Question

Accounting Cycle The Swatch Group Limited (Swatch) is a publicly listed organization based in Switzerland. Swatch manufacturers and sells high quality watches. Swatch's fiscal year end is December 31. You have been hired by the Corporate Controller to provide assistance in accurately identifying and posting the adjusting entries necessary to ensure reliable financial statements are prepared for year end. You have also been asked to provide draft financial statements (see details noted below in the Required section). Swatch's account balances as of December 31, 2019 before adjusting entries are in Canadian dollars: Accounts payable 235.000 Accounts Receivable 1.450,000 Accrued liabilities 389.000 Accumulated depreciation-plant and equipment 30.000 Advertising expense 410,000 Allowance for doubtful accounts 32,000 Bad debt expense 20,000 Bonds payable 1,300,000 Cash 3,400,000 Common shares, 12,500 no par shares issued 3.500.000 Cost of goods sold 770.000 Goodwill 2.900.000 Intangible assets 780,000 Interest expense 270,000 Inventory 470.000 Land 3,340,000 Office expense 620.000 Office Supplies 7,000 Plant and equipment 257.000 Prepaid insurance 120,000 Retained earnings 6,828.000 Salaries and wages expense 1.700,000 Sales 4,200,000 The Controller has provided the following information for year- end: 1. Swatch uses the percentage-of-receivables method to calculate the bad debt provision each year. Swatch has estimated this allowance should be $40,000 at the end of the year. 2. During the last quarter of 2019, an additional 500 shares were issued for cash at $400 per share. The accounting for this entry was missed and Swatch has not recorded the transaction.

Answer 1

	The Swatch Group Limited
	Dec 31. 2019. Adjusting entries
No	Account Title	Dr CAD	Cr CAD
1	Bad Debt Expense	8,000
	Allowance for Doubtful Accounts		8,000
2	Common Shares -no par		200,000
	Cash	200,000

The Swatch Group Limited
Income Statement
for the period ended Dec 31. 2019.
Particulars	Amt CAD
Sales Revenue	4,200,000
Cost of Goods Sold	770,000
Gross Profit	3,430,000
Operating Expense
Salaries and Wages expense	1,700,000
Office Expense	620,000
Advertising Expense	410,000
Bad debt Expense	28,000
Total Operating Expense	2,758,000
EBIT	672,000
Interest Expense	270,000
EBT	402,000
Income Tax	-
Net Income/(Loss)	402,000

The Swatch Group Limited
Statement of Retained Earning
for the period ended Dec 31. 2019.
Opening Balance Retained Earning	6,828,000
Add: net Income from Income Statement	402,000
Ending Balance Retained Earning	7,230,000

The Swatch Group Limited
Balance Sheet
As on Dec 31, 2019
Assets	Amt CAD	Liabilities & Equity	Amt CAD
Current Assets		Current Liabilities
Cash	3,600,000	Accounts Payable	235,000
Accounts Receivable	1,450,000	Accrued Liabilities	389,000
Allowance for Doubtful accounts	(40,000)	Total Current Liabilities	624,000
Inventory	470,000
Prepaid Insurance	120,000	Bonds Payable	1,300,000
Office Supplies	7,000
Total Current Assets	5,607,000	Total Liabilities	1,924,000
Long Term Assets		Shareholders' Equity
Land	3,340,000	Common Stock-no par ,13000 issued	3,700,000
Plant & Equipment	257,000	Retained Earning	7,230,000
Accumulated Depreciation-Plant & Equipment	(30,000)	Total Shareholders' Equity	10,930,000
Net Fixed Assets	3,567,000
Intangible Assets	780,000
Goodwill	2,900,000
Total Assets	12,854,000	Total Liabilities & Equity	12,854,000