QUESTION 1
Colton’s Western Wear Corp. (CWW) is a publicly reportable enterprise. Its year end is December 31. During 20X4 it invested some of its excess cash in various debt and equity securities. Pertinent details follow:
• All dividend and interest payments were received on the scheduled payment dates.
• CWW only updates the book value of its investments at the time of the transactions and at year end.
• CWW elects to reclassify reserves (AOCI) to retained earnings immediately upon derecognition of investments in equity securities at FVOCI — elect.
January 1, 20X4
• Paid $2,600 to purchase 100 common shares of Zulu Inc. CWW elected to irrevocably classify the investment at FVOCI — elect.
February 1, 20X4
• Paid $11.65 per share to purchase 2,700 shares of PLZ Corp., a publicly traded company with over 1,000,000 shares outstanding. July 1, 20X4
• Paid $262,443 to acquire $250,000 of General Company Inc. six-year, 7% bonds. Interest is paid on June 30 and December 31 each year. CWW’s objective of its business model for this investment is to hold the financial asset for purpose of collecting contractual cash flows.
• Paid $96,490 to acquire $100,000 of Gidget Corp.’s four-year, 5% bonds. Interest is paid on June 30 and December 31 each year. CWW’s business model for this investment is to hold the investment with a view to profiting from a decline in the market rate of interest.
December 15, 20X4
• PLZ declared dividends of $1.00 per share, payable on January 5, 20X5.
• Zulu declared dividends of $0.50 per share, payable on December 31, 20X4.
December 31, 20X4

January 1, 20X5
• CWW reclassified its investment in General Company’s bonds to at FVPL.
• CWW reclassified its investment in Gidget’s bonds to amortized cost.
July 1, 20X5
CWW sold all of its investments. The net proceeds of each sale follow:

Required:
Prepare all journal entries to reflect the purchase, income recognition, revaluation, reclassification, and derecognition of the investments detailed in the question. Provide a separate journal entry for each event, date it, include a brief description of the pertinent details, and provide supporting calculations. Clearly indicate the nature of the investment in each journal entry (for example, Investment in Co. X — FVPL, FVOCI, or FVOCI — elect, or at amortized cost).

Colton’s Western Wear Corp. (CWW) is a publicly reportable enterprise. Its year end is December 31. During 20X4 it invested some of its excess cash in various debt and equity securities. Pertinent details follow: • All dividend and interest payments were received on the scheduled payment dates. • CWW only updates the book value of its investments at the time of the transactions and at year end. • CWW elects to reclassify reserves (AOCI) to retained earnings immediately upon derecognition of investments in equity securities at FVOCI — elect. January 1, 20X4 • Paid $2,600 to purchase 100 common shares of Zulu Inc. CWW elected to irrevocably classify the investment at FVOCI — elect. February 1, 20X4 • Paid $11.65 per share to purchase 2,700 shares of PLZ Corp., a publicly traded company with over 1,000,000 shares outstanding. July 1, 20X4 • Paid $262,443 to acquire $250,000 of General Company Inc. six-year, 7% bonds. Interest is paid on June 30 and December 31 each year. CWW’s objective of its business model for this investment is to hold the financial asset for purpose of collecting contractual cash flows. • Paid $96,490 to acquire $100,000 of Gidget Corp.’s four-year, 5% bonds. Interest is paid on June 30 and December 31 each year. CWW’s business model for this investment is to hold the investment with a view to profiting from a decline in the market rate of interest. Intermediate Financial Reporting 1 Project 2 2 / 8 December 15, 20X4 • PLZ declared dividends of $1.00 per share, payable on January 5, 20X5. • Zulu declared dividends of $0.50 per share, payable on December 31, 20X4. December 31, 20X4 Investment in Market value PLZ Corp. shares $29.85 per share Zulu Inc. shares $24.00 per share Market rate of interest General Company Inc.’s bonds 5.5% Gidget Corp.’s bonds 4.8% January 1, 20X5 • CWW reclassified its investment in General Company’s bonds to at FVPL. • CWW reclassified its investment in Gidget’s bonds to amortized cost. July 1, 20X5 CWW sold all of its investments. The net proceeds of each sale follow: Investment in Sales price PLZ Corp. shares $27.50 per share Zulu Inc. shares $27.00 per share General Company Inc.’s bonds $258,000 Gidget Corp.’s bonds $106,000 Required: Prepare all journal entries to reflect the purchase, income recognition, revaluation, reclassification, and derecognition of the investments detailed in the question. Provide a separate journal entry for each event, date it, include a brief description of the pertinent details, and provide supporting calculations. Clearly indicate the nature of the investment in each journal entry (for example, Investment in Co. X — FVPL, FVOCI, or FVOCI — elect, or at amortized cost).

Exercise 1. The following information is available for company ABC as of 31December N:

Land                   500
Additional paid in capital (share premium)         150
Advance payments to suppliers (from which for inventories 200)             300
Licenses             50
Customers         600
Prepayments     80
Legal reserve     70
Dividends payable          100
Depreciation of plant and machinery     50
Investments in associates                        700
Issued capital paid in (Share capital paid in)       ??
Sundry debtors               100
Raw materials                 60
Plant and machinery      700
Long term bank loans (of which becoming due in less than one year 150)        525
Write downs of raw materials                 5
Cash at bank     30
Provisions for guarantees to customers               500
VAT payable                   50
Long term receivables   100
Buildings                         300
Development costs (assets recognition criteria are fulfilled)             100
Other reserves                700
Salaries payable             200
Depreciation of buildings           50
Short term bank loans                150
Finished goods               180
Profit for the period       250
Advances received from customer          100
Short term financial investments            150
Suppliers payable           100
Bills of exchange payable            30
Other taxes payable      50
Deferred income (venituri amanate)      100

Required:
a. Draw up the balance sheet
b. Calculate issued capital (paid in capital).

Exercise 2. Using the following elements prepare an income statement by function and by nature (you must obtain the same result with both method.

1. Personal expenses 650

a.1. for production 400

a.2. for distribution 150

a.3. for administration 100

2. Interest expenses 40
3. row material expenses 150
4. income tax expenses 150
5. merchandise expenses 10
6. consumable expenses 300

f.1. for production 200

f.2. for distribution 70

f.3. for administration 30

7. Finish goods revenues 1.400
8. Other op expenses.210
9. Financial expenses 46
10. Other taxes expenses 20
11. Finish goods -31.12.N 200
12. Costs CSS 210:

l.1. for production 130

l.2. for distribution 50

l.3. for administration 30

13. INTEREST REVENUE 60
14. Services expenses 10
15. other financial revenue 10
16. seles revenue 50
17. depreciation expenses 250

q.1. for production 180

q.2. for distribution 20

q.3.for administration 50

18. revenue from dividends 120

Assessing Revenue Recognition Timing and Income Measurement Discuss and justify when each of the following businesses should recognize revenue and identify any income measurement issues that are likely to arise.

a. RealMoney.Com, a division of TheStreet.Com provides investment advice to customers for an up-front fee. It provides these customers with password-protected access to its website where customers can download certain investment reports. Real Money has an obligation to provide updates on its website.

b. Oracle Corporation develops general ledger and other business application software that it sells to its customers. The customer pays an up-front fee to gain the right to use the software and a monthly fee for support services.

c. Intuit Inc. develops tax preparation software that it sells to its customers for a flat fee. No further payment is required and the software cannot be returned, only exchanged if defective. d. A developer of computer games sells its software with a 10-day right of return period during which the software can be returned for a full refund. After the 10-day period has expired, the software cannot be returned.

Case 19-1 The Terminator Trans Ocean Shipping (“Trans Ocean”) provides domestic and international transportation and logistics services to customers. The company contracts shipping vessels, trucks, and aircraft to provide regional, long-haul, and international shipments of customer goods. Trans Ocean has entered into the following contracts: In March 2019, Trans Ocean entered into a revenue contract with a customer, Asia Manufacturing (“Asia”), in which Trans Ocean would be the exclusive shipper of Asia’s products between Shanghai and Los Angeles. Trans Ocean’s contract with Asia is effective on July 1, 2019. Before signing the contract with Asia, Trans Ocean did not operate the ShanghaiLos Angeles route, and to satisfy the contract with Asia, in April 2019, Trans Ocean leases a cargo ship from Heavy Vessel Manufacturing (“Heavy”), which commences on July 1, 2019. Because the shipping route is new, on July 1, 2019,

(1) Trans Ocean has no other customers to deliver goods on the Shanghai-Los Angeles route and (2) because of operational costs, Trans Ocean does not have alternative uses for the leased cargo ship. Trans Ocean adopted ASC 842, Leases, on January 1, 2019. The following are relevant facts about Trans Ocean’s revenue contract with Asia, and Trans Ocean’s lease with Heavy. Trans Ocean’s Revenue Contract With Asia • The revenue contract’s stated term with Asia is for one year. • Asia can renew the contract annually for up to four additional years. Therefore, the revenue contract can extend to five full years. • Asia pays a significant up-front nonrefundable fee for the initial one-year term; the same amount is due at the beginning of every renewal period. • Asia can cancel at any time without incurring a penalty outside of forfeiting any up-front nonrefundable fees already paid or owed at the beginning of the initial contract term and any and each renewed period. • Although the contract is new, Trans Ocean and Asia have entered into similar arrangements with similar terms and historically, Asia has renewed for one or more years. • Trans Ocean appropriately concludes that (1) the revenue contract meets the scope of, and criteria in, ASC 606, Revenue From Contracts With Customers, and (2) the contract term for its revenue contract with Asia is one year. Trans Ocean’s Lease With Heavy • The contract between Trans Ocean and Heavy contains a lease under ASC 842. • Rental payments are at market and fixed each year. Case 19-1: The Terminator Page 2 Copyright © 2019 Deloitte Development LLC All Rights Reserved. • To mitigate risks, Trans Ocean negotiated the lease period and renewal options to mirror those of Trans Ocean’s revenue contract with Asia. As a result, the fixed, noncancelable term of the lease is one year, and Trans Ocean can renew annually for four additional years (i.e., up to five full years). Trans Ocean believes that since Asia can terminate the revenue contract after one year (even though Asia may need to ship products for longer than a year and has historically renewed under other similarly structured contracts), it is uncertain whether Asia will renew the revenue contract. Because of this uncertainty, Trans Ocean believes that the renewal options related to the lease are not reasonably certain at the commencement date of the lease. As a result, Trans Ocean concludes that the lease term for its lease contract with Heavy is also one year. Required:

2. What factors should Trans Ocean consider in supporting its conclusion related to the lease term? Additional Facts On December 1, 2019, Trans Ocean entered into a shipping contract with Eastern Manufacturing Company (“Eastern”) to ship Eastern’s products between Shanghai and Los Angeles. The contract with Eastern commences on January 1, 2020, and on the basis of Trans Ocean’s evaluation of its enforceable rights and obligations in the contract with Eastern, Trans Ocean concludes that term of the revenue contract with Eastern is for a period of two years. Further, Trans Ocean concludes that (1) because of its contract with Asia and Eastern, it would not be operationally feasible to deploy the leased cargo vessel on other routes; (2) the cargo vessel will have sufficient capacity to service both Asia and Eastern; and (3) the leased asset is needed for Trans Ocean to perform under its revenue contract with Eastern (because of economic reasons that would not allow Trans Ocean to use another vessel). Required: 3. Should Trans Ocean reassess the lease term of the cargo vessel? If so, why?

The following table gives the weights, to the nearest kilogram, of randomly-selected male university students. 69 82 75 66 72 63 74 78 73 79 70 74 68 74 76 72 84 63 69 78 81 60 77 83 73 86 71 68 76 70 68 80 73 67 71 75 78 73 64 73 a. Using class intervals of size 5kg, construct a frequency distribution of the above data. b. Using the grouped data, calculate the following quantities: iv. Quartile number 1 v. Quartile number 3 vi. Variance vii. Standard Deviation (1 mark)

Consider the following table:

Fill in the missing data, using the quantity equation of money.

Why might velocity change in this way?

Calculate the average inflation rate between 2006 and 2009 and between 2009 and 2012.

If velocity had remained at the 2006 level, what would the deflator have been in 2009 and 2012, assuming real GDP and money are as in the table?

Exercise 5-14 Effect of credit card sales on financial statements LO 5-5

Ultra Day Spa provided $85,050 of services during 2018. All customers paid for the services with credit cards. Ultra submitted the credit card receipts to the credit card company immediately. The credit card company paid Ultra cash in the amount of face value less a 4 percent service charge.

Required

1. Record the credit card sales and the subsequent collection of accounts receivable in a horizontal statements model like the one shown here. In the Cash Flow column, indicate whether the item is an operating activity (OA), investing activity (IA), or financing activity (FA). If an element is not affected by the event, leave the cell blank.
2. Based on this information alone, answer the following questions:

1. (1) What is the amount of total assets at the end of the accounting period?
2. (2) What is the amount of revenue reported on the income statement?
3. (3) What is the amount of cash flow from operating activities reported on the statement of cash flows?

Trial Balance Transactions Required: 5 Assets, 2 Liabilities, 2 Equity, 1 Revenue, and 5 Expense accounts Jan 1 Owner invested $10,000 and recorded ownership in the company 2 Company paid current month's rent $500 7 Purchased merchandise to sell to customers on account from vendor TicWick Products $3,000 8 Sold to customer Mary Jones merchandise on account $1,600; cost of merchandise was $1,000 10 Signed a contract with a new supplier 15 Paid advertising from checking $100 17 Purchased a new computer from checking $250 20 Mary Jones paid her account balance in full. Amount deposited to checking account. 22 Paid legal fees $200 23 Purchased store equipment on account from Ace Supply $1,000. 25 Paid utilities $140 28 Paid 3 months of insurance $300 for coverage beginning Feb 1. 31 Paid Ace Supply for amount owed

The company rents vehicle and has contracts with customers that run from Sep to June.

Customers pay the yearly fee in advance for the rentals. In September 2001, the company received $70,000 cash and recorded it as rental income.

What is Dec 31,2001 year-end adjusting entries for this transaction under IFRS.