Part A

Albright Company derived the following items of income in 2018. Indicate whether the items will be sourced as U.S. or foreign:

Albright receives interest on a bank account it has with Deutschebank in Bonn, Germany.

Albright receives royalties on a patent it leases to an Irish Company. The patent was previously developed by Albright with respect to a business it discontinued many years ago.

Albright sells baby car seats manufactured at its plant in Tennessee to a customer in Buenos Aires, Argentina. Albright delivers the goods to its customers warehouse in Buenos Aires.

Part B

Albright generates $900,000 of interest expense in 2018. Explain how the interest expense will be allocated as an expense against U.S. and foreign source income. What alternative(s) are available?

Explain generally how Albright will allocate support and stewardship expenses between U.S. and foreign sources.

Prestige International, a swiss watch manufacturer exports sports and premium wrist and smart watches to the U.S. In early 2012, the spot exchange rate between the Swiss Franc and U.S. dollar was 1.0404 ($ per franc). While they are usually happy about their exports being billed in US Dollars, but due to the recent fluctuation in exchange rates, the company has taken a toll on their net receipts when converted into Swiss Francs.

Interest rates in the U.S. and Switzerland were 0.25% and 0% per annum respectively, with continuous compounding. The three-month forward exchange rate was1.0300 ($ per franc).

Ms. Saleha, the CFO of the company has asked you to devise strategy where arbitrage is possible on the current scenario. What arbitrage strategy was possible? How does your answer change if the exchange rate is 1.0500 ($ per franc).

1. Common shares are issued in exchange for a noncash asset. Under IFRS, the noncash asset should be recorded at:

1. The average cost of the common shares in the common shares account
2. The fair market value of the shares
3. The fair market value of the asset acquired
4. The fair market value of the asset acquired or the fair market value of the common shares if the fair market value of the asset cannot be reliably determined

2. What is the cumulative effect of the declaration and payment of a cash dividend on a company’s financial statements?

1. To decrease total liabilities and shareholders’ equity
2. To increase total expenses and total liabilities
3. To increase total assets and shareholders’ equity
4. To decrease total assets and shareholder’s equity

3. What is the journal entry to record the issuance of 1,000,000 common shares for $8 each and 250,000, $2.50 preferred shares for $50 each?

1. Cash                                                                8,875,000

                 Common Shares                                                                   8,000,000

                 Preferred Shares                                                                      875,000

2. Cash                                                                  8,625,000

                 Common Shares                                                                   8,000,000

                 Preferred Shares                                                                      625,000

3. Cash                                                                  8,000,000

                 Common Shares                                                                   8,000,000

4. Common Shares                                             8,000,000

Preferred Shares                                                875,000

                 Cash                                                                                       8,875,000

4. The liability for a cash dividend is recorded on which of the following dates?

1. Date of record
2. Date of payment
3. Year-end date
4. Date of declaration

5. On January 1^st, 2019, Hanson Corporation has 15,000, $2.60 cumulative preferred shares and 20,000 common shares. Hanson did not pay any dividends during the previous year ended December 31^st, 2018. The company pays $45,000 of dividends during 2019. Which of the following amounts represents the amount of dividends that the preferred shareholders would receive in 2019?

1. $45,000
2. $39,000
3. $15,000
4. $6,000

6. Which of the following best describes the authorized shares of a corporation?

1. They must be recorded in a formal accounting entry
2. They have an effect on both assets and shareholders’ equity
3. Authorized share capital is required to be shown on a corporation’s financial statements under both ASPE and IFRS
4. They are indicated in a corporation’s articles of incorporation

7. What is total shareholders’ equity based on the following account balances?

Common Shares                           $450,000

$2.25 Preferred Shares                    90,000

Retained Earnings                           190,000

Dividends Payable                             10,000                         

1. $740,000
2. $730,000
3. $720,000
4. $640,000

8. Which of the following would result in a credit to retained earnings?

1. Loss for the period
2. Dividend declaration
3. Dividend payment
4. Profit for the period

9. Based on the following information, calculate return on equity ( round to two decimal places ).

Number of Issued Common Shares                     #30,000

Number of Issued Preferred Shares                    #100,000

Profit for the year                                                   $76,000

Average Shareholders’ Equity for the year        $262,300

1. 2.02
2. 0.29
3. 0.50
4. 3.45

10. Turpin Ltd. reported retained earnings of $725,000 on its March 31, 2019 balance sheet.

It reported a profit of $260,000 for the year ended March 31, 2020. Its retained earnings at March 31, 2020 was $865,000. Which of the following amounts represents the dividends declared by Turpin during the year ended March 31, 2020? ( assume no other effects on retained earnings during the year )

1. $120,000
2. $400,000
3. $465,000
4. $985,000

Blossom Inc. had sales of $2,300,000 for the first quarter of 2020. In making the sales, the company incurred the following costs and expenses.

Prepare a CVP income statement for the quarter ended March 31, 2020.

Concord Corporation, a publicly-traded company, agreed to loan money to another company. On July 1, 2020, the company received a five-year promissory note with a face value of $505,000, paying interest at a face rate of 5% on July 1 each year. The note was issued to yield an effective interest rate of 6%. Concord used the effective interest method of amortization for discounts or premiums, and the company’s year-end is September 30.

1. Use 1. PV.1 Tables, 2. a financial calculator, or 3. Excel functions to arrive at the amount to record the note receivable.

2. Prepare a schedule of note premium / discount amortization schedule

3. Prepare the journal entries to record the issue of the note on July 1, 2020, and any required accrual entries at the company’s year-end on September 30, 2020. Finally, prepare the journal entry to record the first cash collection received on July 1, 2021 for Concord Corporation.

Chiefs Construction Company has contracted to build an office building. The construction is scheduled to begin on January 1, 2020, and the estimated time of completion is July 1, 2023. The building cost is estimated to be $20,000,000 and will be billed at $24,000,000. The following data relate to the construction period:

1) Compute the estimated gross profit for 2020, 2021, 2022, and 2023 assuming that the percentage-of-completion method is used.

2) Prepare the necessary journal entries for Chiefs Company for the years 2022 and 2023 under percentage-of-completion method.

3) Prepare the necessary journal entries for Chiefs Company for the years 2022 and 2023 under completed contract method.

B1 - Snow Company started operations on February 1, 2020 by depositing $3,000,000 cash in the bank as capital. The following transactions took place during the first month of operations:

February 3: Purchased supplies for $22,500 in cash.

February 9: Purchased equipment for $255,000, paid $105,000 in cash and the remaining amount will be paid after 10 days.

February 12: Received a bill from Dubai News for advertising amounted to $1,650.

February 14: Paid $24,000 salaries in cash.

February 16: Paid $6,000 utilities expense in cash.

February 17: Provided services to customers for $195,000 in cash.

February 19: Paid $150,000 for equipment purchased on February 9.

February 28: The owner withdrew $7,500 cash for personal use.

Required:

1. Prepare the trial balance of Snow Company on February 29, 2020.
2. Prepare the financial statements of Snow Company on February 29, 2020.

B1 - Snow Company started operations on February 1, 2020 by depositing $3,000,000 cash in the bank as capital. The following transactions took place during the first month of operations:

February 3: Purchased supplies for $22,500 in cash.

February 9: Purchased equipment for $255,000, paid $105,000 in cash and the remaining amount will be paid after 10 days.

February 12: Received a bill from Dubai News for advertising amounted to $1,650.

February 14: Paid $24,000 salaries in cash.

February 16: Paid $6,000 utilities expense in cash.

February 17: Provided services to customers for $195,000 in cash.

February 19: Paid $150,000 for equipment purchased on February 9.

February 28: The owner withdrew $7,500 cash for personal use.

Required:

1. Prepare the trial balance of Snow Company on February 29, 2020.
2. Prepare the financial statements of Snow Company on February 29, 2020.

Below are Lebnas Corp.’s 2019 income statement and comparative balance sheet at 12/31/2019 and 12/31/2018.  

Additional information:                                                  

1. On December 31, 2018, Lebnas acquired 25% of Island Co.’s common stock for $609,000. On that date, thecarrying value of Island’s assets and liabilities, which approximated their fair values, was $2,435,000. Islandreported income of $319,000 for the year ended December 31, 2019. No dividend income was received by Lebnas on Island’s common stock during the year 2019.

2. During 2018, Lebnas loaned $797,500 to POI Co., an unrelated company. POI made the first semi-annualprincipal repayment of $72,500, plus interest at 10%, on December 31, 2018. POI is current on the loan as of December 31, 2019.

3. On January 2, 2019, Lebnas sold equipment costing $145,000, with a carrying amount of $44,950 for cash.

4. On December 31, 2019, Lebnas entered into a finance lease for a new factory. The present value of the annual rental payments is $1,232,500, which equals the fair value of the building. Lebnas will make the firstrental payment of $174,000 on 1/2/2020.

Note:  The right of use asset is included in Property, Plant and Equipment on the balance sheet.

5. Depreciation expense of $230,550 is included in Cost of Goods Sold.

6. Lebnas declared and paid cash dividends as follows.

Required: Prepare a statement of cash flows for Lebnas Corp. for the year ended 12/31/2019, using the indirect method and good form, including footnote disclosures.

1. U.S company - UPS 2. Research UPS and the markets in which it competes in 3. prepare six paper page for your client.