Question:

XYZ Company, a leading manufacturing firm, is preparing its financial statements for the year ending December 31, 20__. The company's accounting records show various transactions and balances that need to be adjusted before preparing the final financial statements.

(A) As of the balance sheet date, the company identified several (i) that occurred during the year. These transactions need to be recognized in the financial statements to accurately reflect the company's financial position. For instance, the company sold equipment for $50,000, resulting in a gain of $10,000. This gain needs to be properly accounted for in the income statement.

(B) In addition to recognizing transactions, XYZ Company also needs to adjust its (ii) to ensure that the financial statements adhere to the accrual basis of accounting. For example, the company has received $30,000 from customers for services that will be provided next year. According to the accrual basis, this revenue needs to be deferred and recognized in the following year when the services are delivered.

(C) Furthermore, the company has to estimate and record the (iii) that are necessary for the preparation of financial statements. One of the significant estimates relates to the allowance for doubtful accounts. Based on historical data and market conditions, the company estimates that 5% of accounts receivable, totaling $100,000, will be uncollectible. This estimation is crucial for reporting the net realizable value of accounts receivable in the balance sheet.

(D) Additionally, XYZ Company must recognize the (iv) that occurred but have not yet been recorded in the accounting records. For instance, the company's employees have earned $20,000 in salaries for the last week of December, but the payment will be made in January. This accrued expense needs to be recognized in the income statement for the current year to accurately represent the company's expenses.

(E) Lastly, the company needs to evaluate its (v) and ensure that they are recorded at the appropriate amounts. For example, the company owns a building that was purchased 10 years ago for $500,000. Due to the passage of time and wear and tear, the building's current fair value is $700,000. It is essential for the company to adjust the building's carrying amount in the balance sheet to reflect its fair value accurately.

In summary, XYZ Company must address these various blanks (i)-(v) to complete the adjustments process and prepare accurate financial statements for the year ending December 31, 20__. Properly recognizing transactions, adhering to the accrual basis, making necessary estimates, recording accrued expenses, and evaluating asset values are all essential components of the adjusting process that ensure the financial statements provide a true and fair view of the company's financial position and performance.