Question

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.

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

b) Journalize the Depreciation adjustments entries.

Accruals & Deferrals

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

a) 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.

b) 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

€.

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

d) 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.

e) 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

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

a) 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.

b) 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.

c) 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.

d) 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.

Answer 1