Sunny Ltd., a hand sanitizer manufacturer, has prepared its financial statements for the year ended at December 31, 2019. On February 28, 2020, the board of directors authorized to issue the financial statements to shareholders. The following events have occurred:

1. On December 1, 2019, the board of directors decided to issue $50,000,000, 9% convertible bonds for the purpose of expanding business in other countries. The conversion rate is fixed at 50 shares for bond with face value of $1,000. The convertible bonds are offered to the public on January 15, 2020. The market interest rate for a similar bond without conversion option is at 12%.

2. On October 23, 2019, Sunny signed a contract to sell 10,000 hand sanitizer to a local store at a price of $200 each. However, due to the increase in the cost of materials, the estimated cost of making one hand sanitizer has been increased to $250. Sunny has to deliver the hand sanitizer to its customer on January 30, 2020.

3. Under the terms of the sales contract, Sunny undertakes to recall its new formulated sanitizer, for its manufacturing defects within six months from the date of sale. The accountants estimated that 5% of the sanitizer will be returned for refund. In January 2020, Sunny discovered a serious problem in the manufacturing process of the new formulated sanitizer. Because of this, Sunny expected that 20% of the sanitizer sold in 2019 will be returned for refund.

4. On December 15, 2019, a group of customers reported that the hand sanitizer that they bought in 2019 caused them have serious skin infection problems. They filed a lawsuit against Sunny on December 20, 2019. The company’s attorney said that it was probable that Sunny would be liable for the case. However, the amount of damage could not be estimated.

5. On February 12, 2020, the above lawsuit case was settled for the amount of $2,500,000.

6. Sunny has retail stores in China doing poorly. On February 15, 2020, Sunny estimated that those stores might report a loss of $1,500,000 in 2020.

7. In May 2019, Sunny had legal disputes with Coco Limited. Unable to reach out-of-court settlement with Coco, Sunny sued Coco for compensation for damages in August 2018. In November 2019, Sunny heard good news about the lawsuit in which the company sued Coco. Sunny’s lawyer is confident that the company will win the case and will receive about $120,000 in compensation for damages from Coco in early 2020. Sunny recognized the gain and receivable from litigation of $120,000 in year 2019.

8. On March 1, 2020, a customer owing $600,000 to Sunny filed for bankruptcy. The financial statements include an allowance for doubtful debts pertaining to this customer only of $30,000.

Required: For each of the above event, state the correct accounting treatments in accordance with Hong Kong Accounting Standards for the year ended at December 31, 2019. If it is an event after the reporting period, identify whether it is an adjusting or non-adjusting event. Give reasons for your answer.

Required information

Exercise 11-6 Stock dividends and per share book values LO P2

[The following information applies to the questions displayed below.]

The stockholders’ equity of TVX Company at the beginning of the day on February 5 follows:

On February 5, the directors declare a 12% stock dividend distributable on February 28 to the February 15 stockholders of record. The stock’s market value is $39 per share on February 5 before the stock dividend. The stock’s market value is $35 per share on February 28.

Exercise 11-6 Part 2

2. One stockholder owned 900 shares on February 5 before the dividend. Compute the book value per share and total book value of this stockholder’s shares immediately before and after the stock dividend of February 5. (Round your "Book value per share" answers to 3 decimal places.)

The balance sheet and income statement shown below are for Koski Inc. Note that the firm has no amortization charges, it does not lease any assets, none of its debt must be retired during the next 5 years, and the notes payable will be rolled over.

B)

What is the firm's ROE?

C)

What is the firm's quick ratio?

D)

What is the firm's TIE?

Acccounting questions I have on capital assets:

1.

The Electric Company buys machinery for $500,000 and gives a promissory note to pay dated 2 years from the purchase date. Interest at 10% and principal are to be repaid at maturity. The life of the asset is also estimated to be two years with no salvage and straight line depreciation is used. The charge to earnings in year 2 resulting from this will be:

$250,000

$300,000

$350,000

None of the above

$200,000

2.

A company sells a piece of equipment half way through the accounting year. The straight-line rate of amortization on the equipment is $40,000 a year. Before recording the asset sale, the company should debit:

amortization expense for $20,000 and credit accumulated amortization for $20,000

none of the above

cash for $20,000 and credit amortization expense for $20,000.

amortization expense for $40,000 and credit long-lived assets for $40,000.

accumulated amortization for $40,000 and credit cash for $40,000

3.

Shark Ltd. buys a building on April 1, 2010 for $600,000. The building will last for 40 years, but Shark expects to use the building for 25 years. At the end of 40 years the building will have no disposal value, but is expected to have a $100,000 disposal value at the end of 25 years. Shark uses the straight-line method of depreciation.


The depreciation expense at for the year-ended December 31, 2010 is:

$7,500

$10,800

$9,375

$11,200

None of the above

4.

Val Ltd. began the year with capital assets of $743,000 and accumulated amortization of $121,000. During the year, capital assets were purchased for $78,000 and capital assets were sold for proceeds of $27,000. Amortization expense for the year was $31,000. At the end of the year, Val had capital assets of $757,000 and accumulated amortization of $103,000. What was the gain/loss on the disposal of capital assets?

$49,000 loss

$12,000 loss

$64,000 gain

Unable to determine from data provided

$12,000 gain

Define and explain Foreign Direct Investment. What is the difference between a closed and open Economy? How would they obtain the financing for investment?

A 20.0 cm long organ pipe is filled with air and is open at one end and closed at the other. The velocity of sound in air at 0