Question 3: Statement of Financial Position & Cash Flow Statement ( 36

marks)

The following Trial Balances for the Markham Corporation are below. The

balances for the fiscal year end December 31, 2018 are final and based on the

Audited Financial Statements The bookkeeper for Markham has prepared an

unadjusted Trial Balance of the Balance Sheet accounts for the fiscal year

ending December 31, 2019.

Trial Balances for the Markham Corporation

Unadjusted Final

December 31, 2019 December 31, 2018

Cash $ 39,000 $ 25,000

Accounts Receivable 90,000 93,000

Less: Allowance for Doubtful accounts (6,000) (5,000)

Prepaid Insurance 14,000 6,000

FV-NI Investments 26,000 26,000

Equipment 75,000 70,000

Less: Accumulated Amort.- Equipment (13,000) (15,000)

Total Assets 225,000 $200,000

Accounts Payable $ 30,000 $ 25,000

Unearned Revenue 10,000 10,000

Long Term debt 15,000 25,000 Total Liabilities & Equity 225,000 $200,000

Common Shares 110,000 100,000

Retained Earnings 60,000 40,000 Total Liabilities & Equity 225,000 $200,000

he following additional information is provided and some entries have NOT

been adjusted for in the December 31, 2019 trial balance. It is stated only if they

have been adjusted, otherwise assume adjustments are required.

1. Upon reviewing the aged accounts receivable it has been determined that

one account in the amount of $2,000 is uncollectible and needs to be written

off as a bad debt.

2. Insurance is paid each June 30th the balance in the prepaid insurance

represents the full year insurance amount.

3. FV-NI investments are long-term investments. The fair value of the portfolio

investments at Dec 31, 2019 was $28,000

4. In reviewing the sales, it was determined that the balance in the unearned

revenue account at Dec 31, 2019 should be $9,000.

5. Long-term debt in the amount of 10,000 was retired by the issuance of

common shares. This entry has been recorded and is reflected in the

unadjusted trial balance of Dec 31, 2019

6. New Equipment was purchased, and equipment costing $25,000 with

accumulated depreciation $5,000 was sold for $22,000. This entry has

already been recorded and is reflected in the unadjusted trial balance of Dec

31, 2019

7. Dividends were paid in the amount of $5,000. This amount is reflected in the

unadjusted trial balance of Dec 31, 2019.

8. Assume, Net income after adjustments for the fiscal year ended Dec 31,

2019 is $20,000.

Required:

a) Prepare the journal entries for items #1 to #4 (4 marks)

b) Prepare a statement of financial position based on your adjusted entries

for items #1 to #4. (18 marks)

c) Prepare a cash flow statement based on the above information using the

indirect method (14 marks)