1.

On January 1, 2020, Ginseng Inc. entered into a forward contract to purchase U.S. $6,000 for $6,336 Canadian in 30 days. On January 15, the fair value of the contract was $40 (reflecting the present value of the future cash flows under the contract). Assume that the company would like to update its records on January 15. (a) Prepare only the necessary journal entries on January 1 and 15, 2020.

2.

(Derivative Transaction) On April 1, 2020, Petey Ltd. paid $175 for a call to buy 700 shares of NorthernTel at a strike price of $27 per share any time during the next six months. The market price of NorthernTel's shares was $27 per share on April 1, 2020. On June 30, 2020, the market price for NorthernTel's stock was $38 per share, and the fair value of the option was $10,000.

Instructions

a. Prepare the journal entry to record the purchase of the call option on April 1, 2020.

b. Prepare the journal entry(ies) to recognize the change in the call option's fair value as at June 30, 2020.

c. Prepare the journal entry that would be required if Petey Ltd. exercised the call option and took delivery of the shares as soon as the market opened on July 1, 2020.

3.

(Issuance and Conversion of Bonds) The following are unrelated transactions.

1. On March 1, 2020, Loma Corporation issued $300,000 of 8% non-convertible bonds at 104, which are due on February 28, 2040. In addition, each $1,000 bond was issued with 25 detachable stock warrants, each of which entitled the bondholder to purchase one of Loma's no par value common shares for $50. The bonds without the warrants would normally sell at 95. Loma prepares its financial statements in accordance with IFRS.
2. Grand Corp. issued $10 million of par value, 9% convertible bonds at 97. If the bonds had not been convertible, the company's investment banker estimates they would have been sold at 93. Grand Corp. has adopted ASPE, and would like to explore all options available to report the convertible bond.
3. Hussein Limited issued $20 million of par value, 7% bonds at 98. One detachable stock purchase warrant was issued with each $100 par value bond. At the time of issuance, the warrants were selling for $6. Hussein Limited has adopted ASPE.
4. On July 1, 2020, Tien Limited called its 9% convertible bonds for conversion. The $10 million of par value bonds were converted into 1 million common shares. On July 1, there was $75,000 of unamortized discount applicable to the bonds, and the company paid an additional $65,000 to the bondholders to induce conversion of all the bonds. At the time of conversion, the balance in the account Contributed Surplus—Conversion Rights was $270,000, and the bond's fair value (ignoring the conversion feature) was $9,955,000. The company records conversion using the book value method.
5. On December 1, 2020, Horton Company issued 500 of its $1,000, 9% bonds at 103. Attached to each bond was one detachable stock warrant entitling the holder to purchase 10 of Horton's common shares. On December 1, 2020, the fair value of the bonds, without the stock warrants, was 95. Horton Company prepares its financial statements in accordance with IFRS.

Instructions

Present the required entry(ies) to record each of the above transactions. For transaction 4, prepare the journal entries if Tien Limited prepares its financial statements using IFRS and if it uses ASPE.

4.

(Issuance, Exercise, and Termination of Stock Options) On January 1, 2020, Waldorf Corporation granted 40,000 options to key executives. Each option allows the executive to purchase one share of Waldorf's common shares at a price of $30 per share. The options were exercisable within a two-year period beginning January 1, 2022, if the grantee was still employed by the company at the time of the exercise. On the grant date, Waldorf's shares were trading at $25 per share, and a fair value options pricing model determined total compensation to be $1,680,000. Management has assumed that there will be no forfeitures because they do not expect any of the key executives to leave.

On May 1, 2022, 12,000 options were exercised when the market price of Waldorf's shares was $34 per share. The remaining options lapsed in 2023 because executives decided not to exercise them. Management was indeed correct in their assumption regarding forfeitures in that all executives remained with the company. Assume that Waldorf follows IFRS.

Instructions

a. Prepare the necessary journal entries related to the stock option plan for the years ended December 31, 2020 through 2023.

b. What is the significance of the $25 market price of the Waldorf shares at the date of grant? Would the exercise price normally be higher or lower than the market price of the shares on the date of grant?

c. What is the significance of the $34 market price of the Waldorf shares at May 1, 2022, the date of the exercise of the stock options?

d. What likely happened to the market price of the shares in 2023?

5.

(Share Appreciation Rights) Parsons Limited established a share appreciation rights program that entitled its new president, Brandon Sutton, to receive cash for the difference between the shares' fair value and a pre-established price of $32 (also fair value on December 31, 2019), on 50,000 SARs. The date of grant is December 31, 2019, and the required employment (service) period is four years. The president exercised all of the SARs on December 31, 2024. The shares' fair value fluctuated as follows: December 31, 2020, $36; December 31, 2021, $39; December 31, 2022, $45; December 31, 2023, $36; and December 31, 2024, $48. The company recognizes the SARs in its financial statements. Assume that Parsons follows ASPE.

Instructions

a. show a five-year (2020 to 2024) schedule of compensation expense pertaining to the 50,000 SARs granted to Brandon Sutton.

b. Prepare the journal entry for compensation expense in 2020, 2023, and 2024 relative to the 50,000 SARs.

c. From the perspective of the employee, contrast the features of a share appreciation right to the features of a compensatory stock option.

You are the external auditor of Suleman and Stock Ltd. The CEO, Ahsan Suleman, has contacted you because the company is considering setting up an internal audit department for the first time and he is looking for some guidance as to what is required for an effective internal audit department.

Required:

Explain the key considerations Ahsan Suleman should consider when setting up an internal audit department.

You are the external auditor of Suleman and Stock Ltd. The CEO, Ahsan Suleman, has contacted you because the company is considering setting up an internal audit department for the first time and he is looking for some guidance as to what is required for an effective internal audit department.

Required:

Explain the key considerations Ahsan Suleman should consider when setting up an internal audit department.

You are the external auditor of Suleman and Stock Ltd. The CEO, Ahsan Suleman, has contacted you because the company is considering setting up an internal audit department for the first time and he is looking for some guidance as to what is required for an effective internal audit department.

Required:

Explain the key considerations Ahsan Suleman should consider when setting up an internal audit department.

What are three recruitment strategies for a small business CEO? three examples below

Develop and execute vacancy and non-vacancy recruitment programs utilizing all resources that result in the hiring of top talent.

Develop and execute an employee referral program to increase the number of new hires by referral source by 25%.

Develop marketing materials to brand the company as a great place to work with competitive compensation and benefits.

. Prepare the necessary journal entry on September 30, 2020 to account for:

CAD$3,045 on hand from tips up to March 31, 2020, its pre-COVID operations when the exchange rate was CAD$1 = $2.01 XCD. On September 30, 2020, the exchange rate was CAD$1 = $1.95 XCD

Willow Deng is the sole owner of Spinnaker Pty Ltd, a private company selling sailing accessories in Adelaide. He has been experiencing tremendous growth in his business in recent years. He has approached Best Accounting Solutions Pty Ltd to help develop improved accounting systems for his business. Assume you are a graduate accountant working for Best Accounting Solutions Pty Ltd and you are required to prepare the year-end Balance Day Adjustments Journals for Spinnaker Pty Ltd.

Additional information:

1. Office Equipment is expected to have a useful life of 10 years and will then be sold for an estimated amount of $3,000.
2. Accrued salaries expense at 30 June is $4,876.
3. $9,500 of the recorded sales represents payments for goods which will not be delivered until July 2020.
4. A physical count shows supplies of $1,450 on hand at 30 June.
5. The prepaid insurance was paid for twelve months commencing 1st March.
6. A physical stock take of inventory at 30 June reveals $47,000 on hand.
7. Upon receipt of the business’s bank statement, it was observed that the business had earned $1,050 rental income on 30 June 2020. This amount was directly paid by a tenant into the business’s bank account. The accounting records need to be updated for this transaction.
8. It is estimated that 3% of the 30 June balance of accounts receivable are unlikely to be received.
9. A payment of $5,029 on 20 May for advertising expense has been incorrectly debited to freight inward account.  

REQUIRED:

It is now the end of the financial year and based on the information Willow has provided above, the CEO of Best Accounting Solutions Pty Ltd (Lisa Turner) has asked you to prepare any necessary balance day adjusting journals.

Use the General Journal document provided on the following page to record any journal entries required.

All journals must be correctly formatted and include a narration (explanation) for each entry.

Your clients, both just turned 40, will retire when they turn 62. They have a current salary at an annual rate of ($10,000*salary scalar + $100,000), being paid equally at the end of each month. They expect a 3% raise in their salary every year until they retire. They deposit 12% of their monthly salary in their 401(k) account that generates an annual rate of return of 10%, compounded daily. In addition, their employer matches their contribution with 5% of their monthly salary to the same 401(k) account.

Q1. Determine the cash flows pattern of the monthly contributions to the 401(k) account within each year; and calculate and explain precisely your choice of interest rate, i.e., EAR/EPR/PER, used in your analysis. Also, calculate the yearend value of the 401(k) contributions for each year. Verify your work for Years 1 and 2 only with either the formula or the financial calculator approach!

Q2. Determine the pattern of the year-end values of the 401(k) contributions across years; and calculate and explain precisely your choice of interest rate, i.e., EAR/EPR/PER, used in your analysis. Also, calculate their 401(k) account balance upon their retirement. Verify your work with the formula approach!

At the end of each year, your clients will receive a bonus of 15% of their annual salary. Your clients commit to deposit part of their annual bonus, $14,000, in a 529 Plan account each year for financing their daughter’s, who just turned 12, college education. They will keep contributing to the 529 account until their daughter finishes college. Any remaining amount from the annual bonus check will be deposited in an IRA account. The 529 Plan account and the IRA account are expected to generate annual rates of return of 8% and 10%, respectively. And both accounts are compounded daily.

Q3. Determine the cash flows pattern of their contributions to the IRA account; and calculate and explain precisely your choice of interest rate, i.e., EAR/EPR/PER, used in your analysis. Also, calculate their IRA account balance upon their retirement.

Q4. Determine the cash flows pattern of their contributions to the 529 Plan account; and calculate and explain precisely your choice of interest rate, i.e., EAR/EPR/PER, used in your analysis. Also, calculate the 529 Plan account balances at the time their child starts college. Verify your work with either the formula or the financial calculator approach!

Currently, annual college expenses are running at $30,000, and are expected to grow at an annual rate of 5%. Their daughter will enter college when she turns 18, and complete the degree program in five years. Your clients expect their daughter to be responsible for 30% of her college expenses via the work-study program. All annual college expenses will be due at the beginning of each year. Your clients will tap into the 529 Plan account for paying their daughter’s college expenses.

Q5. Will there be sufficient funding in the 529 account for financing their daughter’s college expenses? If not, when will the funding run out of money? Support your answer numerically by showing the annual balances of the 529 Plan account through their daughter’s college years.

With a positive balance in the 529 account at their daughter’s college graduation, your clients will partially support her graduate study with money left in the 529 account. Their daughter plans to work for three years before returning to graduate school for an MBA. Currently, annual expenses for a highly competitive full-time 2-year MBA program are running at $55,000, and are expected to grow at an annual rate of 4%. Your clients will offer assistance to their daughter’s pursuit of graduate education through the 529 account at one-third of the annual expenses during her MBA study.

Q6. Will there be sufficient funding in the 529 account for subsidizing their daughter’s MBA program’s expenses? If not, when will the funding run out of money? Support your answer numerically numerically by showing the annual balances of the 529 Plan account through her MBA study.

If there is money left (i.e., positive balance) in the 529 account after their daughter’s MBA study, your client will transfer the balance to their IRA account.

Q7. How large will be the nest egg upon the retirement of your clients? In other words, calculate the combined balance of the 401(k) account and their IRA account when they retire.