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Retro Productions Ltd$.$ is a Vancouver$-$based furniture manufacturer. The company reported the following information on its trial balance for $11$ months of the year ended November $30,2021.$

Retro Productions LimitedTrial BalanceNovember $30,2021$

Debit

Credit

Cash

$ $421,100$

Accounts receivable

$1,390,000$

Inventory

$2,780,000$

Supplies

$39,000$

Prepaid rent

$14,000$

Equipment

$1,350,000$

Accumulated depreciation$$equipment

$ $35,625$

Accounts payable

$1,230,000$

Deferred revenue

$96,000$

Bank loan payable$$non$-$current

$1,240,000$

Common shares

$600,000$

Retained earnings

$1,239,275$

Dividends declared

$120,000$

Sales

$16,457,200$

Cost of goods sold

$9,174,000$

Advertising expense

$405,000$

Freight out

$980,000$

Office expense

$78,000$

Rent expense

$154,000$

Salaries expense

$3,482,000$

Utilities expense

$61,000$

Interest expense

$70,000$

Income tax expense

$380,000$

$$20,898,100$

$$20,898,100$

Retro reported the following transactions for the month of December. The company uses a perpetual inventory system and owned $10,000$ units of inventory on December $1.$

Dec. $1$

Received $$315,000$ on account from a major customer.

$1$

Paid $$14,000$ in rent for the month of December.

$4$

Paid $$375,000$ owing to a supplier from a purchase made in November.

$6$

Sold $4,200$ units of inventory to a Canadian furniture retailer for $$2,121,000$ on credit, FOB shipping point.

$15$

Purchased $6,000$ units of inventory from a supplier at a cost of $$290$ per unit on credit, FOB shipping point.

$18$

Paid salaries of $$125,000.$

$21$

Sold $8,000$ units of inventory for $$4,092,000$ on account, FOB shipping point.

$24$

Paid $$32,000$ for advertising expenses incurred in the month.

$27$

Purchased $5,000$ units of inventory from a supplier at a cost of $$300$ per unit, FOB shipping point.

Adjustment and additional data:

Accrued $$6,000$ for utilities and $$140,000$ for salaries.

Accrued $$6,200$ of interest on the bank loan.

Recorded annual depreciation on equipment, which has an expected useful life of eight years.

Carried out a physical inventory and determined that inventory with a cost of $$2,596,000$ was on hand in Retro Production$$s warehouse. The physical inventory correctly accounted for goods in transit and there were no goods on consignment.

After adjusting the inventory to the cost determined at the count of $$2,596,000,$ determined that some of this inventory had a net realizable value that was $$2,000$ lower than its cost.

Recorded an additional $$112,000$ of income tax payable.

Instructions

Record the December transactions. The company uses the FIFO cost formula.

Set up T accounts, enter any opening balances, and post the general journal entries prepared in part $($a$).$

Prepare an unadjusted trial balance at December $31.$

Record and post the December adjusting entries, assuming the company records adjusting entries annually.

Prepare an adjusted trial balance at December $31.$

Prepare $(1)$ a multiple$-$step statement of income, $(2)$ a statement of changes in equity, and $(3)$ a statement of financial position for the year ended December $31.$

Record and post the closing journal entries.

Prepare a post$-$closing trial balance as at December $31.$

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Answer

Explanation:

Record the December transactions using the FIFO cost formula:

Dec. $1$

Accounts receivable $315,000$

Sales $315,000$

$($Recorded receipt from major customer$)$

Dec. $1$

Rent expense $14,000$

Cash $14,000$

$($Paid rent for the month of December$)$

Dec. $4$

Accounts payable $375,000$

Cash $375,000$

$($Paid amount owing to supplier$)$

Dec. $6$

Accounts receivable $2,121,000$

Sales $2,121,000$

Inventory $924,000$

Cost of goods sold $924,000$

$($Recorded sale of $4,200$ units of inventory on credit, FOB shipping point$)$

Dec. $15$

Inventory $1,740,000$

Accounts payable $1,740,000$

$($Recorded purchase of $6,000$ units of inventory on credit, FOB shipping point$)$

Dec. $18$

Salaries expense $125,000$

Salaries payable $125,000$

$($Paid salaries$)$

Dec. $21$

Accounts receivable $4,092,000$

Sales $4,092,000$

Inventory $1,848,000$

Cost of goods sold $1,848,000$

$($Recorded sale of $8,000$ units of inventory on account, FOB shipping point$)$

Dec. $24$

Advertising expense $32,000$

Cash $32,000$

$($Paid for advertising expenses$)$

Dec. $27$

Inventory $1,500,000$

Accounts payable $1,500,000$

$($Recorded purchase of $5,000$ units of inventory, FOB shipping point$)$

The above answer contains a set of instructions for a financial accounting problem. The problem is focused on Retro Productions Ltd$.,$ a furniture manufacturer based in Vancouver, and requires the student to record and post transactions for the month of December, prepare trial balances and financial statements, and record closing journal entries

Step $2$

Explanation:

$2.$ T$-$Accounts:

Cash

$|$ Debit $|$ Credit $|$

$|$ Beginning balance $|421,100||$

$|$ Dec. $1||315,000|$

$|$ Dec. $1|14,000||$

$|$ Dec. $4|375,000||$

$|$ Dec. $6||2,121,000|$

$|$ Dec. $15|||$

$|$ Dec. $18|125,000||$

$|$ Dec. $21||4,092,000|$

$|$ Dec. $24|32,000||$

$|$ Dec. $27||1,500,000|$

$||||$

$|$ Ending balance $||7,553$

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