INTERMEDIATE ACCOUNTING

1. Maxpein Company has reclassified certain assets as biological assets. The
total value of the forest assets is P6, 000,000 which comprises:

In the statement of financial portion, what total amount of the forest assets
should be classified as biological assets?
2.Naih Company is a producer of coffee. The entity is considering the valuation
of harvested coffee beans. Industry practice is to value the coffee beans at
market value and uses as reference a local publication “Accounting for
Successful Farms”
On December 31, 2014, the entity has harvested coffee beans costing P3,
000,000 and with fair value less cost of disposal of P3, 500,000 at the point
harvest.
Because of long aging and maturation process after harvest, the harvested
coffee beans were still on hand on December 31, 2015. On such date, the fair
value less cost of disposal is P3, 900,000 and the net realizable value is P3,
200,000.
What is the measurement of the coffee beans inventory on December 31, 2014?
3.On August 1, 2006, Bamco Company purchased a new machine on a deferred
payment basis. A down payment of P100,000 was made and 4 montly
installments of P250,000 each are to be made beginning on September 1, 2006.
The cash equivalent price of the machine was P950,000. Bamco incurred and
paid installation costs amounting to P30,000.
The amount to be capitalized as the cost of the machine is
a. 950,000 b. 980,000 c. 1,100,000 d. 1,130,000
4. On April 30, 2019, Shark Corporation purchased for P 30 per share all 200,000
of Fins Corporation’s outstanding ordinary share. On this date, Fin’s balance sheet
showed net assets of P 5,000,000. Additionally, the fair value of Fin’s identifiable
assets on the same date was P600,000 in excess of their carrying amount.
What amount should Shark report as goodwill in its April 30, 2019 consolidated
balance sheet?

Metropolitan Hydro (MH) is a private company that owns and operates all of the province's electricity generation and transmission systems. It is deciding whether it should follow IFRS or ASPE in the upcoming year. The company must choose now and is looking to analyze the impact of following IFRS or ASPE. Each year, MH must prepare and submit audited financial statements to the government. The company generates and sells electricity to residential and commercial customers. It is committed to the following: Identifying and providing innovative solutions that will improve the reliability and efficiency of electrical delivery Sustainability (including not only profitability but also environmental sustainability)—in this regard, MH has a publicly available environmental policy against which the company is measured by the government The company has just finished a new project to install smart meters in all residential houses. The meters allow residents to track usage and power supply and demand. Each meter is very expensive and will likely become technologically obsolete in three years. MH decided to pursue this strategy nonetheless due to its commitment to sustainability. The company wants all customers to think about using electricity wisely and the meters help with this. The company generally requires a security deposit (amounting to the cost of the meter) when a customer signs up to receive electricity or when the meter is first installed. The value of the meter declines over time and after three years it is worthless. If customers cancel their electricity delivery contract early, they get the full amount back once they return their meters. Otherwise, at the end of three years, MH retains the security deposit and has no obligation to return the cash. MH is rate-regulated. This means that it must ask for government approval whenever it wants to raise the rates that it charges for electricity. Generally, the government allows the company to recover all costs incurred in generating the electricity plus a reasonable profit margin. Therefore, rates are set as being equal to “cost plus reasonable profit margin.” This means that, once approved, the company is able to charge revenues equal to all costs incurred plus a reasonable profit. Under ASPE, special “rate-regulated accounting” exists. One of the features of this special accounting is that companies following rate-regulated accounting are able to defer any losses that are incurred on disposition of assets, on the basis that they can recover these losses from future revenues. IFRS does not allow this. Sometimes MH signs supply contract agreements with other suppliers of electricity to ensure that power supplies to MH customers are not disrupted. Under the terms of these contracts, MH locks in the quantity and price of electricity. However, the contracts do not explicitly include net settlement provisions. Because electricity is a commodity, the contracts may be bought and sold on the regional commodities exchange. MH is concerned about maintaining a consistent supply of electricity to its customers, since many of its generating stations are getting very old and the incidence of breakdown and generating station closures due to the age of the equipment is increasing. There is no market for these old generating stations (and MH would probably replace the capacity with newer, greener forms of electricity, such as wind or solar). Often the land that these stations are sitting on is polluted with chemicals. Technically, since this pollution occurred many years ago in most cases, there are no laws in place to force cleanup. Currently, the company is doing a voluntary land assessment and remediation program to identify the extent of this pollution. The company expects that it would recover all of the cleanup costs it might incur from future revenues through increased customer rates. However, there is always the chance that future governments might change the ability to build these costs into the rates charged to customers. Some of the generating stations are located on lands held by First Nations. The company is negotiating to obtain legal title to the lands but understands that it may have to relocate the assets. The assets in question are material. MH obtains much of its financing through bonds and commercial paper issuances. Therefore, it is important that it retain its good credit ratings. Currently, it has a very good credit rating, awarded by both S&P and Moody's credit rating agencies. This good rating helps keep costs (and therefore customer rates) down. There are debt covenants in the debt agreements that limit the amount of debt as a percentage of total capitalization (total assets). Debt may not exceed 75% of total assets under these covenants. (Currently, the actual debt to total assets ratio is 65%.) Instructions Assume the role of an accounting consultant hired to determine which set of accounting standards to follow. Discuss the financial reporting issues relating to the above. Use the case analysis framework presented in the Case Primer, including an overview, analysis, and recommendations.

1. A company wants to apply k-NN to find out whether new customers response to its marketing campaign or not. We have data of six existing customers and their response. In the table below, we list their response and their distances to two new customers (Jack and Colleen).

What will be the predicted responses of Jack and Colleen using k-NN when k is set to the following values? Justify your answer.

1. k = 1
2. k = 3
3. k = 5

Ricky’s Piano Rebuilding Company has been operating for one year. On January 1, at the start of its second year, its income statement accounts had zero balances and its balance sheet account balances were as follows:

Following are the January transactions:

1. Received a $795 deposit from a customer who wanted her piano rebuilt in February.
2. Rented a part of the building to a bicycle repair shop; $545 rent received for January.
3. Delivered five rebuilt pianos to customers who paid $14,425 in cash.
4. Delivered two rebuilt pianos to customers for $7,600 charged on account.
5. Received $6,400 from customers as payment on their accounts.
6. Received an electric and gas utility bill for $750 for January services to be paid in February.
7. Ordered $1,140 in supplies.
8. Paid $3,400 on account in January.
9. Paid $16,900 in wages to employees in January for work done this month.
10. Received and paid cash for the supplies in (g).

Prepare a classified balance sheet for the month ended and at January 31.

Supply Club, Inc., sells a variety of paper products, office supplies, and other products used by businesses and individual consumers. During July 2018 it started a loyalty program through which qualifying customers can accumulate points and redeem those points for discounts on future purchases. Redemption of a loyalty point reduces the price of one dollar of future purchases by 20% (equal to 20 cents). Customers do not earn additional loyalty points for purchases on which loyalty points are redeemed. Based on past experience, Supply Club estimates a 75% probability that any point issued will be redeemed for the discount. During July 2018, the company records $132,000 of revenue and awards 220,000 loyalty points. The aggregate stand-alone selling price of the purchased products is $132,000. Eighty percent of sales were cash sales, and the remainder were credit sales.

Required:
1. & 2. Prepare Supply Club’s journal entry to record July and August sales. During August, customers redeem loyalty points on $132,000 of merchandise. Seventy-five percent of those sales were for cash, and the remainder were credit sales. (Do not round intermediate calculations. If no entry is required for a particular transaction/event, select "No journal entry required" in the first account field.)

Supply Club, Inc., sells a variety of paper products, office supplies, and other products used by businesses and individual consumers. During July 2018 it started a loyalty program through which qualifying customers can accumulate points and redeem those points for discounts on future purchases. Redemption of a loyalty point reduces the price of one dollar of future purchases by 20% (equal to 20 cents). Customers do not earn additional loyalty points for purchases on which loyalty points are redeemed. Based on past experience, Supply Club estimates a 80% probability that any point issued will be redeemed for the discount. During July 2018, the company records $153,000 of revenue and awards 106,250 loyalty points. The aggregate stand-alone selling price of the purchased products is $153,000. Seventy percent of sales were cash sales, and the remainder were credit sales.

Required:
1. & 2. Prepare Supply Club’s journal entry to record July and August sales. During August, customers redeem loyalty points on $68,000 of merchandise. Seventy-five percent of those sales were for cash, and the remainder were credit sales. (Do not round intermediate calculations. If no entry is required for a particular transaction/event, select "No journal entry required" in the first account field.)

Supply Club, Inc., sells a variety of paper products, office supplies, and other products used by businesses and individual consumers. During July 2018 it started a loyalty program through which qualifying customers can accumulate points and redeem those points for discounts on future purchases. Redemption of a loyalty point reduces the price of one dollar of future purchases by 20% (equal to 20 cents). Customers do not earn additional loyalty points for purchases on which loyalty points are redeemed. Based on past experience, Supply Club estimates a 70% probability that any point issued will be redeemed for the discount. During July 2018, the company records $157,500 of revenue and awards 125,000 loyalty points. The aggregate stand-alone selling price of the purchased products is $157,500. Seventy percent of sales were cash sales, and the remainder were credit sales.

Required:
1. & 2. Prepare Supply Club’s journal entry to record July and August sales. During August, customers redeem loyalty points on $70,000 of merchandise. Sixty-five percent of those sales were for cash, and the remainder were credit sales. (Do not round intermediate calculations. If no entry is required for a particular transaction/event, select "No journal entry required" in the first account field.)

Supply Club, Inc., sells a variety of paper products, office supplies, and other products used by businesses and individual consumers. During July 2018 it started a loyalty program through which qualifying customers can accumulate points and redeem those points for discounts on future purchases. Redemption of a loyalty point reduces the price of one dollar of future purchases by 20% (equal to 20 cents). Customers do not earn additional loyalty points for purchases on which loyalty points are redeemed. Based on past experience, Supply Club estimates a 70% probability that any point issued will be redeemed for the discount. During July 2018, the company records $220,500 of revenue and awards 175,000 loyalty points. The aggregate stand-alone selling price of the purchased products is $220,500. Seventy percent of sales were cash sales, and the remainder were credit sales.

Required:
1. & 2. Prepare Supply Club’s journal entry to record July and August sales. During August, customers redeem loyalty points on $98,000 of merchandise. Seventy-five percent of those sales were for cash, and the remainder were credit sales. (Do not round intermediate calculations. If no entry is required for a particular transaction/event, select "No journal entry required" in the first account field.)

Pole Position, a retailer at Destiny Mall, has a variable cost of $5 per lap driven. It has identified two segments of customers: Hard-Core drivers and Just-For-Fun drivers. For simplicity, throughout this problem, assume there is exactly one customer in each of the two segments. Market research has revealed how each segment values the experience, depending on how many laps are raced:

5. Suppose Pole Position had to set the price per lap the same regardless of the type of customer.

1. x
2. x
3. At this price, how many laps would a Just-For-Fun driver purchase?
4. How much profit would Pole Position earn from these sales?
5. x
6. Briefly explain why profit increases or decreases in this scenario.

A cube is painted on the outside, then cut into 27 equally sized pieces in a 3^3 format. Let X = the total number of painted sides when the 27 pieces are put in a bag and two pieces are randomly selected. Find the probability mass function, the expected value, and the variance of X