Problem 2 - Financial Statements, Closing Entries & Ratio Analysis 45 MARKS Having completed your prior assignment on Westerson Inc., you have now been tasked with assisting in the Financial Statements and Ratio Analysis preparation for All Star Apparel Inc., a merchandising company, together with preparing the company's accounts for the next financial period. A colleague has provided the company's Adjusted Trial Balance: Credit All Star Apparel Inc. Adjusted Trial Balance December 31, 2020 Accounts Debit Cash $10,500 Accounts Receivable 15,000 Inventory 30,000 Prepaid Rent 2,400 Building 160,100 Accumulated Depreciation-Building Uneared Service Revenue Notes Payable (due 2023) Retained Earnings Sales Revenue Sales Returns and Allowances 14,000 Sales Discounts 7,500 Cost of Goods Sold 155,000 Freight out Expense Advertising Expense 22.00 Salaries and Wage Expense Utilities Expense Insurance Expense Depreciation Expense 11,000 Total $526,400 $35,000 6,000 17.000 100,000 49,000 Share Capital Dividends 16,000 319,400 4,000 72,000 3,300 3,600 $526,400 Required: a. Using the Adjusted Trial Balance above, prepare the following statements in proper form: i. Income Statement 8 Marks ii. Retained Earnings Statement 3 Marks iii. A classified Statement of Financial Position 9 Marks 5 Marks b. Journalize the necessary closing entries. c. Compute the following ratios, stating what each ratio indicates about All Star Apparel: i. Current Ratio ii. Inventory Turnover (use Inventory instead of Avg. Inventory) iii. Gross Profit Rate iv. Profit Margin V. Debt to Total Assets 3 Marks each d. The same intern who questioned the need for adjusting entries, does not understand the purpose of closing entries. Advise the intem. 5 Marks