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: 235,000 1,450,000 389,000 30,000 410,000 32,000 20,000 Accounts payable Accounts Receivable Accrued liabilities Accumulated depreciation-plant and equipment Advertising expense Allowance for doubtful accounts Bad debt expense Bonds payable Cash Common shares, 12,500 no-par shares issued Cost of goods sold Goodwill Intangible assets Interest expense Inventory 1,300,000 3,400,000 3,500,000 770,000 2,900,000 780,000 270,000 470,000 3,340,000 620,000 7,000 257,000 120,000 Land Office expense Office Supplies Plant and equipment Prepaid insurance Retained earnings Salaries and wages expense Sales 6,828,000 1,700,000 4,200,000 Screenshot

Answer 1

FIRST 4 SUBPARTS ANSWERED

Ans-1

DEBIT CREDIT Ref ACCOUNT 1 Bad Debts Expenses Allowance for Doubtful accounts 8000 8000 2 Cash 200000 Common Share,12500 no-par shares issued 140000 Additional Paid Up capital 60000 (par value = 3500000/12500 = 280 hence extra 120 is premium) 50000 3 Insurance Expense Prepaid Insurance (120000/12*5 current year exp) 50000 1400 4 Office Expenses Office Supplies (7000-5600 expensed) 1400 13000 5 Retained Earnings Accrued Liabilities 13000 7000 7000 6 Cost of Goods Sold Acc Dep-Plant&Equip (Assumed that rest of dep is all booked and since no separate Dep Exp account is seen in TB it imlies same has been accounted in COGS) 87000 7 Unaccrued Expenses Advertisement Expense (348000*3/12 corrected) 87000 22000 8 Salaries and wages expenses Accued Liabilities 22000 16500 9 Interest Expense Accued Liabilities (assumed 3 months int exp not booked) 16500 100000 10 Sales Unearned Revenue 100000 50000 11 Unaccrued Expenses Land 50000

Ans-2

Ref Amount Ref Bad Debt Expenses Amount Ref Amount 20000 1 8000 CL Bal 28000 Allowance for Doubtful accounts Ref Amount Ref Amount TB 32000 CL Bal 40000 1 8000 Ref TB Cash Amount Ref 3400000 2 200000 CL Bal Common Shares Amount Ref Amount TB 3500000 3640000 2 140000 TB 3600000 CL Bal Additional Paid Up capital Amount Ref Amount 60000 2 60000 Ref Insurance Expense Amount Ref Amount 3 50000 CL Bal 50000 Ref CL Bal Ref Ref Prepaid Insurance Amount Ref Amount 120000 3 50000 CL Bal 70000 Office Expenses Amount Ref Amount 620000 41 1400 CL Bal 621400 TB TB Ref Ref Ref TB Office Supplies Amount Ref Amount 7000 4 1400 CL Bal 5600 Retained Earnings Amount Ref Amount 4 13000 TB 6828000 6815000 Cost of Goods Sold Amount Ref Amount 770000 61 7000 CL Bal 777000 Ref TB Land Amount Ref 3340000 CL Bal TB Amount 11 50000 3290000 CL Bal Ref Ref Ref Ref Acc Dep-Plant& Equip Amount Ref Amount TB 30000 37000 6 7000 Unaccrued Expenses Amount Ref Amount 7 87000 11 50000 CL Bal 137000 Advertisement Expense Amount Ref Amount 410000 7 87000 CL Bal 323000 Salaries and wages expenses Amount Ref Amount 1700000 8 22000 CL Bal 1722000 TB TB CL Bal Interest Expense Amount Ref Ref Ref Amount Ref Amount Ref Sales Amount Ref 10 100000 TB 4100000 Unearned Revenue Amount Ref Amount 100000 10 100000 TB 270000 4200000 CL Bal Accued Liabilities Amount Ref Amount TB 389000 4 13000 8 22000 440500 9 16500 9 16500 CL Bal 286500 CL Bal CL Bal

Ans-3

ACCOUNTS Accounts Payable Accounts Receivable Accued Liabilities Acc Dep-Plant&Equip Advertisement Expense Allowance for Doubtful accounts Bad Debt Expenses Bonds Payable Cash Common Share, 12500 no-par shares issued Cost of Goods Sold Goodwill Intangible Assets Interest Expense Inventory Land Office Expense Office Supplies Plant and Equipment Prepaid Insurance Retained Earnings Salaries and wages expenses Sales Additional Paid Up Capital Insurance Expesne Unaccrued Expenses Unearned Revenue UNADJUSTED ADJUSTMENT ADJUSTED DEBIT CREDIT ADJ REF DEBIT CREDIT DEBIT CREDIT 235000 235000 1450000 1450000 389000 5/8/9 51500 440500 30000 6 7000 37000 410000 7 87000 323000 32000 1 8000 40000 20000 1 8000 28000 1300000 1300000 3400000 2 200000 3600000 3500000 21 140000 3640000 770000 6 7000 777000 2900000 2900000 780000 780000 270000 9 165001 286500 470000 470000 11 50000 3290000 3340000 620000 4 1400 621400 4 1400 7000 257000 120000 5600 257000 70000 3 50000 6828000 5 13000 6815000 1700000 8 1722000 22000 100000 4200000 10 4100000 60000 2 60000 3 50000 7/11 137000 50000 137000 100000 100000 554900 16767500 16767500 10 16514000 16514000 554900

Ans-4

SWATCH Limited Income statement For the Year Ended- 31st December,2019 Details AMOUNT AMOUNT Sales 4100000 Less:Cost of Goods Sold -777000 GROSS PROFIT 3323000 Other Expenses Advertisement Expense 323000 Bad Debt Expenses 28000 Office Expense 621400 Salaries and wages expenses 1722000 Insurance Expesne 50000 Other Expense Total 2744400 EBIT 578600 286500 Interest Expenses Retained Earnings 292100

SWATCH Limited Statement of Retained Earnings For the Year Ended- 31st December,2019 Details AMOUNT AMOUNT Opening Balance 6828000 Add: Current Income 292100 Less:Dividend - 13000 Taken to Balance Sheet 7107100

AMOUNT 2900000 3290000 LIABILITIES Common Shares Retained Earnings Additional Paid up Bonds Payable Accounts Payable Accued Liabilities Unearned Revenue 257000 -37000 SWATCH Limited Statement of Financial Position As on - 31st December,2019 AMOUNTASSETS 3640000 Goodwill 7107100 Land 60000 plant and Equipment 1300000 Less:Acc Dep 235000 Office Supplies 440500 Inventory 100000 Accounts Receivable Less:Provision for Doubtfu Prepaid Insurance Unaccrued Expenses Cash Intangible Assets 12882600 5600 470000 1450000 -40000 70000 137000 3600000 780000 12882600