TV Co. was founded on December 1, 2015. Assume the following information for TV Co. on January 1, 2016 Inventories Equipment (net value) Buildings (net value) Cash and cash-equivalents Share Bank loan Trade creditors 20,000 130,000 100,000 20,000 150,000 114,400 5,600 capital The cash disbursements and receipts of TV Co. for the year 2016 were the following: Cash receipts: - Sales in cash 185,000 75,000 22,000 Collection of accounts receivable Increase in share capital Cash disbursements: -General operating expenses 5,000 7,000 2,000 1,200 3,500 9,100 6,000 5,600 Inventory purchases Advertising expenses Interest Salaries and wages Payment of bank loan installment Payment to trade creditors In addition, the following information is provided regarding the operations of TV Co. during 2016 Income tax rate for 2016 was 20%. Taxes are paid during the subsequent fiscal period and the annual result is carried forward. Interest expenses accrue and are paid at the end of year, on December 31. The payment of the bank loan installment occurred on December 31 The annual depreciation charges for 2016 were: 11,000 for buildings and 12,000 for equipment. -On December 31, 2016 TV Co. owned 10,000 purchase of inventories. to suppliers concerning -At the end of 2016 customers owned to TV Co. 22,000. TV Co. considered that around 2,000 of accounts receivable were not likely to be collected in the future. Given that 2016 was the first full-year of operations, TV Co. employed the direct write-off method for recording uncollectible accounts receivable. - The closing inventory had a net-realizable value of 12,000 while its acquisition cost was 11,500 Required A. On the basis of the above information: Prepare all joumal entries for the period 2016 and post them to the general - Prepare the income statement and balance sheet as of December 31, 2016. (40%) B. On December 1 2016, TV Co. receives a loan of 2,500,000, due on March 1 2017. The loan agreement provides that TV Co. has the right to apply for a refinancing of debt on a long-term basis. The refinancing decision will be been taken by the bank after negations with TV Co. TV Co. intents to extend the maturity date of the loan by refinancing the loan. In particular, TV Co. aims to extend the maturity date of the loan to 1/7/2020. Negotiations with bank's officials commence on December 12, 2016. Required Indicate how this event should be reported on the December 31, 2016 balance sheet of TV Co. assuming that Negotiations were completed on January 20, 2017, when the bank approved the refinancing of the loan to TV Co. (explain your answer) Negotiations were completed on December 20, 2016, when the bank approved the refinancing of the loan to TV Co. (explain your answer) - - Additional information: The financial statements of TV Co. were authorized for issue on Apr1, 2017 while the firm's operating cycle is twelve months. (Word limit 500 words) (10%)
