Question

You are a Junior Accountant for X-RAY Inc., and you receive from the CFO the following...

You are a Junior Accountant for X-RAY Inc., and you receive from the CFO the following information which affects the Financial Statements of the company.

X-RAY Incorporate

Unadjusted Trial Balance 31.12.2016 Debit Credit

Cash

43.820

Accounts receivable

22.000

Supplies

1.230

Prepaid Expenses

5.200

Prepaid Interests

18.750

Vehicles

10.000

Computers

3.000

Furniture

8.000

Building

55.000

Accumulated Depreciation

7.000

ST Debt (Loan)

25.000

LT Debt (Loan)

100.000

Accounts payable

2.000

Unearned Revenue

10.000

Common stock

5.000

Retained earnings

18.000

Loss/Profit

Total

167.000

167.000

Required: Prepare the Journal, the Ledger, the adjusted Trial Balance, the Balance Sheet & Income Statement at 31/12/2016 considering the following business events not recorded yet in the financial statements.

Depreciation

Tangible Assets

Cost of

Acquisition

Useful Life (Years)

RV

Date of Acquisition

Vehicles

10.000

5

2.500

01/03/2015

Buildings

55.000

50

-

01/06/2010

Computers

3.000

3

-

30/08/2016

Furniture

8.000

10

1.000

30/04/2016

You are performing the year-end adjustments at 31/12/2016

Journalize the necessary entries for the transactions listed below at 31/12/2016 closing.

Calculate the Annual Depreciation Expense for all the Tangible Assets listed in the table before.

Journalize the Depreciation adjustments entries.

Accruals & Deferrals

Journalize the necessary entries for the transactions listed below at 31/12/2016 closing.

X-Ray Inc., where you work pays in advance 5.000 € of Rent Expense. The Rent contract is annual, and is signed every 30/04.

X-Ray Inc., receives and pays in advance every two months the Water Supply bill. The last bill was dated on 01/12/2016 for the Water consumption of December’16 and January’17, for 250

€.

Collects from a good client, 30.000 €, for a sales project to be started during the month of January 2017.

In 2015, signed a Sales contract of 10.000 €, and was fully paid in advance. The X-Ray Inc. Chief Financial Officer (CFO), estimates that at 31/12/2016 the project is 50% done.

In December 2016, the Company is informed that one of its vehicles has received a fine of 140

€ because of high speed driving. The due-date of the fine is at 30/03/2017.

Accounts Receivables

In the following graph, you can see a break-down of Accounts Receivables, along with its due dates.

Accounts Receivable

Amount

Due Date

ECO 1, Ltd.

2.500

30/06/2016

RESOMAG, Inc

4.000

15/11/2016

TEKPLUS, S.A.

5.500

15/02/2017

GIANT Inc.

10.000

30/03/2017

Total

22.000

Required:

Your boss, the CFO, asks you to perform the Bad-Debts calculations at year end 31/12/2016. He gives you the following instructions. Journalize the following events at 31.12.2016, following the CFO instructions:

1-) All the Accounts Receivables which are unpaid for more than 90 days, must be written-off. 2-) Allocate an Allowance for Doubtful accounts of 50%, for all the remaining unpaid accounts. 3-) Allocate an Allowance for Doubtful accounts for 5% for the remaining amount of Accounts Receivables.

Notes Receivables

Ray Inc. experiences the following business events regarding some Notes Receivables:

At 01/09/2016, performs two Sale Projects to INKJET SL: Project A for 35.000 €, and Project B for 15.000 €. We agree to receive both payments with a Notes Receivable with a maturity of 60 days.

As we need Cash, the CFO decides to discount Project A Notes, with the Bank. The expenses for bank services were €100, and the interest for discounting the notes was 3% of the total Amount.

At the maturity date, the Bank informs us that the client has paid 50% of the Notes Receivables of Project A. Project B remains fully unpaid.

The CFO decides to allocate 100% of Allowance of Bad Debts for the remaining amounts because he has red in the newspaper that INKJET SL went bankrupt.

Loans

At 01/01/2016, your company signs a Loan contract with CAIXABANK to fund a new project, with the following conditions:

Loan Amount: 125.000 €. Interest Rate: 5%. Term: 5 years. Payment of Interests: In advance the day of the loan signature.

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