You Beaut Ltd is an Australian company which has a functional currency that is A$. It has reporting periods ending on 31 December and 30 June. On 22 November 2020 You Beaut Ltd sold some inventories to a Chinese customer for the agreed price of 400,000 Yuan. The original purchase cost of the inventories was A$75,000. On 19 January 2021, the customer pays the amount owing on the sales invoice to You Beaut Ltd.

The applicable exchange rates were:

                                    1 July 2020                  1 Yuan = A$0.24

                                    22 November 2020     1 Yuan = A$0.28

                                    31 December 2020     1 Yuan             = A$0.21         

                                    19 January 2021          1 Yuan = A$0.24

                                    30 June 2021               1 Yuan = A$0.22

Required:

In accordance with AASB 121/IAS 21, prepare the necessary journal entries for You Beaut Ltd to account for the above transactions for the half year to 31 December 2020 and the full year to 30 June 2021

During 2020, Pharoah Furniture Company purchases a carload of wicker chairs. The manufacturer sells the chairs to Pharoah for a lump sum of $47,880 because it is discontinuing manufacturing operations and wishes to dispose of its entire stock. Three types of chairs are included in the carload. The three types and the estimated selling price for each are listed below.

During 2020, Pharoah sells 160 lounge chairs, 80 armchairs, and 96 straight chairs.

What is the amount of gross profit realized during 2020? What is the amount of inventory of unsold straight chairs on December 31, 2020? (Round cost per chair to 2 decimal places, e.g. 78.25 and final answer to 0 decimal places, e.g. 5,845.)

On June 1, 2020, the Crocus Company began construction of a new manufacturing plant. The plant was completed on October 31, 2021. Expenditures on the project were as follows ($ in millions):

On July 1, 2020, Crocus obtained a $70 million construction loan with a 6% interest rate. The loan was outstanding through the end of October, 2021. The company's only other interest-bearing debt was a long-term note for $100 million with an interest rate of 8%. This note was outstanding during all of 2020 and 2021. The company's fiscal year-end is December 31.

What is the amount of interest that Crocus should capitalize in 2021, using the specific interest method? (Enter your answers to nearest whole dollar amount.)

$7,283,000.

$7,117,000

$8,740,000.

$7,248,000.

On December 31, 2019, Cheyenne Inc. borrowed $3,960,000 at 13% payable annually to finance the construction of a new building. In 2020, the company made the following expenditures related to this building: March 1, $475,200; June 1, $792,000; July 1, $1,980,000; December 1, $1,980,000. The building was completed in February 2021. Additional information is provided as follows.

Determine the amount of interest to be capitalized in 2020 in relation to the construction of the building

Prepare the journal entry to record the capitalization of interest and the recognition of interest expense, if any, at December 31, 2020.

For its first year if operations, Altitude Inc. reports pretax GAAP income of $100,000 in 2020. Assume pretax income in 2021 and 2022 of $125,000 and $90,000 respectively. The enacted income tax rate in all years is 25%. The following additional information is available for the first three years of operation (with the exception of the one item in the 4th year).

• Prepaid rent in the amount of $20,000 was recorded on December 21, 2020 for 2021 rent.
• A warranty accrual of 30,000 was recorded on December 31, 2020. The warranty was paid evenly over the years 2021-2023.
• The company recorded interest revenue of $500 each of the three years on municipal bonds.

1. Compute the income tax payable each year for 202, 2021, 2022
2. Determined the balance of any deferred tax assets or deferred tax liabilities at the end of each year (2020, 2021, 2022)
3. Record the journal entry related to taxes in 2020, 2021, 20222

Shrieves Casting Company is considering adding a new line to its product mix, and the capital budgeting analysis is being conducted by Sidney Johnson, a recently graduated MBA. The cost of new machinery for the new product line would be $644,000. The machinery has economic life of eight years, and has no salvage value. Assume that depreciation is straight-line to zero over the life of the machine. The new line would generate incremental sales of 70,000 units per year at variable cost per unit of $21 and fixed cost of $725,000 per year. Each unit can be sold for $37 in the first year. The sale price and cost are both expected to remain the same. The firm’s tax rate is 35 percent, and the rate of return required for this type of investment is 15 percent. Calculate the base-case cash flow and NPV.

Pyre Company leased equipment to the Poland Company on January 1, 2020, for a ten-year period. Equal annual payments under the lease are $240,000 and are due on January 1 of each year beginning on the date the lease was signed. The rate of interest used by Pyre to compute the lease payments is 9%. The lease receivable before the first payment is $1,678,860, and the cost of the equipment on Pyre’s accounting records was $1,488,000.

Assuming that the lease is appropriately recorded as a sale for accounting purposes, write the entries required on the date the lease is signed and on December 31, 2020.  

1. Your company wants to launch a new product. The price will be $108 and the projected units sold will be 5,000 each of the next five years and then zero sales after that (i.e. life of five years). Variable costs per unit is $47 and fixed costs will be $36,000 per year. This project will need initial net working capital of $37,000, and NWC will then increase $7,000 per year through the end of year five. At that point 75% of NWC (no tax ramifications) will be returned to the company. Necessary equipment investment will be $900,000 and have a salvage value of 23%, net of tax. The depreciation will be straight-line over the life of this project. Your company’s current debt/equity ratio is 1.15 and this product is in line with the operations of the rest of your company. Your company is in the 21% tax bracket. Your equity investors demand a 13% return and your company’s bonds yield 5.3%. Even though no debt will be used, you still need to use your company’s WACC. Price is accurate within 5%, units sold within 3%, and variable & fixed costs within 2%. What is the NPV in the worst-case scenario?

2.In 2020 and 2019, your cash was 4,563 and 3,597, your accounts receivables were 7,531 and 6,423, and your inventory was 10,235 and 11,563. Similiarly, in 2020 and 2019 your accounts payable was 8,423 and 5,789, and your other current liabilities were 7,413 and 10,356. Lastly from the balance sheet, in 2020 and 2019 your net fixed assets were 74,562 and 71,246.

In 2020 your net sales were 111,425, your costs of good sold was 38,999, rent was 48,543, and depreciation was 2,015. You paid interest of 1,728 and your tax rate was 20.36%.

What is cash flow from assets (i.e. free cash flow) in 2020?

The accompanying data represent the total compensation for

12

randomly selected chief executive officers​ (CEO) and the​ company's stock performance in a recent year. Complete parts​ (a) through​ (d) below.

LOADING...

Click the icon to view the CEO data.

​(a) One would think that a higher stock return would lead to a higher compensation. Based on​ this, what would likely be the explanatory​ variable?

Stock return

Compensation

​(b) Draw a scatter diagram of the data. Use the result from part​ (a) to determine the explanatory variable. Choose the correct graph below.

A.

0160025Stock ReturnCompensation

A scatter diagram has a horizontal axis labeled "Stock Return" from 0 to 160 in increments of 20 and a vertical axis labeled "Compensation" from 0 to 25 in increments of 5. The following 12 approximate points are plotted, listed here from left to right: (0, 14.5); (10, 4); (24, 7); (30, 1); (32, 2); (32, 4); (56, 12); (58, 7.5); (64, 8.5); (70, 4); (76, 21); (142, 6.5).

B.

0160025Stock ReturnCompensation

A scatter diagram has a horizontal axis labeled “Stock Return” from 0 to 160 in increments of 20 and a vertical axis labeled “Compensation” from 0 to 25 in increments of 5. The following 12 approximate points are plotted, listed here from left to right: (0, 12); (10, 2); (24, 21); (30, 4); (32, 1); (32, 6.5); (56, 4); (58, 8.5); (64, 4); (70, 7.5); (76, 14.5); (142, 7).

C.

0250160CompensationStock Return

A scatter diagram has a horizontal axis labeled "Compensation" from 0 to 25 in increments of 5 and a vertical axis labeled "Stock Return" from 0 to 160 in increments of 20. The following 12 approximate points are plotted, listed here from left to right: (1, 32); (2, 10); (4, 30); (4, 56); (4, 64); (6.5, 32); (7, 142); (7.5, 70); (8.5, 58); (12, 0); (14.5, 76); (21, 24).

D.

0250160CompensationStock Return

A scatter diagram has a horizontal axis labeled "Compensation" from 0 to 25 in increments of 5 and a vertical axis labeled "Stock Return" from 0 to 160 in increments of 20. The following 12 approximate points are plotted, listed here from left to right: (1, 76); (2, 64); (4, 10); (4, 32); (4, 142); (6.5, 30); (7, 0); (7.5, 70); (8.5, 58); (12, 56); (14.5, 24); (21, 32).

​(c) Determine the linear correlation coefficient between compensation and stock return.

requals=nothing

​(Round to three decimal places as​ needed.)

​(d) Does a linear relation exist between compensation and stock​ return? Does stock performance appear to play a role in determining the compensation of a​ CEO?

The linear correlation coefficient is close to

▼

1 comma1,

0 comma0,

negative 1 comma−1,

so

▼

no

a positive

a negative

linear relation exists between compensation and stock return. It appears that stock performance plays

▼

no

a negative

a positive

role in determining the compensation of a CEO.

Data Company   Compensation ($mil)   Stock Return (%)
Company A   14.55   75.44
Company B   4.08   63.96
Company C   7.11   142.05
Company D   1.05   32.68
Company E   1.99   10.67
Company F   3.78   30.67
Company G   12.02   0.77
Company H   7.65   69.41
company I   8.45   58.69
Company J   4.08   55.95
Company K   20.92   24.28
Company L   6.65   32.15

The following information relates to the debt investments to Mayor Company on 2020.

1. On January 1, Purchased 100, $1,000 Mirror Corp. 10% bonds for $100,000 (at 100). Interest is payable on July 1 and January 1.

2. On April 1, Purchased 80, $1,000 Bondi Inc 9% bonds for $80,000 (at 100). Interest is payable on April 1 and October 1.

3. On July 1, semiannual interest is received.

4. On October 1, semiannual interest is received.

5. On October 1, Sold 30 Bondi Inc. bonds for $34,000 after receiving the interest due.

6. On December 31, accrued semiannual interest on Mirror Corp. and Bondi Inc bonds.

7. On December 31, the fair value of Mirror Corp. and Bondi Inc bonds are 102 and 101, respectively (102 means fair value=102% of par value). Mayor Company doesn’t have debt investment before 2020.

Instructions

(a) Prepare any journal entries you consider necessary, including year end entries (December 31), assuming these investments are managed to profit from changes in market interest rates (held for trading). Mayor Company doesn’t have debt investment before 2020.

(b) Prepare a partial statement of financial position showing the Investment account at December 31, 2020.

(c) If Mayor Company purchase the debt investment to collect the contractual cash flow (held the debt investment to maturity), explain how the journal entries would differ from those in part (a).