Felix Pharmaceuticals Inc. is a diagnostic company. They are a small start-up and have some promising developments for covid-19 diagnostic tools. They have just completed their accounts for December 2019 but they did not finish the audit, as unfortunately most of their key staff in the finance team are ill due to the pandemic. You have been recruited as a consultant by the CEO as a recent graduate from EU Business School to assist in this difficult situation. The CEO is a very bright scientist but gets very afraid of accounts. Your job is to get him through this difficult period with your deep insights about finance and accounting.

The CFO before she became ill prepared a budget but you need to prepare the journals and explain each one. The CEO is also worried about the financial situation of the company once these transactions are processed. The following journals are required to be prepared and explanations required.

I. 1 Feb. They plan to borrow $1,300,000 from Valley Bank, signing a 90-days, 1.5% Note Payable on 1 February 2020. (Use 360 day rule)

II. I March. The wants to sell some old plant and machinery for $500,000, receiving $100,000 cash and a five-year, 12 percent note receivable for the remaining balance in one year. (Use 360 day rule)

III. 1 May. They paid Valley Bank the Note Payable plus the accrued interest.

IV. 1 June. They plan to issue 100,000 ordinary shares of par value $0.01 at $20 each

V. 1 Oct they plan to purchase fixtures and fitting for $1,500,000 with a residual value of $200,000 at the end of its economic life of 5 years.

VI. 1 December – they plan to buy 20,000 ordinary shares at $15. VII. 31 December.

a. Calculate the depreciation charge at 31 December for item bought on I October.

b. The interest receivable for items sold on 1 March.

Answer rating: 100% (QA)

answers Journal As required CashDr 1300000 Feb 1 2020 To 15 Note Payable 1300000 Being amount borrows against note payable for 90 days 15 Assumed 15 r... View the full answer