Assignment Task: XYZ Company is a distributer of office furniture. It started to operate at the beginning of 2015. Now it is the end of 2017 you are asked to record following transactions and related impacts to future years using journal entries.
1. At the beginning of 2015, the company borrowed $50,000 from the bank, with 5% interest paying back in three years with interest.
2. At the beginning of 2015, the company purchased an operating equipment at $10,000, with useful life of 5 years and $5,000 residual value. (JEs for the purchase and amortization for 2015, 2016 and 2017)
3. The company purchased 30 desks at $500 each and 50 chairs at $100 each with cash, kept a desk and a chair to use in the office, and held the rest for sale.
4. Rent is due annually at $2,000/year. The company paid rent for four years in advance.
5. Sale price for desks is $1,000 and $300 for chairs at the beginning of 2015, but chair price was then adjusted to $250 each in the middle of the year. Customer ABC purchased 10 desks and 20 chairs in the beginning of the year with cash, so the company gave ABC 10% discount when ABC came back in the second half of the year purchasing another 15 chairs. The payment of the purchase of the chairs was not received until 2016.
6. Customers CBA ordered 30 desks and 100 chairs at the end of 2015, paid half of the purchase in cash as deposit, the rest will be paid when all purchased delivered. The company kept 5 desks and 10 chairs and shipped the rest of the inventory to CBA in 2015. Shipping cost was $2,000 which the company did not pay until 2016.
7. XYZ Company ordered another 50 desks at $550 each and 100 chairs at $110 each after CBA's order in 2015, paid $10,000 as deposit. Received 10 desks and 10 chairs by the end of 2015, and the rest will be shipped to them in 2016. The desks and chairs received were not included in the shipment to CBA in previous question.
8. At the beginning of 2016, the company received payment from ABC in question 5, received the rest of the desks and chairs ordered in question 7, paid the remaining balance to its supplier, shipped the rest of CBA's order to them and collected balance.
9. At the beginning of 2016, XYZ decides to rent out part of the office to company Tenant at a price of $500/year. Tenant paid XYZ $1500 for three years rent plus another $500 as security deposit which will be paid back to Tenant when they leave.
10. XYZ hired external accountant to prepare 2015 financial statements at $3000+GST, paid in full by cash. Accountant told them this expense should be recorded in 2015 income statement.
11. At the beginning of 2016, the accountant of XYZ company realized they forgot to charge GST for all the sales made during 2015, so XYZ company billed customer ABC and CBA for the GST amount, they both agreed to pay at a later date. They did not need to pay GST on any of the inventory purchase made during 2015.
12. At the same time, landlord notified XYZ Company that they forgot to charge GST on the rent in 2015, as a result, the landlord will make adjustment to their book so that the $2,000 rent in 2015 includes GST, and XYZ Company is expected to make proper adjustment as well. XYZ agrees to pay GST on the rent at the end of each year until 2018 as they have prepaid the rent (in question 4)
13. XYZ Company collected GST owed to them by customer ABC and CBA and then paid everything to Receiver General.
14. In 2016, XYZ Company purchased 50 desks at $570 each and 50 chairs at $105 each, this time they were charged GST by the supplier, as the supplier now is a Canadian company.
15. At the middle of 2016, (July 1st, 2016), XYZ Company tried to borrow more money from the bank. They were required to first pay back the outstanding balance with proper interest charges (in question 1). XYZ Company paid back the loan (in question 1) and then borrowed another $100,000 with same term in question 1.
16. The equipment (in question 2) was sold at the end of 2017 for $4,000, only half was paid by cash, the rest of the sales proceeds will be paid in full in 2018.
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