Date Account Title and Description PR

ITEM 1
12/31/2017 Depreciation Expense
Accumulated Depreciation - Investment Property
to record the depreciation for the year

12/31/2017 Cash
Accumulated Depreciation - Investment Property
Loss on Sale
Investment Property
to record the sale of investment property

ITEM 2
1/1/2017 Cash
Loans Payable
to record the bank borrowing

12/31/2017 Interest Expense

Cash
to record the interest payment for the year

12/31/2017 Unrealized Loss - Interest Rate Swap

Interest Rate Swap Payable
to record the interest payment for the year

ITEM 3
2/1/2017 Cash
Deferred Grant Income
to record the receipt of government grant

12/31/2017 Environmental Cost

Cash
to record the incurrence of environmental cost this year

12/31/2017 Deferred Grant Income

Grant Income
to record the income from government grant

ITEM 4
3/31/2017 Machinery
Notes Payable
Cash
to record the acquisition of machinery

3/31/2017 Machinery
Cash
 to record the capitalizable cost of machinery

12/31/2017 Interest Expense

Interest Payable
to record the amortization of discount for the year

12/31/2017 Depreciation Expense

Accumulated Depreciation - Machinery
to record depreciation for the year

ITEM 5
1/7/2017 Intangible Assets
Cash
to record the patent incurred

1/7/2017 Research and development cost

Cash
to record the income from government grant

12/31/2017 Amortization
Intangible Assets
to record the amortization of patent

ITEM 6
12/31/2017 Amortization
Intangible Assets
to record the amortization of patent

12/31/2017 Loss on Patent Writeoff

Intangible Assets
to record the writeoff of patent

ITEM 7
12/31/2017 Cash
Sales
to record the sales for the year

12/31/2017 Premiums - containers

Cash
to record the purchase of containers

12/31/2017 Premiums Expense

Premiums - containers
to record the distribution of containers

12/31/2017 Premiums Expense

Estimated Premium Liability
 to record the income from government grant

ITEM 8
1/1/2017 Cash
Bonds Payable
Premium on Bonds Payable
Share Premium - Conversion Privilege
to record the issuance of convertible bonds

12/31/2017 Interest Expense

Cash
to record the interest payment

12/31/2017 Premium on Bonds Payable

Interest Expense
to record the amortizaiton of premium on bonds payable

ITEM 9
12/31/2017 Bonus Expense
Bonus Payable
to record the bonus for the period
 DR CR

75,000.00 Petty cash fund

75,000.00 Cash in bank
Trading securities
Accounts receivable – trade
2,200,000.00 Allowance for doubtful accounts
225,000.00 Notes receivable
575,000.00 Inventories
3,000,000.00 Premium - containers
Prepaid advertising
Prepaid insurance
Prepaid rent
5,000,000.00 Office supplies inventory
5,000,000.00 Furniture and fixtures
Accumulated Depreciation - Furnitures and Fixtures
Equipment
500,000.00 Accumulated Depreciation - Equipment
500,000.00 Machinery
Accumulated Depreciation - Machinery
Investment Property
162,000.00 Accumulated Depreciation - Investment Property
162,000.00 Intangible assets
Accounts payable – trade
Estimated Premium Liability
Notes payable
45,000,000.00 Accrued expenses
45,000,000.00 Interest Payable
Interest Rate Swap Payable
Bonus Payable
10,000,000.00 Deferred Grant Income
10,000,000.00 Loans Payable
Bonds Payable
Premium on Bonds Payable
15,000,000.00 Ordinary share capital
15,000,000.00 Share Premium - Conversion Privilege
Retained earnings
Unrealized Loss - Interest Rate Swap
Sales
200,000.00 Cost of goods sold
125,000.00 Depreciation Expense
75,000.00 Research and Development Cost
Legal Expense
Loss on Patent Write Off
45,000.00 Environmental Cost
45,000.00 Marketing Expenses
 Interest Expense
Advertising Expense
9,375.00 Bonus Expense
9,375.00 Loss on Sale
Premium Expense
Grant Income
60,000.00 Amortization
60,000.00 TOTAL

100,000.00
100,000.00

340,000.00
340,000.00

2,500.00
2,500.00

33,600.00
33,600.00

100,800.00
100,800.00

9,000,000.00
9,000,000.00

180,000.00
180,000.00

111,000.00
111,000.00

159,000.00
159,000.00
4,250,000.00
4,000,000.00
151,600.00
98,400.00

360,000.00
360,000.00

27,872.00
27,872.00

761,761.02
761,761.02
UNADJUSTED TRIAL BALANCE ADJUSTMENTS ADJUSTED TRIAL BALANCE
DEBIT CREDIT DEBIT CREDIT DEBIT CREDIT
60,000.00 60,000.00
1,056,000.00 65,450,000.00 11,600,000.00 54,906,000.00
983,640.00 983,640.00
3,618,660.00 3,618,660.00
110,360.00 110,360.00
1,300,000.00 1,300,000.00
2,754,900.00 2,754,900.00
180,000.00 111,000.00 69,000.00
640,000.00 640,000.00
490,000.00 490,000.00
420,000.00 420,000.00
361,000.00 361,000.00
2,798,400.00 2,798,400.00
530,000.00 530,000.00
4,270,000.00 4,270,000.00
677,500.00 677,500.00
245,000.00 245,000.00
60,000.00 60,000.00
3,000,000.00 3,000,000.00 -
150,000.00 225,000.00 75,000.00 -
548,000.00 100,000.00 136,900.00 511,100.00
1,856,320.00 1,856,320.00
159,000.00 159,000.00
3,300,000.00 125,000.00 3,425,000.00
169,040.00 169,040.00
780,000.00 9,375.00 789,375.00
162,000.00 162,000.00
761,761.02 761,761.02
15,000,000.00 45,000,000.00 30,000,000.00
5,000,000.00 5,000,000.00
5,000,000.00 4,000,000.00 9,000,000.00
27,872.00 151,600.00 123,728.00
5,400,000.00 5,400,000.00
98,400.00 98,400.00
2,245,660.00 2,245,660.00
162,000.00 162,000.00
13,078,000.00 9,000,000.00 22,078,000.00
7,734,000.00 7,734,000.00
1,500,000.00 135,000.00 1,635,000.00
340,000.00 340,000.00

100,800.00 100,800.00
10,000,000.00 10,000,000.00
357,000.00 357,000.00
 780,000.00 869,375.00 27,872.00 1,621,503.00
625,280.00 625,280.00
761,761.02 761,761.02
575,000.00 575,000.00
270,000.00 270,000.00
15,000,000.00 15,000,000.00
36,100.00 36,100.00
33,296,880.00 33,296,880.00 94,477,908.02 94,477,908.02 97,646,144.02 97,646,144.02
 Cash and cash equivalents
Financial asset at fair value
Trade and other receivable
Inventories
Prepaid Expense
Property, plant, and equipment
Intangibe Asset

Trade and other payable

Note payable-short term
Current portion of notes payable
Estimated premium liability
Bonds payable
Noncurrent portion of notes payable
Loans payable
Deferred grant income
Ordinary shares
Retained earnings
Unrealized Loss - IRS
Share premium-conversion privilege
Net income

Sales 22,078,000.00
Cost of goods sold (7,734,000.00)
Gross Profit 14,344,000.00
Add: Grant Income 15,000,000.00
Total Gross Income 29,344,000.00
Less: Expenses
Depreciation Expense 1,635,000.00
Research and Development Cost 340,000.00
Loss on Patent Write Off 100,800.00
Environmental Cost 10,000,000.00
Marketing Expenses 357,000.00
Interest Expense 1,621,503.00
Advertising Expense 625,280.00
Loss on Sale 575,000.00
Premium Expense 270,000.00
Amortization 36,100.00
Total Expenses (15,560,683.00)
Net Income Before Bonus and Income Tax 13,783,317.00
Less: Bonus Expense (761,761.02)
Net Income After Bonus 13,021,555.98
 KAYA COTTO INCORPORATED
54,966,000.00 STATEMENT OF FINANCIAL POSITION
983,640.00 December 31, 2017
4,808,300.00
2,754,900.00 ASSETS
1,980,000.00 Current Asset
6,045,900.00 Cash and cash equivalents 54,966,000.00
511,100.00 Financial asset at fair value 983,640.00
72,049,840.00 Trade and other receivable 4,808,300.00
Inventories 2,754,900.00
3,738,496.02 Prepaid Expense 1,980,000.00
3,300,000.00 Total Current assets
25,000.00
159,000.00 Noncurrent asset
9,123,728.00 Property, plant, and equipment 6,045,900.00
100,000.00 Intangibe Asset 511,100.00
5,000,000.00 Total Noncurrent Asset
30,000,000.00
5,400,000.00 Total Asset
2,245,660.00
(162,000.00) LIABILITIES AND SHAREHOLDER'S EQUITY
98,400.00
13,021,555.98 Current Liabilities
72,049,840.00 Trade and other payable 3,738,496.02
Note payable-short term 3,300,000.00
Current portion of notes payable 25,000.00
Estimated premium liability 159,000.00
Total Current Liabilities

Noncurrent Liabilities
Bonds payable 9,123,728.00
Noncurrent portion of notes payable 100,000.00
Loans payable 5,000,000.00
Deferred grant income 30,000,000.00
Total Noncurrent Liabilities

Shareholder's Equity
Ordinary shares 5,400,000.00
Reserves (63,600.00)
Retained earnings 15,267,215.98
Total Shareholder's equity

Total liabilities and shareholders' equity

KAYA COTTO INCORPORATED

 INCOME STATEMENT
December 31, 2017

Net Sales
Cost of Goods Sold
Gross Income
Other Income
Total Income

Total Expenses
Operating Expense 3,685,141.02
Other Charges 11,015,800.00
Finance cost 1,621,503.00

Net income
65,492,840.00

6,557,000.00

72,049,840.00

7,222,496.02

44,223,728.00

20,603,615.98

72,049,840.00
22,078,000.00
(7,734,000.00)
14,344,000.00
15,000,000.00
29,344,000.00

(16,322,444.02)

13,021,555.98
 Date Account Title and Description PR DR
ITEM 1
12/31/2017 Depreciation Expense 75,000.00
Accumulated Depreciation - Investment Property
to record the depreciation for the year

12/31/2017 Cash 2,200,000.00

Accumulated Depreciation - Investment Property 225,000.00
Loss on Sale 575,000.00
Investment Property
to record the sale of investment property

ITEM 2
1/1/2017 Cash 5,000,000.00
Loans Payable
to record the bank borrowing

12/31/2017 Interest Expense 500,000.00

Cash
to record the interest payment for the year

12/31/2017 Unrealized Loss - Interest Rate Swap 162,000.00

Interest Rate Swap Payable
to record the interest payment for the year

ITEM 3
2/1/2017 Cash 45,000,000.00
Deferred Grant Income
to record the receipt of government grant

12/31/2017 Environmental Cost 10,000,000.00

Cash
to record the incurrence of environmental cost this year

12/31/2017 Deferred Grant Income 15,000,000.00

Grant Income
to record the income from government grant

ITEM 4
3/31/2017 Machinery 200,000.00
Notes Payable
Cash
to record the acquisition of machinery

3/31/2017 Machinery 45,000.00

Cash
 to record the capitalizable cost of machinery

12/31/2017 Interest Expense 9,375.00

Interest Payable
to record the amortization of discount for the year

12/31/2017 Depreciation Expense 60,000.00

Accumulated Depreciation - Machinery
to record depreciation for the year

ITEM 5
1/7/2017 Intangible Assets 100,000.00
Cash
to record the patent incurred

1/7/2017 Research and development cost 340,000.00

Cash
to record the income from government grant

12/31/2017 Amortization 2,500.00

Intangible Assets
to record the amortization of patent

ITEM 6
12/31/2017 Amortization 33,600.00
Intangible Assets
to record the amortization of patent

12/31/2017 Loss on Patent Writeoff 100,800.00

Intangible Assets
to record the writeoff of patent

ITEM 7
12/31/2017 Cash 9,000,000.00
Sales
to record the sales for the year

12/31/2017 Premiums - containers 180,000.00

Cash
to record the purchase of containers

12/31/2017 Premiums Expense 111,000.00

Premiums - containers
to record the distribution of containers
12/31/2017 Premiums Expense 159,000.00
Estimated Premium Liability
to record the income from government grant

ITEM 8
1/1/2017 Cash 4,250,000.00
Bonds Payable
Premium on Bonds Payable
Share Premium - Conversion Privilege
to record the issuance of convertible bonds

12/31/2017 Interest Expense 360,000.00

Cash
to record the interest payment

12/31/2017 Premium on Bonds Payable 27,872.00

Interest Expense
to record the amortizaiton of premium on bonds payable

ITEM 9
12/31/2017 Bonus Expense 761,761.02
Bonus Payable
to record the bonus for the period
 CR

Investment Property, cost 3,000,000.00

75,000.00 Divide useful life 40.00
Annual Depreciation 75,000.00
Multiply by years expired 3.00
Accumulated Depreciation 225,000.00

Investment Property 3,000,000.00

3,000,000.00 Less: Accumulated Depreciation (225,000.00)
Carrying Amount 2,775,000.00
Less: Proceeds (2,200,000.00)
Loss on Sale 575,000.00

5,000,000.00

500,000.00

162,000.00

45,000,000.00 10,000,000.00 0.33 15,000,000.00

8,000,000.00 0.27 12,000,000.00
6,000,000.00 0.20 9,000,000.00
4,000,000.00 0.13 6,000,000.00
10,000,000.00 2,000,000.00 0.07 3,000,000.00
30,000,000.00 45,000,000.00

15,000,000.00
Downpayment 75,000.00
Installment Payment 125,000.00
Cost of Machinery 200,000.00
Add: Capitalizable Cost 45,000.00
125,000.00 Total Cost of Machinery 245,000.00
75,000.00 Less: Residual Value (5,000.00)
Depreciable Amount 240,000.00
SYD Denominator 15.00

45,000.00 Depreciation
 Depreciable Amount 240,000.00
Multiply by 5/15 0.33
Depreciation for first year 80,000.00
9,375.00 Multiply by applicable months (April-Dec) 0.75
Depreciation for 2017 60,000.00

60,000.00

100,000.00

340,000.00

2,500.00

Cost of Patent, 2013 240,000.00

33,600.00 Divide by useful life 10.00
Amortization 24,000.00
Multiply by expired years until change in esti 3.00
Total amortization 72,000.00
100,800.00
Year 2016
Carrying amount of patent 168,000.00
Divide by revised remaining useful life 5.00
Amortization 33,600.00
9,000,000.00 Multiply by expired years until writeoff 2.00
Total amortization 67,200.00
Carrying amount of patent, 2017 100,800.00

180,000.00

Sales in units 3,000,000.00

Divide by # of pack per container 10.00
111,000.00 Total # of containers 300,000.00
Multiply by 0.30
# of containers to be redeemed 90,000.00
 Less: # of containers redeemed (37,000.00)
159,000.00 # of containers to redeem next period 53,000.00

Market value of bonds with conversion 4,250,000.00

4,000,000.00 Less: Market value of bonds
151,600.00 PV of principal (4,000,000 x .735) 2,960,000.00
98,400.00 PV of interest (4,000,000 x 9% x 3.3121) 1,191,600.00 4,151,600.00
98,400.00

Interest Expense 332,128.00

360,000.00 Less: Interest Payment 360,000.00
Premium amortization 27,872.00

27,872.00

761,761.02

BONUS IS A CERTAIN PERCENT OF INCOME AFTER BONUS AND AFT

FORMULA: B = % (NI BEFORE BONUS AND TAX - B
T = % (NI - B)

PROOF
Income before bonus and tax
Bonus
Tax
Income after bonus and tax
Multiply by percentage of bonus
BONUS
COME AFTER BONUS AND AFTER TAX
I BEFORE BONUS AND TAX - B - T) B = 9% (13,783,317 - B - T)
T = 35% (13,783,317 - B)
B = 9% [13,783,317 - B - 35% (13,783,317 - B)]
B = 9% (13,783,317 - B - 4,824,160.95 + .35B)
B = 1,240,498.53 - .09B (434,174.49) +.0315B
B = 806,324.04 -.0585B
1.0585B = 806,324.04
B = 761,761.02
T = 35% (13,783,317 - 761,761.02)
T = 4,557,544.59

13,783,317.00
(761,761.02)
(4,557,544.59)
8,464,011.38
age of bonus 9%
761,761.02