BCO114: Accounting I-Assignment Solution

Task: Assignment 2 (33% of course grade)

You are required to answer all the questions in the following exercise.

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This task assesses the following learning outcomes:

Identify the steps in the accounting cycle.

Apply acquired knowledge and skills to prepare an income statement and a statement of retained earnings.

Demonstrate understanding of the balance sheet and the accounting equation.

Prepare closing entries required at the end of accounting period.

LAUNCH: WEEK 3 Friday January 8th, 2021 / DELIVERY: WEEK 3 Sunday January 10th, 2021, 23:59hrs ON MOODLE

Submission file format: Word document with all the answers.

EXERCISE 1 (100 points)

The following is Rainbow Corporation year-end adjusted trial balance dated December 31, 2019.

Rainbow Co.

Adjusted Trial Balance
at 31 December 2019
	Debit	Credit
Cash	â‚¬ 5,700
Accounts Receivable	4,500
Prepaid Insurance	2,100
Office Equipment	18,300
Accumulated Depreciation: Office Equipment		â‚¬ 600
Accounts Payable		3,600

Unearned Revenue			5,300
Capital Stock			10,000
Retained Earnings			4,700
Dividends	1,100
Service Revenue Earned			19,750
Wages Expense	6,600
Utilities Expense	1,800
Rent Expense	2,700
Depreciation Expense	600
Income Taxes Expense		550	______
	â‚¬43,950			â‚¬43,950

Instructions:

Using Adjusted Trial Balance above, perform the following tasks:

Prepare an Income Statement for the year ended December 31, 2019 (10 points).

Prepare a Statement of Retained Earnings for the year ended December 31, 2019 (10 points).

Prepare a Balance Sheet dated December 31, 2019 (20 points).

Prepare all necessary closing entries at December 31, 2019 (20 points).

Prepare an after-closing trial balance dated December 31, 2019 (10 points).

Does the company appear to be liquid? Explain. Justify your conclusion with calculation of working capital and current ratio (15 points).

Has the company been profitable in the past? Is the company profitable this year? Justify your conclusion with calculation of net income percentage and return on equity (15 points).

Rubrics

	Descriptor
9-10	The student demonstrates an excellent understanding of the
	concepts.
8-8.9	The student demonstrates a good understanding of the concepts.
7-7.9	The student demonstrates a fair understanding of the concepts.
6-6.9	The student demonstrates some, but insufficient understanding of the
	concepts.
3-5.9	The student demonstrates insufficient understanding of the concepts.
	They may mention some relevant ideas or concepts, although it is
	clear that the relationship between them is not understood by the
	student.
1-2.9	The student demonstrates insufficient understanding of the concepts
	and does not mention any relevant ideas or concepts.
0	The student leaves the question blank or cheats.

Points are stated at the end of each question.

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