On December 31, 2020, Information Inc. completed its third year of operations. A

Question

On December 31, 2020, Information Inc. completed its third year of operations. Abdul Mukhtar is a student working part-time in the company's business office while taking his first accounting course. Abdul assembled the following list of account balances, which are not arranged in any particular order: $76,000 20,000 140,000 12,000 6,000 6,300 177,000 200,000 5,200 72,700 125,000 3,700 Accounts Receivable $150,000 Advertising Expense 2,000 Cash Interest Expense Notes Receivable Cost of Goods Sold 26,000 Inventory 590,000 Dividends Declared 570,000 Unearned Revenue 360,000 Insurance Expense Common Shares Buildings Accumulated Depreciation, Equipment Land 20,000 160,000 Equipment 40,000 Miscellaneous Expense Retained Earnings (as at January 1, 2020) Accumulated Depreciation, Buildings Sales Revenue 963,000 Accounts Payable Utilities Expense Notes Payable 2,500 Wages Expense 30,000 Supplies These account amounts are correct, but Abdul did not consider the following information: 1. The amount shown as insurance expense includes $900 for coverage during the first two months of 2021. 2. The note receivable is a six-month note that has been outstanding for four months. The interest rate is 9% per year. The interest will be received by the company when the note becomes due at the end of February 2021 3. As at December 31, 2020, the supplies still on hand had a cost of $500 4. On November 1, 2020, the company rented surplus space in one of its building to a tenant for $1,000 per month. The tenant paid for six months in advance 5. Depreciation for 2020 is $17,000 on the buildings and $22,000 on the equipment. 6. Employees earned $2,800 of wages in December 2020 that will not be paid until the first scheduled payday in 2021 7. Additional dividends of $47,000 were declared in December 2020, but will not be paid until January 2021.

Explanation / Answer

STATEMENT OF FINANCIAL POSITION Assets Current Assets: Cash 20000 Accounts receivable 150000 Interest receivable 780 Notes receivable 26000 Inventory 140000 Supplies 500 Prepaid insurance 900 Total current assets 338180 Non-current Assets Equipment 200000 Less: Accumulated depreciation-Euqipment 42000 158000 Buildings 360000 Less: Accumulated depreciation-Building 57000 303000 Land 160000 Total Non-current Assets 621000 Total Assets 959180 Liabilities and Shareholders' Equity Current liabilities: Accounts payable 72700 Notes payable 30000 Dividends payable 47000 Wages payable 2800 Unearned revenue 4000 Total current liabilities 156500 Shareholders Equity: Common Shares 570000 Retained earnings 232680 Total shareholders' equity 802680 Total liabilities and Shareholders' Equity 959180 Workings for Income Statement: INCOME STATEMENT Debit Credit 963000 2500 780 125000 2000 2000 76000 5400 5200 590000 3200 17000 22000 2800 851100 965780 114680

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