Question The trial balance of Sharp Security Services Ltd. as of January 1, 2019 had the following normal balances: Accounts payable €1,950 Accounts receivable €13,500 Cash €74,210 Common stock €50,000 Land €4,000 Merchandise inventory (24 @ €265; 1 @ €260) €6,620 Prepaid rent €3,200 Retained earnings €47,800 Salaries payable €1,000 Supplies €200 Unearned revenue €980 The following transactions took place during 2019 for Sharp Security Services Ltd.: 1. Paid the salaries payable from 2018. 2. On March 1, 2019, Sharp established a €100 petty cash fund to handle small expenditures. 3. Paid €4,800 on May 1, 2019, for one year's lease on the company van in advance. 4. Paid €7,200 on May 2,2019 for one year's office rent in advance. 5. Purchased €400 of supplies on account. 6. Purchased 100 alarm systems for €28,000 cash during the year. 7. Sold 102 alarm systems for €57,120. All sales were on account. 8. Paid €2,100 on accounts payable during the year. 9. Replenished the petty cash fund on August 1. At this time, the petty cash fund had a balance of €7. It contained the following receipts: office supplies expense €23, cutting grass €55, and miscellaneous €14. 10. Billed €52,000 of monitoring services for the year. 11. Paid employees’ total salaries of €25,000. 12. Collected €89,300 of accounts receivable during the year. 13. Paid €3,600 of advertising expenses during the year. 14. Paid €2,500 of utilities bills during the year. 15. Paid a dividend of €10,000 to the shareholders. 16. The unearned income of €980 remains outstanding at the end year. Final Assessment Summer 2020 You are Required to Answer all Parts of the Question. Required: (1) Prepare the trial balance as at Dec 31, 2018. (20 marks) (2) Prepare the adjusted trial balance as at Dec 31, 2019. (20 marks) (3) Prepare the Income Statement as at Dec 31, 2019. (20 marks) (4) Prepare the Balance Sheet as at Dec 31, 2019. (20 marks) (5) Calculate for the following ratios in relation to the financial statements: (10 marks) (a) Gross Profit Percentage (b) Net Profit Percentage (c) Quick Ratio (d) Accounts Receivable Days (e) Accounts Payable Days (6) Draft a report to the Board of Directors of Sharp Security Services and outline what you consider: (a) to be the strengths and weaknesses of using financial ratios, and (5 Marks) (b) identify and discuss the main qualitative characteristics that need to be considered to ensure that financial ratios are useful analytical tools for management and that other third-party users of the financial statements. (5 Marks) Please not that you should not discuss the results of your financial ratio calculations in this question. This a general theory question.