EXERCISE

Starting from the Balance Sheet below, book the following transactions and adjustments in the Journal Ledger and prepare the Balance Sheet and the Income Statement at the end of the period.

ES. The company sells products for 1.000, immediate payment.

N. Transaction ACCOUNT

1 Bankaccount Revenues from products

R/S A/L-C/R SIGN

DEBIT

CREDIT

ASSETS

LIQUIDITA' Bank Account

TRADE RECEIVABLES Receivables from clients

R A S R

+ +

1.000 1.000

900 150

1.050

FINANCIAL STATEMENT 31/12/2020 LIABILITIES

EQUITY 800 Shareholderscapital

FINANCIAL DEBTS 150 Debts to Factoring co.

FIXED ASSETS Plants 100

TOTAL ASSETS

TRANSACTIONS

1.050 TOTAL LIABILITIES

1) The company enters into an annual contract with a supplier for an ordinary maintenance services for 60, immediate payment 2) The company buys raw materials for 300. Deferred payment for the 30% and immediate for the 70%

3) The company sells products for 500 including post-sales assistance services for 1 years (whose fair value is 200), immediate collection from clients for half. 4) The company receives a building as contribution in kind by a new shareholder. The value of the building is 300. The contribution is allocated in the share capital for 200. The rest is allocated to the share premium reserve.

5) The company buys an extraordinary maintenance for the building whose cost is 30. Immediate payment. 6) The company issues a bond with an issuing value of 250 and a nominal value of 200. 7) The company gets an overdraft facility for 100

8) In the previous year, the company transfered to a Factoring co. receivables for 50 at a price of 45, with a "with recourse clause", immediatly paid. During the year the clients whose the credit is referred goes to bankruptcy and the recoverable value of the credit is zero. The factoring co. activates the recourse clause and the company immediately pays the debt.

9) Some clients return bad products of transaction n. 3 to the company for 50. 10) The company pays gross salaries for euro 200, net of euro 30 for fiscal witholdings and euro 15 for social security witholdings. Social contribution charged to the company is 70. Deferred payment for both witholdings and the social charges.

11) The company concludes an operating leasing contract with the leasing company ABC for the use of a car for a year. The total leasing cost is 200, immediate payment.

ADJUSTMENTS

a) The useful life of plants and buildings is 10 years b) The annual contract for the ordinary maintenance service (transaction n. 1) is signed on 1/02/2021 c) The annual contract for the operating leasing (transaction n. 11) is signed on 1/07/2021 d) A client cited us to a court asking for 100. The lawyer judges likely to pay 20. e) The cost of the products inventory at 31/12/2021 is 70 f) The cost of the internal works for extraordinary maintenance to the plants is 15

N. ACCOUNT R/S A/L-C/R SIGN DEBIT CREDIT