 305500 Net Income 122500 428000 Owner's Drawings -17000 411000

Balance sheet As at Nov 30 Assets Amounts in $ Amounts in $ Liabilities Amounts in $ Amounts in $ Current Assets Current Liabilities Cash 110000 Accounts Payable 25000 Accounts Receivable 40000 Sales Commission Paya 9000 34000 Inventory 20000 Prepaid Insurance 18000 188000 Non Current Liabilities Mortgage Payable 35000 Non Current Assets Equipment 260000 Accumulated Depreci -45000 215000 Furniture 97000 Owner's Equity Accumulated Depreci -20000 77000 Owner's Capital 411000 Total Assets 480000 Total Liabiities & Equity 480000