Presented below is the comparative balance sheet for Diatessaron Inc., a private company reporting under ASPE, at December 31, 2021, and 2020:

DIATESSARON INC.

Balance Sheet

December 31

Assets 2021 2020

Cash $ 67,000 $ 98,000

Accounts receivable 101,000 75,000

Inventory 205,000 155,500

Long-term investment 101,500 0

Property, plant, and equipment 535,000 460,000

Accumulated depreciation (162,500) (140,000)

$847,000   $648,500

Liabilities and Shareholders' Equity

Accounts payable $ 57,500 $ 47,000

Dividends payable 6,000 0

Income tax payable 14,000 15,000

Long-term notes payable 25,000 0

Common shares 630,000 525,000

Retained earnings 114,500 61,500

$847,000  $648,500

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DIATESSARON INC.

Income Statement

Year Ended December 31, 2021

Sales $663,000

Cost of goods sold 432,000

Gross profit 231,000

Operating expenses $147,500

Loss on sale of equipment 3,000 150,500

Profit from operations 80,500

Interest expense 3,000

Interest revenue (4,500) (1,500)

Profit before income tax 82,000

Income tax expense 14,000

Profit $ 68,000

Additional information:

1. 1. Cash dividends of $15,000 were declared.
2. 2. A long-term investment was acquired for cash at a cost of $101,500.
3. 3. Depreciation expense is included in the operating expenses.
4. 4. The company issued 10,500 common shares for cash on March 2, 2021. The fair value of the shares was $10 per share. The proceeds were used to purchase additional equipment.
5. 5. Equipment that originally cost $30,000 was sold during the year for cash. The equipment had a carrying value of $9,000 at the time of sale.
6. 6. The company issued a note payable for $28,000 and repaid $3,000 by year end.
7. 7. All purchases of inventory are on credit.
8. 8. Accounts payable is used only to record purchases of inventory.

Instructions

a. Can you show me a cash flow statement for the year using the indirect method.

b. Can you show me a cash flow statement for the year using the direct method.

John Deere is operated as a C corporation. The company received an order for a $12,000 tractor from a customer on June 30, 2020 and delivered the tractor to the customer on July 31, 2020. The company sent the customer a bill saying they had to pay for the tractor by no later than January 31, 2021. John Deere uses a calendar year tax period. Based on phone calls with the customer in December of 2020, the customer explained that it may have to file bankruptcy proceedings but was trying to work its way out of financial hardship before taking that option. The customer said that at worst it would be able to pay at least $9,000 of the bill. On January 15, 2021, John Deere received a check from the customer for $9,000 and was informed it would receive no additional payment based on the outcome of the bankruptcy case. In addition to the transaction above, the following occurred:

• A different customer paid for the same type of tractor (at $12,000) on November 1, 2020 and scheduled delivery for January 15, 2021. John Deere included the income in its 2020 financial accounting statements.
• The company both incurred and paid expenses for the following in 2020:
  • Wages:                                                                               $3,000
  • Rental costs for a warehouse:                                            $4,000
  • Repairs:                                                                              $2,000
• The company both incurred and paid expenses for the following in 2021:
  • Wages:                                                                               $4,000
  • Rental costs for a warehouse:                                            $4,000
  • Repairs:                                                                              $3,000

1. Assuming the local John Deere’s operates on a calendar year-end under the accrual method and prefers to defer income whenever possible, what amount of net profit (loss) for tax purposes in 2020?
   
2. Assuming the local John Deere’s operates on a calendar year-end under the accrual method and prefers to defer income whenever possible, what amount of net profit (loss) for tax purposes in 2021?
   
3. Assuming the local John Deere’s operates on a calendar year-end under the cash method and prefers to defer income whenever possible, what amount of net profit (loss) for tax purposes in 2020?
   

d. Assuming the local John Deere’s operates on a calendar year-end under the cash method and prefers to defer income whenever possible, what amount of net profit (loss) for tax purposes in 2021?

Blue Company purchased equipment for $266,000 on October 1, 2020. It is estimated that the equipment will have a useful life of 8 years and a salvage value of $14,000. Estimated production is 40,000 units and estimated working hours are 20,000. During 2020, Blue uses the equipment for 530 hours and the equipment produces 1,100 units. Compute depreciation expense under each of the following methods. Blue is on a calendar-year basis ending December 31.

The Mateo Corporation's inventory at December 31, 2020, was $325,000 based on a physical count priced at cost, and before any necessary adjustment for the following:

1. Merchandise costing $30,000, shipped F.o.b. shipping point from a vendor on December 30, 2020, was received on January 5, 2021.
2. Merchandise costing $22,000, shipped F.o.b. destination from a vendor on December 28, 2020, was received on January 3, 2021.
3. Merchandise costing $38,000 was shipped to a customer F.o.b. destination on December 28, 2020, arrived at the customer's location on January 6, 2021.
4. Merchandise costing $12,000 was being held on consignment by Traynor Company.

What amount should Mateo Corporation report as inventory in its December 31, 2020, balance sheet? (Show your reasoning!)

Kershaw Electric sold $6,000,000, 10%, 10-year bonds on January 1, 2020. The bonds were dated January 1, 2020, and paid interest on January 1. The bonds were sold at 98.

Prepare entries to record issuance of bonds, interest accrual, and bond redemption.

Instructions

1. Prepare the journal entry to record the issuance of the bonds on January 1, 2020.
2. At December 31, 2020, $8,000 of the Discount on Bonds Payable account has been amortized. Show the balance sheet presentation of the long-term liability at December 31, 2020.
3. On January 1, 2022, when the carrying value of the bonds was $5,896,000, the company redeemed the bonds at 102. Record the redemption of the bonds assuming that interest for the period has already been paid.

Please show all work!

Excavation Co., a publicly-traded company, has a December 31 year end. For the 2020 fiscal year, there were 100,000 common shares outstanding all year. Net income for the year ended December 31, 2020 was $900,000. The company’s income tax rate is 25%. During 2019, Spade issued a $5,000,000, 5% convertible bond at par. Each $1,000 bond is convertible into 20 common shares. No bonds have been converted as of December 31, 2020. Also during 2019, Spade issued 100,000, $2 cumulative, convertible preferred shares. Two preferred shares are convertible into one common share. The preferred share dividend was declared and paid in June, 2020. Required : Calculate basic and diluted earnings per share for 2020.

Beniluz Company was formed on July 1, 2016. It was authorized to issue 1,000,000 shares of $5 par value common stock and 200,000 shares of 4% $100 par value, cumulative and nonparticipating preferred stock. Beniluz Company has a July 1-June 30 fiscal year. The following information relates to the stockholders’ equity accounts of Penn Company: Common Stock Prior to the 2020-21 fiscal year, Beniluz Company had 304,000 shares of outstanding common stock issued as follows: 1. 220,000 shares were issued for cash on July 1, 2016, at $24 per share. 2. On August 4, 2018, 24,000 shares were exchanged for an office building and warehouse which had a book value in the seller’s book of $431,000 and had an estimated fair value of $627,000 on August 4, 2018. 3. 60,000 shares were issued on November 1, 2019, for $29 per share. During the 2020-21 fiscal year, the following transactions regarding common stock took place: 1. August 31, 2020 - Beniluz purchased 5,000 shares of its own stock on the open market at $30 per share. Beniluz uses the cost method for treasury stock. 2. December 1, 2020 - Beniluz declared a 6% stock dividend for stockholders of record on December 20, 2020, to be issued on January 15, 2021. Beniluz was having a liquidity problem and could not afford a cash dividend at the time. Beniluz ‘s common stock was selling at $28 per share on December 1, 2020. 3. June 20, 2021 - Beniluz sold 1,500 shares of its own common stock that it had purchased on August 31, 2020 for $36,000. Preferred Stock Beniluz issued 20,000 shares of preferred stock at $105 per share on October 1, 2019. 2 Cash Dividends Beniluz has followed a schedule of declaring cash dividends in December and June, with payment being made to stockholders of record in the following month. The cash dividends which have been declared since inception of the company through June 30, 2021, are shown below. Date Common Preferred 6/1/2018 $ 0.50 $ 2.00 12/1/2019 $ 0.50 $ 2.00 6/1/2020 $ 0.40 $ 2.00 12/1/2020 - $ 2.00 Dividend per Share No cash dividends were declared during June 2021 due to the company’s liquidity problems. Retained Earnings As of June 30, 2020, Beniluz Retained Earnings account had a balance of $824,000 and the Accumulated Other Comprehensive Income account had a credit balance of $136,000. For the fiscal year ending June 30, 2021, Beniluz reported net income of $32,000 and an unrealized loss correctly recorded as Other Comprehensive Income for the amount of $12,000. Instructions Prepare, in good form, the Stockholders’ Equity section of the Balance Sheet, including appropriate notes, for Beniluz Company as of June 30, 2021, as it should appear in its annual report to the shareholders.

Canberra acquired all of the equity shares in Yass on 1 October 2019, for consideration of $2,150 million. The carrying amount of identifiable net assets at acquisition was $2,130 million, which was the same as the fair value. Canberra is actively selling its entire shareholding in Yass as a single transaction and has classified the investment as a disposal group held for sale, in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations, for the year ended 30 September 2020. The carrying amounts of the net assets of Yass in the individual financial statements of Canberra at 30 September 2020, before classification as held for sale, were ($ million):

Canberra measures properties at fair value, in accordance with IAS 16 Property, Plant and Equipment. No revaluations had been recognised on acquisition, when the estimated fair values were substantially the same as the carrying amounts. Properties with a carrying amount of $630 million were revalued to fair value of $680 million, at 30 September 2020. This fair value change has not been recognised in the financial statements. The total fair value less costs to sell of the disposal group was estimated as $2,140 million, at 30 September 2020. No impairments had been recognised previously, to the goodwill of Yass.

Yass owns and operates private hospitals and the medical sector is highly regulated. Canberra is confident that the sale of Yass will be agreed shortly after 30 September 2020. Any purchaser will require regulatory approval, which could delay completion of the sale until after 30 September 2021. Regulatory approval cannot be sought by a purchaser until a contract of sale had been agreed. Yass will continue to operate the hospitals until the sale is completed. Canberra will sell all of the shares in Yass to the purchaser, who would obtain all of Yass’s rights and obligations. Yass does not intend to sell or acquire any significant assets or liabilities prior to completion of the sale, as that would affect the value of the shares being sold.

Required:

Discuss the correct recognition and measurement of the investment in Yass in the consolidated financial statements, for the year ended 30 September 2020. Provide calculations.     

Canberra acquired all of the equity shares in Yass on 1 October 2019, for consideration of $2,150 million. The carrying amount of identifiable net assets at acquisition was $2,130 million, which was the same as the fair value. Canberra is actively selling its entire shareholding in Yass as a single transaction and has classified the investment as a disposal group held for sale, in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations, for the year ended 30 September 2020. The carrying amounts of the net assets of Yass in the individual financial statements of Canberra at 30 September 2020, before classification as held for sale, were ($ million):

Canberra measures properties at fair value, in accordance with IAS 16 Property, Plant and Equipment. No revaluations had been recognised on acquisition, when the estimated fair values were substantially the same as the carrying amounts. Properties with a carrying amount of $630 million were revalued to fair value of $680 million, at 30 September 2020. This fair value change has not been recognised in the financial statements. The total fair value less costs to sell of the disposal group was estimated as $2,140 million, at 30 September 2020. No impairments had been recognised previously, to the goodwill of Yass.

Yass owns and operates private hospitals and the medical sector is highly regulated. Canberra is confident that the sale of Yass will be agreed shortly after 30 September 2020. Any purchaser will require regulatory approval, which could delay completion of the sale until after 30 September 2021. Regulatory approval cannot be sought by a purchaser until a contract of sale had been agreed. Yass will continue to operate the hospitals until the sale is completed. Canberra will sell all of the shares in Yass to the purchaser, who would obtain all of Yass’s rights and obligations. Yass does not intend to sell or acquire any significant assets or liabilities prior to completion of the sale, as that would affect the value of the shares being sold.

Required:

Discuss the correct recognition and measurement of the investment in Yass in the consolidated financial statements, for the year ended 30 September 2020. Provide calculations.