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MFAB Oct 2020-Practice Set 1-Isb-V1

This document provides information for a group assignment for Fancy Furniture Company. It includes: 1) Trial balance as of December 31, 2018. 2) Transactions that occurred in 2019, including sales, purchases, expenses, asset purchases/sales. 3) Requirements to prepare journal entries for 2019 transactions, and year-end adjusting and closing entries. Also to prepare balance sheet, income statement and cash flow statement as of December 31, 2019.

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Shashank Gupta
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74 views2 pages

MFAB Oct 2020-Practice Set 1-Isb-V1

This document provides information for a group assignment for Fancy Furniture Company. It includes: 1) Trial balance as of December 31, 2018. 2) Transactions that occurred in 2019, including sales, purchases, expenses, asset purchases/sales. 3) Requirements to prepare journal entries for 2019 transactions, and year-end adjusting and closing entries. Also to prepare balance sheet, income statement and cash flow statement as of December 31, 2019.

Uploaded by

Shashank Gupta
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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ISB MFAB October 2020

Group Assignment. Due 11:30 PM, October 26, 2020.

Fancy Furniture Company, a dealer in furniture and furnishings, had the following trial balance
as of December 31, 2018 (all amounts in ₹thousands):

Debit Credit
Cash 94, 600
Marketable Securities 3,200
Accounts Receivables 22,000
Inventory 8,500
Prepaid Insurance 3,200
Plant and Equipment 110,000
Accrued Interest Payable 1,000
Accumulated Depreciation 55,000
Accounts Payable 27,700
Advances from customers 6,000
Long-term Debt 25,000
Common Stock 30,000
Retained Earnings ______ 96,800

241,500 241,500

The following items summarize the operations for 2019:

1. Sales were ₹300,000 of which ₹100,000 were cash sales.

2. Cash collections on account total ₹172,000.

3. A portion of the marketable securities portfolio costing ₹2,500 was sold for ₹2,900
cash.

4. Inventory costing ₹220,000 was purchased on account.

5. Payments to suppliers for purchases made on account totaled ₹205,000.

6. In the trial balance above, the advances from customers reflect down payments
received in 2018 for the work that Fancy Furniture completed in 2019. The contract
with the customer was for a total sales price of ₹15,000 with a ₹6,000 down
payment and the balance to be paid on delivery. The product was delivered in July
2019. The product cost was ₹11,000 and is accounted for in the regular inventory
account. The revenue for this special transaction is not included in #1 above.

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7. A physical count indicated inventory at the end of 2019 of ₹20,000.

8. The insurance premium is paid every year on Sept 1. It covers the period from the
date of payment to the following August 31. The 2019 premium paid was ₹4,500.

9. Dividends of ₹4,000 were declared in 2019 of which ₹300 remain unpaid at the
year-end.

10. Salaries and miscellaneous expenses of ₹82,500 were paid in cash.

11. The long-term debt consists of a 10-year, 12% bank note, originally issued on
March 1, 2012, requiring semi-annual interest payments on Feb 28 and Aug 31 of
each year.

12. On July 1, 2019, equipment for ₹20,000 was purchased by paying cash of ₹5,000
and issuing a 5-year, 10% note payable for the balance. Interest is to be paid
annually on July 1 of each year, and the principal is to be repaid at maturity.

13. The plant and equipment are being depreciated on a straight-line basis over 10
years (Assume no salvage value).

14. Assume no income taxes.

Required:

(a) Present journal entries to record transactions above, including the year-end
adjusting entries, and closing entries. You need not write narrative explanations.
Fancy Furniture records depreciation for the part of the fiscal year that the
equipment is used.

(b) Prepare, in good form, (a) Balance Sheet, (b) Income Statement, and (c) Cash Flow
Statement for Fancy Furniture Company. Present supporting work. Marketable
securities are to be treated as investments. You can use the direct or indirect
method for presenting the cash flow from operations.

Note: Although not required, it is advisable to prepare the necessary T-accounts also. They will
provide the details of (i) beginning balances (from December 31, 2018), (ii) the effect of the
journal entries in (a) above, and (iii) the ending balances (as of December 31, 2019). If you
prefer, use the Pivot table feature in Excel to complete this task.

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