TASK A

Oman Food Industry Company’s statement of financial position at December 31, 2017, is presented below.

Oman Food Industry Company

Statement of Financial Position

December 31, 2017

Inventory9,400	Share capital—ordinary30,000
Accounts receivable 19,780	Retained earnings12,730
Allowance for doubtful accounts (800)	Accounts payable8,750
Cash23,100
Total Assets51,480	Total Equity and Liabilities51,480

During January 2018, the following transactions occurred.

Jan. 1Oman Food Industry accepted a 6-month, 5% note from Nizwa Transport Company in payment of OR 1,500

Jan. 1The unearned rent revenue of 6,600 was received for 6 months rent.

Jan. 2Oman Food Industry purchased equipment for OR 13,000 on account. The equipment is being depreciated using the straight-line method over 5 years, with a residual value of 1,000.

Jan. 3Oman Food Industry wrote off as uncollectible the accounts of Barker Corporation –

OR 200 and Elmo Company – OR 100.

Jan. 8Oman Food Industry purchased OR 5,500 of inventory on account.

Jan. 10 The patent was acquired for OR 500 cash and has a useful life of 10 years from that date.

Jan. 11 Oman Food Industry sold for OR 3,000 on account inventory that cost OR 2,500.

Jan. 15 Oman Food Industry sold inventory that cost OR 120 to Mr Mohammed for OR 180 cash.

Jan. 17 Oman Food Industry collected OR 12,000 from customers on account.

Jan. 21 Oman Food Industry paid OR 11,300 on accounts payable.

Jan. 27 Oman Food Industry purchased supplies for OR 1,500 cash.

Jan. 31 Oman Food Industry paid other operating expenses – OR 3,218.

Adjustment data:

1. Interest is recorded for the month on the note from January 1.

2. Bad debts are expected to be 5% of the January 31, 2018, accounts receivable.

3. Unpaid salaries and wages at December 31, 2018, total 2,200.

INSTRUCTIONS: (You need to set up T-accounts to determine ending balances).

(a) Prepare journal entries for the transactions listed above and adjusting entries.

(b) Prepare an adjusted trial balance at January 31, 2018.

(c) Prepare an income statement and a retained earnings statement for the month ending January 31, 2018, and a classified statement of financial position as of January 31, 2018.

TASK B

The income statement of Muscat Port Trade Company is presented below.

Additional information:

1. Accounts receivable decreased 230,000 during the year, and inventory increased 120,000.

2. Prepaid expenses increased 125,000 during the year.


3. Accounts payable to merchandise suppliers increased 50,000 during the year.

4. Accrued expenses payable increased 155,000 during the year.

Muscat Port Trade Company


Income Statement


For the Year Ended December 31, 2016

Service revenue 5,250,000

Cost of goods sold

Beginning inventory 1,780,000

Purchases 3,430,000

Goods available for sale 5,210,000

Ending inventory 1,900,000

Total cost of goods sold 3,310,000

Gross profit 1,940,000

Operating expenses

Depreciation expense 95,000

Amortization expense 20,000

Other expenses 945,0001,060,000

Net income 880,000

INSTRUCTIONS:

Prepare the operating activities section of the statement of cash flows for the year
ended December 31, 2016, for Muscat Port Trade Company, using the indirect method.