Kelly Ltd that sells toys extracted the following unadjusted trial balance from its books for the financial year ending on 31 December 2020. Debit Credit Account title $ $ Accounts payable 234,000 Accounts receivable 362,000 Allowance for doubtful accounts (1 January 2020) 4,000 Equipment 300,000 Accumulated depreciation equipment (1 January 2020) 80,000 Delivery trucks 500,000 Accumulated depreciation delivery trucks (1 January 2020) 200,000 Common stock (620,000 shares at $1 par value each) 620,000 Additional paid-in capital 400,000 Cash at bank 9,457,500 Inventories (1 January 2020) 720,000 Bank loan (required to make a $20,000 repayment by the year ended 31 December 2021) 74,000 Retained earnings (1 January 2020) 8,000,000 Rent expense 36,000 Revenues (all revenues are on credit) 2,310,000 Purchases 210,000 Wages expense 327,000 Insurance expense 1,500 Total 11,918,000 11,918,000 Additional information: 1 Kelly Ltd owed $5,000 in wages to employees for working the last 15 days in December 2020. The employees will be paid in January 2021. No record had been made. 2 Rent expense of $27,000 recorded in the book covers the rental period from 1 January 2021 to 30 Oct 2021. 3 All bank loans were drawn on 1 September 2020. The annual interest rate was 6%. The first due date for interest payment is on 31 August 2021. No record had been made. 4 Sales invoices showed that the terms of revenues of $110,000 are FOB destination. The merchandises will arrive at the customers warehouse on 18 March 2021. The terms of the rest of revenues are FOB shipping point. The merchandises will arrive at the customers warehouse on 18 February 2021. All sales had been recorded in revenues account. 5 Kelly Ltd is in a lawsuit as a customer alleged that the toys sold by Kelly Ltd caused harms to his children. The legal department of Kelly Ltd advised that the probability that Kelly Ltd will lose lawsuit is 80 percent. The loss of $400,000 can be reasonably estimated. The result of the lawsuit will be known on 1 June 2021. No record had been made. 6 Kelly Ltd uses the aging of accounts receivable method to estimate the uncollectible amount. Kelly Ltd determined that accounts receivable of $20,000 were uncollectible. 2 percent of estimated percentage uncollectible applies to $100,000 of accounts receivable. 5 percent of estimated percentage uncollectible applies to the remaining balance of accounts receivable. No record had been made. 7 8 Kelly Ltd purchased a new delivery truck on 1 March 2020. Kelly Ltd paid $40,000 for the purchase price, $2,000 for insurance and $5,000 for the service to clean the delivery truck. It is a legal requirement that delivery truck must be insured so that the truck can be driven on a road. The cleaning service provided the basic cleaning of the truck. The delivery truck was put in use on 1 October 2020. No record had been made. The new truck is depreciated on a straight-line basis with an estimated useful life of 10 years and $5,000 residual value. No record had been made. 9 Other delivery trucks already recorded on trial balance are depreciated on a straight-line basis with an estimated useful life of 10 years and $10,000 residual value. No record had been made. 10 Equipment is depreciated on a double declining balance basis with an estimated useful life of 10 years and $20,000 residual value. No record had been made. 11 The impairment test was performed to determine the impairment loss of its non-current assets. The estimated future cash flows of total equipment and total delivery trucks were $200,000 and $100,000, respectively. The fair values of total equipment and total delivery trucks were $250,000 and $130,000, respectively. No record had been made. 12 After a physical count on 31 December 2020, the cost of inventory was determined to be $320,000. On 31 December 2020, the sales price of the inventory was $380,000. The cost to sell the inventory was $80,000. 13 Kelly Ltd issued bonds on 30 June 2020 and received cash. The face value of the bonds was $500,000. The annual coupon rate was $10%. The annual market interest rate was $8%. The bonds will mature in 10 years. Coupon payments were made semi-annually. Kelly Ltd uses effective amortization method to amortize any premium or discount on bonds. No record had been made to record the issuance of the bonds on 30 June 2020 and interest expense on 31 December 2020. 14 Kelly Ltd re-purchased 20,000 shares of common stock in cash at a market price of $4 per share on 1 February 2020. No record had been made. 15 On 1 September 2020, Kelly Ltd re-issued 10,000 shares of common stock re-purchased on 1 February 2020 in cash. The market price was $2 per share. No record had been made. 16 On 31 December 2020, Kelly Ltd announced and distributed stock dividend of 110,000 shares of common stock. The market price of Kelly Ltd common stock was $5 per share. The par value of common stock was $1 per share. No record had been made.

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