The problem to be resolved:Ready Hospital Supplies (RHS) trades in the buying and selling of supplies primarily targeting hospitals and private medical practitioners. During the COVID-19 pandemic, the business has experienced a rapid increase in demand and RHS is faced with the need for additional financing. You and your group members are the accounting associate supporting the credit request to Millionaire National Bank (MNB). The corporatebanking head at MNB is requesting a full set of financial statements to ensure that granting the loanwould be financially feasible during a period when many similar businesses are facing delinquency and foreclosures. Your head of finance has furnished you with the latest trial balance for RHS, along with other information relevant to the year under review and you are tasked to prepare the documents requested by MNB. Below is the trial balance which was extracted from the books of the business on June 30, the end of the company’s financial year. As a group, you are required to collaborate and analyse the problem at hand then apply the accrual basis of accounting in the preparation of the company’s financial statements. Ready Hospital SuppliesTrial Balance as at June 30, 2020 Dr $ Cr $Cash127,000 Accounts Receivable151,000 Allowance for Bad-Debts 12,500Merchandise Inventory187,500 Store Supplies58,000 Prepaid Insurance72,000 Prepaid Rent56,000 Furniture & Fixtures800,000 Accumulated Depreciation: Furniture & Fixtures 256,000Computer Equipment450,000 Accumulated Depreciation: Computer Equipment Accounts Payable 133,500Salaries Payable Interest Payable 27,000Unearned Sales Revenue 82,000Long-Term Loan 360,000Eva Ready, Capital 898,500Eva Ready, Withdrawals104,000 Sales Revenue 1,043,000Sales Discount7,000 Sales Returns & Allowances5,500 Cost of Goods Sold403,000 Salaries Expense165,000 Insurance Expense Utilities Expense87,500 Rent Expense126,000 Depreciation Expense – Furniture & Fixtures Depreciation Expense – Computer Equipment Store Supplies Expense Gain on Disposal of Old Computer Equipment 14,000Bad-Debt Expense Interest Expense_ 27,000________Total2,826,5002,826,500 The following additional information is available at June 30, 2020: (i) Store Supplies on hand at June 30, 2020 amounted to $25,000.(ii) Insurance of $72,000 was paid on May 1, 2020 for the 6-months to October 31, 2020(iii) Rent was paid on March 31, 2020 for the 4-months to July 31, 2020.(iv) The furniture and fixtures have an estimated useful life of 10 years and is beingdepreciated on the straight-line method down to a residual value of $160,000. (v) The computer equipment was acquired on March 31, 2020 and is being depreciated over 5 years on the double-declining balance method of depreciation, down toa residue of $30,000 (vi) Salaries earned by employees not yet paid amounted to $14,000 at June 30, 2020.(vii) Accrued interest expense as of June 30, 2020, $9,000.(viii) At June 30, 2020, $48,000 of the previously unearned sales revenue had been earned(ix) The aging of the Accounts Receivable schedule at June 30, 2020 indicated that theAllowance for Bad Debts should be $19,500(x) After making all other adjustments, a physical count of inventory was done, whichreveals that there was $186,000 worth of inventory on hand at June 30,2020Other data:(xi)The business is expected to make principal payments totalling $90,000 towards theloan during the fiscal year to June 30 ,2021Required: c) Using the Adjusted trial balance, generate the statements requested by MNB, i.e.▪ A Multiple-step income statement & a Statement of owner’s equity for the year ended June 30, 2020 d) A Classified balance sheet, in report format, at June 30, 2020.

SOLUTION- Multi - step income statement - it is an income statements that divides total sales value…

Answered: The problem to be resolved: Ready…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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The problem to be resolved:

Ready Hospital Supplies (RHS) trades in the buying and selling of supplies primarily targeting hospitals and private medical practitioners. During the COVID-19 pandemic, the business has experienced a rapid increase in demand and RHS is faced with the need for additional financing. You and your group members are the accounting associate supporting the credit request to Millionaire National Bank (MNB). The corporatebanking head at MNB is requesting a full set of financial statements to ensure that granting the loanwould be financially feasible during a period when many similar businesses are facing delinquency and foreclosures. Your head of finance has furnished you with the latest trial balance for RHS, along with other information relevant to the year under review and you are tasked to prepare the documents requested by MNB. Below is the trial balance which was extracted from the books of the business on June 30, the end of the company’s financial year. As a group, you are required to collaborate and analyse the problem at hand then apply the accrual basis of accounting in the preparation of the company’s financial statements.

Ready Hospital Supplies

Trial Balance as at June 30, 2020

	Dr $	Cr $
Cash	127,000
Accounts Receivable	151,000
Allowance for Bad-Debts		12,500
Merchandise Inventory	187,500
Store Supplies	58,000
Prepaid Insurance	72,000
Prepaid Rent	56,000
Furniture & Fixtures	800,000
Accumulated Depreciation: Furniture & Fixtures		256,000
Computer Equipment	450,000
Accumulated Depreciation: Computer Equipment
Accounts Payable		133,500
Salaries Payable
Interest Payable		27,000
Unearned Sales Revenue		82,000
Long-Term Loan		360,000
Eva Ready, Capital		898,500
Eva Ready, Withdrawals	104,000
Sales Revenue		1,043,000
Sales Discount	7,000
Sales Returns & Allowances	5,500
Cost of Goods Sold	403,000
Salaries Expense	165,000
Insurance Expense
Utilities Expense	87,500
Rent Expense	126,000
Depreciation Expense – Furniture & Fixtures
Depreciation Expense – Computer Equipment
Store Supplies Expense
Gain on Disposal of Old Computer Equipment		14,000
Bad-Debt Expense
Interest Expense	_ 27,000	________
Total	2,826,500	2,826,500

The following additional information is available at June 30, 2020:

(i) Store Supplies on hand at June 30, 2020 amounted to $25,000.

(ii) Insurance of $72,000 was paid on May 1, 2020 for the 6-months to October 31, 2020

(iii) Rent was paid on March 31, 2020 for the 4-months to July 31, 2020.

(iv) The furniture and fixtures have an estimated useful life of 10 years and is beingdepreciated on the straight-line method down to a residual value of $160,000.

(v) The computer equipment was acquired on March 31, 2020 and is being depreciated

over 5 years on the double-declining balance method of depreciation, down to

a residue of $30,000

(vi) Salaries earned by employees not yet paid amounted to $14,000 at June 30, 2020.

(vii) Accrued interest expense as of June 30, 2020, $9,000.

(viii) At June 30, 2020, $48,000 of the previously unearned sales revenue had been earned

(ix) The aging of the Accounts Receivable schedule at June 30, 2020 indicated that the

Allowance for Bad Debts should be $19,500

(x) After making all other adjustments, a physical count of inventory was done, which

reveals that there was $186,000 worth of inventory on hand at June 30,2020

Other data:

(xi)The business is expected to make principal payments totalling $90,000 towards the

loan during the fiscal year to June 30 ,2021

Required:

c) Using the Adjusted trial balance, generate the statements requested by MNB, i.e.

▪ A Multiple-step income statement & a Statement of owner’s equity for the year ended June 30, 2020

d) A Classified balance sheet, in report format, at June 30, 2020.

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