Oriole Co. includes one coupon in each bag of dog food it sells. In return for 4 coupons, customers receive a dog toy that the company purchases for $1.40 each. Oriole's experience indicates that 60 percent of the coupons will be redeemed. During 2020, 109,000 bags of dog food were sold, 13,330 toys were purchased, and 43,600 coupons were redeemed. During 2021, 129,000 bags of dog food were sold, 17,485 toys were purchased, and 64,500 coupons were redeemed.

Determine the premium expense to be reported in the income statement and the premium liability on the balance sheet for 2020 and 2021.

Macinski Leasing Company leases a new machine to Sharrer Corporation. The machine has a cost of $70,000 and fair value of $95,000. Under the 3-year, non-cancelable contract, Sharrer will receive title to the machine at the end of the lease. The machine has a 3-year useful life and no residual value. The lease was signed on January 1, 2020. Macinski expects to earn an 8% return on its investment, and this implicit rate is known by Sharrer. The annual rentals are payable on each December 31, beginning December 31, 2020.

(a)

Discuss the nature of the lease arrangement and the accounting method that each party to the lease should apply.

Fuqua Company’s sales budget projects unit sales of part 198Z of 10,400 units in January, 13,000 units in February, and 13,400 units in March. Each unit of part 198Z requires 4 pounds of materials, which cost $3 per pound. Fuqua Company desires its ending raw materials inventory to equal 40% of the next month’s production requirements, and its ending finished goods inventory to equal 20% of the next month’s expected unit sales. These goals were met at December 31, 2019.

Prepare a production budget for January and February 2020.

Prepare a direct materials budget for January 2020.

Royal West Airlines Ltd.
Income Statement
For the Year Ended December 31, 2020
Sales revenue $2,561,096
Cost of sales (1,003,860)
Gross margin $1,557,236
Other expenses ( 890,743)
Net income, before income tax $ 666,493
Royal West Airlines is a regional airline that services Western Canada.
Notes:
a) $10,000 in legal fees relating to the restructuring of a debt.
b) A brand new airplane costing $65,000 used to service a new route
c) Interest on late municipal tax balances of $1,000
d) Sponsorship of a local musical production costing $9,240
e) Convention that was held in Barcelona, Spain costing $3,300
f) Interest expense of $4,000 that was associated with the acquisition of a GIC
g) Cost of sponsoring local hockey teams $500
h) Food and entertainment for clients $60,000
i) Life insurance premiums on the life of the president (required by the bank) $2,000
Item 1. During the year the Company spent $6,500 for landscaping its head office grounds.
For accounting purposes this cost was deducted in the year
Item 2. The Other Expenses account included the following amounts:
Item 3. The Other Income and losses account included the following amount:
$32,000 spent on a staff Christmas party where all employees were invited to
attend the event.
Item 6. All of Royal’s remaining capital assets are Class 1 which related to an office
building that was purchased in 2019. The UCC at the beginning of 2020 was $625,100.
On July 1, the Company added an additional room for $20,000. No Class 1 assets were
disposed of in the year.
Item 5. In 2020, the Company deducted $21,000 bad debt expense based on a review
of specific accounts.
Item 4. For tax purposes, the machinery that was sold was a Class 10 asset. All assets
in class were disposed of. The machinery was purchased for $15,000 and its UCC
balance at the beginning of 2020 was $10,250. The asset was sold in 2020 for
$14,600.
Required:
Complete the table below and show the adjustments that would be required in Royal West Airlines 2020
SCHEDULE 1 for each item listed in the question. For each item, show whether it adds to NITP by
marking “+” in the appropriate column, a “-“ mark if it subtracts from NITP, and a “na” mark if it is not
applicable.
Description
Addition (+)
Subtraction (-)
(na)
$ amount
Citation
Net Income for accounting
$666,493 9(1)
Item 1.
Item 2. a)
b)
c)
d)
e)
f)
g)
h)
i)
Item 3.
Item 4.
Item 5.
Item 6.

1. Describe each of the above with a Journal entry Include the date

2.Prepare T-accounts for the accounts above and post all transactions for April

3.Create the Trial Balance

4.What is the Net Income for the Month

The Income Statement of Adom Enterprise for the year ended 31st March, 2020 as prepared by an AccountsAssistantindicatedanetprofitofGHS148,080.Though,thecashbookon31st March,2020 showed a balance at bank to be GHS 13,460. Your attention is however drawn to the following:

1. i) Cheques from customers totalling GHS 14,940 which were recorded in the cash book on

   March 25, 2020 were not credited by the bank until April 2, 2020.

2. ii) Cheques issued on March 13, 2020 totalling GHS 22,260 in favour of suppliers were not paid

   by the bank until after the end of the year (that is after March 31, 2020)

3. iii) On 22 February 2020, the bank paid an amount of GHS 10,800 with respect to a standing order from Adom Enterprise for rent of business premises for the three months to April 30, 2020 but

   unfortunately, no entry for this payment had been made in the cash book.
   Additionally, no provision of this outstanding rent had been made in the income statement for the period.

4. iv) On March 31, a customer known as Mr. Kwarteng had paid GHS 7,020 into Adom
   Enterprise bank account through a standing order to his bankers in full settlement of a debit balance of GHS 7,200 in Adom Enterprise sale ledger, but no entry had been made in the books.

5. v) On 30th March 2020, a cheque for GHS 1,440 was received from a customer in settlement of sales invoice for the same amount. The cheques were lodged into Adom Enterprise bank account. Both sale of goods and the cheque were entered in Adom Enterprise’s books. However, on 31st March 2020, the customer returned the goods and instructed her

   bankers not to pay the cheque (This instruction was carried out the same day) but no entries in respect of these latter developments have been made in Adom Enterprise’s books. The cost of these goods amounting to GHS 960 were not actually included in the closing inventories.

6. vi) Cheques received from two customers: Madam Adwoa Nyarkoa GHS 2,150 and Papa Kwame Ayisi of GHS 1,520 were recorded at the wrong side of the cash book.

7. vii) A cheque for GHS 2,520 from an insurance company in settlement of claim for fire damage to inventory had been paid into the bank and credited by the bank on 21st March 2020, but an estimated amount of GHS 2,400 had been entered in Adom Enterprise’s income statement.

8. viii) During a review of the financial records, it was discovered that the receipts side of the cash book was overstated by GHS 1,480. This has not been corrected.

Required:

a) Prepare a statement on March 31, 2020, clearly indicating the cash book balance.

b) Prepare the bank reconciliation statement for Adom Enterprise
c) Prepare a statement of corrected net profit of Adom Enterprise on 31st March, 2020

d) Explain TWO reasons for carrying out bank reconciliation.

e) Identify and explain any FIVE causes of discrepancies in the cash book balance and the bank

statement balance in this question

The unadjusted trial balance of Imagine Ltd., a private company following ASPE, at December 31, 2020 is as follows:

Additional information:

(a)

Prepare the year-end adjusting and correcting entries for December 31, 2020, using the information given. Record the adjusting entry for inventory using a Cost of Goods Sold account.

Motor Corp. manufactures machine parts for boat engines. The CEO, James Hamilton, is considering an offer from a subcontractor who would provide 3,000 units of product AB100 for Hamilton at a price of $230,000. If Motor Corp. does not purchase these parts from the subcontractor it must produce them in-house with the following per-unit costs: Direct materials $ 40 Direct labor 25 Variable overhead 15 Allocated fixed overhead 4 In addition to the above costs, if the company produces part AB100, it would incur incremental fixed overhead costs of approximately $10,000. Required: a) What would be the impact on short-term operating income if the company were to accept the offer from the subcontractor? Show calculations to support your answer. b) What strategic factors/considerations are generally relevant to the special-order decision problem (i.e., whether a company should accept a one-time order from a customer with whom the company does not generally do business)? b