Sage Company sells 8% bonds having a maturity value of $2,620,000 for $2,421,360. The bonds are dated January 1, 2020, and mature January 1, 2025. Interest is payable annually on January 1.

Set up a schedule of interest expense and discount amortization under the effective-interest method.

Garza Company enters into a 5 year capital lease as the lease on Jan 1st 2020. The fair value of the asset is $150,000, and the annual lease payments are $33,594 payable each January 1st. Garza uses the straight line method for depreciation. Make the journal entry for the first 2 years.

Sage Company sells 9% bonds having a maturity value of $1,610,000 for $1,435,895. The bonds are dated January 1, 2020, and mature January 1, 2025. Interest is payable annually on January 1.

Set up a schedule of interest expense and discount amortization under the straight-line method.

• Raw Materials Purchases Budget
  	2020
  	July	August	September	TOTAL	October
  Units Produced
  Yards of RM Required Per Unit of FG
  Total Yards Used in Production
  Plus: Desired Yards in Ending Inventory
  Total Yards Required
  Less: Yards in Beginning Inventory
  RAW MATERIALS PURCHASES (YARDS)
  Cost per Yard
  RAW MATERIALS PURCHASES (COST)

• Please fill the raw material budget
• Each mask is referred to as a finished good unit. Although the company makes both adult and children’s sizes, each mask will be treated the same.
• Budgeted sales in units are as follows:
  • July – 222,000 masks
  • August – 290,000 masks
  • September – 216,000 masks
  • October – 165,000 masks
  • November – 197,000 masks
• Each unit sells for $7.75.
• The company sells their masks to merchandisers. All sales are on account. The company’s collection pattern is:
  • 70 % of sales are collected in the month of sale
  • 30 % are collected in the month following the sale

• The company desires to have finished goods inventory (masks) on hand at the end of each month equal to 20% of the following month’s budgeted sales in units. On June 30, 2020, the company had 44,400 masks on hand.
• .2 yards of fabric are required for each mask produced. The company desires to have materials on hand at the end of each month equal to 30% of the following month’s production needs. On June 30, 2020, the company had 14,136 yards of fabric on hand.
• The fabric used in production costs $14.00 per yard. The company’s payment pattern is:
  • 60% of the month’s purchases are paid for in the month of purchase
  • 30% are paid for in the month following the purchase
• Each mask requires 3 minutes (0.2 hours) of labor time to make and the hourly employees are paid $18/hour. Wages are paid in the month incurred.

Variable manufacturing overhead is $0.75 per mask

Please show in excel your calculations

On January 1, 20X4, Pony Company acquired 25% of Stallion Company's common stock at underlying book value of $200,000. Stallion has 80,000 shares of $10 par value, 6 percent cumulative preferred stock outstanding. No dividends are in arrears. Stallion reported net income of $270,000 for 20X4 and paid total dividends of $140,000. Pony uses the equity method to account for this investment.

Based on the preceding information, what amount of investment income will Pony company report from its investment in Stallion for the year?

A) $140,000

B) $67,500

C) $55,500

D) $35,000

The answer is C) $55,500. Please explain how to get this answer!

On January 1, 2017, Stream Company acquired 27 percent of the outstanding voting shares of Q-Video, Inc., for $716,000. Q-Video manufactures specialty cables for computer monitors. On that date, Q-Video reported assets and liabilities with book values of $1.6 million and $800,000, respectively. A customer list compiled by Q-Video had an appraised value of $306,000, although it was not recorded on its books. The expected remaining life of the customer list was five years with a straight-line amortization deemed appropriate. Any remaining excess cost was not identifiable with any particular asset and thus was considered goodwill.

Q-Video generated net income of $304,000 in 2017 and a net loss of $112,000 in 2018. In each of these two years, Q-Video declared and paid a cash dividend of $18,000 to its stockholders.

During 2017, Q-Video sold inventory that had an original cost of $104,000 to Stream for $160,000. Of this balance, $80,000 was resold to outsiders during 2017, and the remainder was sold during 2018. In 2018, Q-Video sold inventory to Stream for $170,000. This inventory had cost only $136,000. Stream resold $100,000 of the inventory during 2018 and the rest during 2019.

For 2017 and then for 2018, compute the amount that Stream should report as income from its investment in Q-Video in its external financial statements under the equity method. (Enter your answers in whole dollars and not in millions. Do not round intermediate calculations.)

On January 1, 20X8, Liv Ltd. (LL), a Canadian company, acquired 90% of Marcus Co. (MC), a foreign company for FC 623,200. At the acquisition date, the carrying value of MC’s net assets equaled their fair value except for the equipment, which had a carrying value of FC 800,000 and a fair value of FC 880,000. At the acquisition date, MC’s equipment had a remaining useful life of 10 years. There was an FC 4,000 impairment of the goodwill which occurred evenly throughout 20X8.

Selected financial statements for LL and MC are presented below.

Liv Ltd.
Statement of Financial Position
As of December 31, 20X8
(in $ CDN)

   Assets:
   Noncurrent assets:
       Plant and equipment, net                   2,752,000
       Investment in Marcus Co.                   1,371,040
                                       4,123,040
   Current assets:
       Inventory                           1,376,000
       Accounts receivable                       700,000
       Cash and cash equivalents               562,080
                                       2,638,080
    Total assets                               6,761,120
  
Shareholders’ Equity:
       Share capital                           1,376,000
        Retained earnings                       2,601,520
                                       3,977,520
   Liabilities:
   Noncurrent liabilities:
       Notes payable                       1,860,000
   Current liabilities:
       Accounts payable and accrued liabilities           923,600
   Total liabilities                           2,783,600
   Total shareholders’ equity and liabilities               6,761,120

Liv Ltd.
Statement of Income
For the year ended December 31, 20X8
(in $ CDN)

       Sales                           16,472,000
       Dividend income                   180,080
                                   16,652,080
       Cost of sales           8,256,000
       Other expenses*       7,124,000       15,380,000
       Net income                       1,272,080

       *includes depreciation

LL declared and paid dividends of $928,000 CDN on December 31, 20X8.

Marcus Co.
Statement of Financial Position
(in FC)

                           Dec. 31,       Jan. 1
                           20X8       20X8
Assets:
Noncurrent assets:
   Equipment, net               720,000       800,000
Current assets:
   Inventory                   484,000       364,000
   Accounts receivable               408,000       280,000
   Cash                       360,000       164,000
                           1,252,000       808,000
Total assets                       1,972,000       1,608,000

Shareholders’ equity:
   Share capital                   400,000       400,000
    Retained earnings               390,000       146,000
                           790,000       546,000
Liabilities:
Noncurrent liabilities:
   Notes payable               640,000       640,000
Current liabilities:
   Accounts payable               542,000       422,000
Total liabilities                   1,182,000       1,062,000
Total shareholders’ equity and liabilities       1,972,000       1,608,000

Marcus Co.
Statement of Income
For the year ended December 31, 20X8
(in FC)

       Sales                               8,400,000
       Cost of sales               5,304,000
       Other expenses*           2,688,000       7,992,000
                                       408,000
       *includes depreciation

Marcus Co.
Statement of Changes in Equity – Retained Earnings Section
For the year ended December 31, 20X8
(in FC)

       Retained earnings, January 1, 20X8           146,000
       Net income                           408,000
       Dividends declared                   (164,000)
       Retained earnings, December 31, 20X8           390,000

MC declared and paid FC164,000 in dividends on December 31, 20X8.

Selected Exchange Rates

       January 1, 20X8                   FC1 = $2.20 CDN
       December 31, 20X8                   FC1 = $2.44 CDN
       Date when ending inventory was purchased   FC1 = $2.38 CDN
       Average rate for 20X8               FC1 = $2.32 CDN

Required:

a)   Prepare consolidated financial statements at December 31, 20X8 under each of the following assumptions:

i) the functional currency is $CAD, and
ii) the functional currency is the FC.

b)   Assume that LL is a private company and reports under ASPE. LL uses the equity method to report its investment in MC. LL’s functional currency is $CAD. Calculate LL’s Investment in Marcus Co.’s account at December 31, 20X8. There is no need to prepare financial statements

On 1/1/19, Athlon Company acquired 100% of Opteron Corporation's common stock for $150,000. At the date of acquisition, Operon's common stock was $50,000 and the retained earnings were $60,000. The difference between Opteron's book value and fair value at the date of acquisition was attributable to depreciable fixed assets that had a continuing life of another 10 years.

For 2009, Opteron reported net income of $50,000 and dividends of $45,000.

In 2010, net income of $25,000 and dividends of $30,000 were reported.

In 2011, net income of $10,000 and dividends of $15,000 were reported.

A) How much investment income would Athlon Company report in 2010 under the equity method?

B) What is the investment account balance on Athlon Company's books for its investment in Opteron corporation as of 12/31/11 under the equity method

C) How much investment income would Athlon Company Report in 2011 from its investment in Opteron under the Cost Method?

Diversified Products, Inc., has recently acquired a small publishing company that offers three books for sale—a cookbook, a travel guide, and a handy speller. Each book sells for $10. The publishing company’s most recent monthly income statement is shown below.

The following additional information is available:

1. Only printing costs and sales commissions are variable; all other costs are fixed. The printing costs (which include materials, labor, and variable overhead) are traceable to the three product lines as shown in the income statement above. Sales commissions are 10% of sales.
2. The same equipment is used to produce all three books, so the equipment depreciation expense has been allocated equally among the three product lines. An analysis of the company’s activities indicates that the equipment is used 30% of the time to produce cookbooks, 50% of the time to produce travel guides, and 20% of the time to produce handy spellers.
3. The warehouse is used to store finished units of product, so the rental cost has been allocated to the product lines on the basis of sales dollars. The warehouse rental cost is $3 per square foot per year. The warehouse contains 48,000 square feet of space, of which 7,200 square feet is used by the cookbook line, 24,000 square feet by the travel guide line, and 16,800 square feet by the handy speller line.
4. The general sales cost above includes the salary of the sales manager and other sales costs not traceable to any specific product line. This cost has been allocated to the product lines on the basis of sales dollars.
5. The general administration cost and depreciation of office facilities both relate to administration of the company as a whole. These costs have been allocated equally to the three product lines.
6. All other costs are traceable to the three product lines in the amounts shown on the income statement above.

The management of Diversified Products, Inc., is anxious to improve the publishing company’s 5% return on sales.

1. Prepare a new contribution format segmented income statement for the month. Adjust allocations of equipment depreciation and of warehouse rent as indicated by the additional information provided.