QUESTION 1

Victory Company Limited closes its books at the end of the year. The trial balance on December 31, 2019 before adjustments is as follows:

Additional data on December 31, 2019:

(i) One- year insurance policy was purchased on November 1, 2019 and the mount was recorded as insurance expense

(ii) The useful life of equipment is 4 years and equipment is depreciated on straight-line basis

(iii) One year rental expense had been paid in full and the amounted was debited to Prepaid Rent account. Prepaid rent still in force on December 31 was $80,000.

(iv) The $280,000 unearned sales revenue still not earned is only $60,000. The company expects to earn this amount during the next few months.

(v) Accrued salaries $40,000.

(vi) Supplies on hand at December 31 amounted to $22,000

Required:

(a) Prepare the adjusting entry for each of the above items. Omit narrative description.

(b) Prepare the Income Statement for the year ending December 31, 2019.

(c) Prepare the Statement of Financial Position as at Dec 31, 2019.