At the end of last year, Fergama Productions Ltd, a company in the film industry, had the following closing accounts (in no particular order). 

During this year, the company’s activities resulted in the following: 

a. Revenue, all on credit, totalled $216 459. 

b. Production expenses totalled $156 320, $11 287 of which was paid in cash and the rest charged. 

c. Depreciation on the office equipment came to $2680 for the year.

d. The company bought, on credit, new supplies costing $8657 and used up supplies costing $12 984 during the year.

e. Income tax expense for the year was estimated to be $12 319.

f. The board of directors declared a dividend of $25 000.

g. Collections from customers totalled $235 260.

h. Payments to suppliers totalled $172 276.

i. Payments of taxes totalled $18 400.

j. A $5000 payment was made on the long-term loan.

k. The dividend was paid in cash to shareholders.

Required:

1. To get you started, prepare a balance sheet for Fergama Productions Ltd as at the end of the last year.

2. Record the activities for this year, using journal entries, and enter those entries to ledgers.

3. Prepare a trial balance of your accounts to show that they balance.

4. From those accounts, prepare the following financial statements: 

a. An income statement for this year 

b. A balance sheet at the end of this year 

c. A note showing the change in balance of the retained profits account.

5. Comment on what the financial statements show about the company’s performance for this year and its financial position at the end of this year. Would you say the company is better off than it was last year?

Transcribed Image Text:

Cash Accounts payable Accumulated depreciation Retained profits Long-term loan payable $ 23 415 37 778 11 134 51 434 15 000 Share capital Office equipment cost Accounts receivable Inventory of supplies Taxes payable $ 20 000 24 486 89 455 10 240 12 250