Imperial Trucking Inc. is a small trucking company that carries freight between centres in central Canada and the northeastern United States. The Johnson family of London owns Imperial Trucking Inc. but professional managers manage it. One member of the Johnson family serves as the chair of the board of directors. No other family members are actively involved with Imperial Trucking Inc. Imperial Trucking's balance sheet for December 31, 2016, the company's year-end, is shown below. The company uses its financial statements for tax purposes, to show to the holders of the long-term notes that the company issued to finance the purchase of some of its trucks, and to provide information to the shareholders. Imperial Trucking Inc. Balance Sheet As of December 31, 2016 Assets Liabilities and Shareholders' Equity Cash $ 77,340 Accounts payable $ 42,220 Accounts receivable 81,500 Taxes payable 15,000 Prepaid insurance 18,000 Wages payable 10,000 Current assets 176,840 Customer deposits 27,000 Capital assets 465,000 Interest payable 11,900 Accumulated depreciation (201,700) Current liabilities 106,120 Long-term notes payable 140,000 Common shares 80,000 Retained earnings 114,020 $440.140 $440.140 It is now January 2018. Imperial Trucking Inc. needs to prepare its financial statements for the year ended December 31, 2017. You have obtained the following information about the fiscal year just ended: I. Shipping revenue for the year was $1,065,225. Imperial Trucking gives credit to all its customers and there were no cash sales during the year. II. Imperial Trucking Inc. purchased $275,000 worth of fuel during the year. All purchases were on credit. At the end of 2017, Imperial Trucking hadn't been billed for an additional $10,000 of fuel that it purchased. III. Imperial Trucking Inc. incurred maintenance costs of $125,000 during 2017. At the end of 2017, Imperial Trucking owed mechanics $8,000. (The $8,000 owed is included in the $125,000.) IV. Imperial Trucking Inc. paid wages and bonuses of $475,000 to employees. At December 31, 2017, Imperial Trucking owed employees $27,500. V. During the year, Imperial Trucking Inc. collected $1,075,000 from customers. VI. Imperial Trucking Inc. paid its fuel suppliers $250,000 during 2017. VII. During the year, Imperial Trucking Inc. paid the taxes it owed at the end of 2016. It also paid $11,000 in instalments on its 2017 income taxes. It's estimated that Imperial Trucking owes an additional $12,000 in income taxes for 2017. VIII. IX. X. The deposits reported on the 2016 balance sheet pertained to customers who were perceived to be high risk to whom Imperial Trucking Inc. wasn't prepared to offer credit. These customers were required to give deposits against shipping to be done during 2017. These customers used shipping services during 2017 in excess of the amount of the deposits. Imperial Trucking Inc. decided in 2017 to offer credit to these customers. The deposits are not included in the other revenue recognized in the year. Members of the Johnson family sometimes used Imperial Trucking employees for personal work at their homes and cottages. Usually, the work was done on weekends and the employees were paid at overtime rates. The company pays the employees' wages for the work done for the family members and accounts for the cost as a wage expense. The wages paid for work done on behalf of Johnson family members was $11,000. During 2017, Imperial Trucking Inc. purchased a new truck for $98,000 in cash. Depreciation expense for 2017 was $48,000. Prepaid insurance pertains to insurance on its truck fleet and premises. During 2017, Imperial Trucking Inc. used $15,000 of insurance that was recorded as prepaid on December 31, 2016. In late 2017, it purchased and paid for insurance for 2018. The insurance cost $21,000. During the year, Imperial Trucking Inc. paid $11,900 in interest to the holders of the long-term notes. Interest is paid annually on January 2. In addition to the interest payment, Imperial Trucking paid $20,000 on January 2, 2017 to reduce the balance owed on the long-term notes. The interest rate on the notes is 8.5 percent. Imperial Trucking Inc. paid $75,000 in cash for other expenses related to operating the business in fiscal 2017 Imperial Trucking Inc. paid dividends of $55,000 to shareholders. XI. XII. XIII. XIV. XV. Required: a) Enter each of the transactions onto an accounting equation spreadsheet. You can use a computer spreadsheet program or create a spreadsheet manually, although the computer spreadsheet will probably be easier because you will be able to correct mistakes more easily. Create a separate column on the spreadsheet for each account. Make sure you prepare all adjusting entries and the closing entry to the spreadsheet. Indicate whether each entry to the spreadsheet is a transactional entry, an adjusting entry or a closing entry. b) Provide explanations for each of your entries. You should explain why you have treated the economic events as you have that is, why you have recorded an asset, liability, etc.). c) Prepare a balance sheet as of December 31, 2017 and an income statement for the year ended December 31, 2017 from your spreadsheet. d) The North American economy is booming and there is a lot of work for shipping companies like Imperial Trucking Inc. However, the competition is fierce and success and failure are defined by how efficient a company is and how well it services its customers. Imperial Trucking's managers would like to upgrade its fleet by adding two new trucks and making significant improvements to its existing vehicles. Based on your examination of the statements, what can you tell about Imperial Trucking Inc. that would be useful to your decision to lend it $125,000? Also, list five questions you might ask Imperial Trucking's management that would help you use the financial statements more effectively