Your friend Bob wants to starts an Italian restaurant and you decide to to invest in it. Bob has full discretion over establishing and managing the business. On January 1, 2010, you gave Bob $150,000 to start the business at the beginning of 2010 in exchange for 10,000 shares and 20,000 common stock, respectively. Bob has agreed to receive a starting salary of $80,000 per year. Bob decided to focus on catering to local corporation, so he rented a space off of 5th avenue on January 1,2010. He purchased equipment for $48,000 and a delivery truck for $60,000. In 2010 you decide to visit the restaurants to meet with Bob and discuss the results of your investment.

Bob: I've focused on selling to companies on credit, so they pay me later. I typically collect money within 30 days of making the sale. This year I sold $1,220,000 of food; as of year-end, I've only collected $1,100,000 of this amount and my customers still owe me the remainder. With the state of the current economy, I am worried about whether I'll be able to collect anywhere from $10,000 to $30,000 of what my customers still owe me. Throughout the year, I've also purchased baking and other supplies for the ship from various vendors . To receive quantity discounts and purchase the supplies for a slightly lower prices, I purchase more at a time. This year I purchased and received $1,010,000 of supplies. My vendors let me buy on credit and then pay them later. Thus I still owe my vendors $50,000. Currently, I have about $20,000 of supplies that I haven't used that are at the shop.

Bob continued:Business has been going well and I've been selling to a variety of places. I've put more miles on the delivery truck than I expected to, so it will only last another, 3 years. I will probably need to replace the equipment after another 2 years. The restaurant is in a great location, which I rent for $2,800 a month. However , to get that low rent, I had to sign a 3 year lease and must pay 3 months of rent at a time. At the end of December, I paid the landlord for rent through March 2011. I've also paid myself the $80,000 salary as we agreed. Currently, I have $60,000 in the bank.  

Based on what you know prepare a balance sheet, income statement and statement of cash flow for Bob.

The ledger of Port Hope Corporation at November 30, 2021, contains the following summary data:

Your analysis reveals the following additional information:

Prepare a multiple-step income statement for the year.

Prepare a statement of comprehensive income as a separate statement.

Explain why each of the following statements is True, False, or Uncertain according to economic principles. Use diagrams where appropriate. Unsupported answers will receive no marks. It is the explanation that is important.

A6-1. An economy with a recessionary gap will never return to long run equilibrium without policy intervention.

A6-2. In a closed economy, investment will equal the sum of private saving and government saving.

A6-3. An increase in private saving for a closed economy implies lower consumption in long-run equilibrium and also leads to lower GDP growth.

A6-4. You have two Canadian dimes. One is from 1962 and contains 25 cents worth of silver; the other is from 2013 and contains no silver. You would clearly use the later coin when paying for a coffee rather than the earlier one.

A6-5. Suppose a $1000 bond pays annual “coupon interest” equal to 10% and matures in two years. If the yield on bonds with similar risk characteristics is 3%, the price of this bond today is greater than $1000.

A6-6. Suppose the Bank of Canada (BOC) buys $10B worth of bonds from the Canadian banking system that operates with a desired reserve ratio of 5%. Immediately after the transaction, the balance sheet of the BOC expands by $10B, while balance sheet of the banking system is the same size, but in the long run, the balance sheet of both the BOC and the banking system expand by $200B.

A6-7. In the long-run, the money supply is neutral with respect to (does not affect) real GDP.

A6-8. A given increase in the money supply is more effective at shifting the aggregate demand curve the more interest rate responsive (elastic) is the money demand curve.

Entries for Bonds Payable, including bond redemption

The following transactions were completed by Montague Inc., whose fiscal year is the calendar year:

Year 1
July 1. Issued $55,000,000 of 10-year, 9% callable bonds dated July 1, Year 1, at a market (effective) rate of 7%, receiving cash of $62,817,040. Interest is payable semiannually on December 31 and June 30.
Dec. 31. Paid the semiannual interest on the bonds. The bond discount amortization of $390,852 is combined
with the semiannual interest payment.
31. Closed the interest expense account.
Year 2
June 30. Paid the semiannual interest on the bonds. The bond discount amortization of $390,852 is combined
with the semiannual interest payment..
Dec. 31. Paid the semiannual interest on the bonds. The bond discount amortization of $390,852 is combined with the semiannual interest payment.
31. Closed the interest expense account.
Year 3
June 30. Recorded the redemption of the bonds, which were called at 103. The balance in the bond premium
account is $6,253,632 after payment of interest and amortization of premium have been recorded.
(Record the redemption only.)

1. Journalize the entries to record the foregoing transactions. For a compound transaction, if an amount box does not require an entry, leave it blank. When required, round amounts to the nearest dollar.

Year 1 July1


Dec.31


Dec.31

Year 2 June 30


Dec.31


Dec.31

Year 3 June 30

2. Indicate the amount of the interest expense in (A) Year 1 and (B) Year 2.

a. Year 1 $
b. Year 2 $

3. Determine the carrying amount of the bonds as of December 31, Year 2.
$

1) Papaya Inc. has 100,000 common shares outstanding and has a policy of paying a $1.30 annual dividend for each of these shares. Papaya has an income tax rate of 35%, and its retained earnings statement for 2020 reported a closing balance of $1,452,000. Assuming an opening retained earnings balance of zero, dividend payments according to its usual policy, and no other adjustments, Papaya's 2020 net income was

$1,582,000.

$1,452,000.

$2,364,846.

$1,536,500.

2) For Pear Limited, events and transactions during 2018-2020 included the following. The tax rate for all items is 30%.

1. Depreciation for 2019 was found to be understated by $30,000.
2. A 2020 strike by the employees of a supplier resulted in a loss of $20,000.
3. The inventory at December 31, 2018 was overstated by $40,000.
4. A 2020 flood destroyed a building that had a book value of $400,000. Floods are very uncommon in that area.

The effect of these events and transactions on the balance of retained earnings at January 1, 2020 would be

$21,000.

$294,000.

$14,000.

$343,000.

3)

eg Inc. incurred the following infrequent losses during 2020:

A $135,000 write down of equipment leased to others (net of tax)
A $60,000 adjustment of accruals on long-term contracts (net of tax)
A $90,000 write off of obsolete inventory (net of tax)

Of those losses, what amount should be included in Meg’s 2020 income from continuing operations?

$285,000

$150,000

$195,000

$225,000

4)

On January 1, 2020, Reggae Ltd. sold land that cost $180,000 for $240,000, receiving a note bearing interest at 10 percent. The note will be paid in three annual instalments of $96,510 starting December 31, 2020. Assuming that collection of the note is very uncertain, how much revenue from this sale should Reggae recognize in 2020?

$96,510

$0

$18,000

$24,000

Bonzo’s Boards makes reasonably high-end skateboards which sell for $400 each.   The production process is fairly simple and involves assembling components purchased from various suppliers.  Since each skateboard only takes one hour to assemble, there is essentially no work-in-process inventory.  

Bonzo’s Boards has the capacity to make 2,000 skateboards per year.

Costs for the skateboard components are:

Each board should take one hour of direct labor to assemble.  Direct labor wages are $55 per hour.

Other manufacturing costs on a monthly basis are:

Inventory balances are as follows (Bonzo’s uses FIFO inventory cost flow assumption):

During 2020 (the entire year) Bonzo’s Boards expects to sell 500 skateboards.  

• What is the budgeted cost of Skateboards manufactured for 2020?

• What is the budgeted cost of Decks purchased for 2020?

• What is the budgeted cost of Hardware Packages purchased for 2020?

• What is budgeted dollar value of ending Finished Skateboard inventory?

• What is the budgeted dollar value of ending Deck inventory?

• What is the budgeted dollar value of ending Hardware Package inventory?

• How much income does Bonzo’s Boards expect to make if they sell 500 skateboards in 2020 and have budgeted Selling & Administrative expenses of $20,000 (assume no income taxes)?

Problem Facts Information related to the Sosa Company for the year 2020:

Common Stock- As of the end of 2020, Sosa had 240,000 shares of common stock outstanding. The shares are due to the following common stock transactions:

january 1, 2020 – 100,000 shares of common stock outstanding

April 1, 2020 – issued an additional 50,000 shares for cash

July 1, 2020 - issued a 2 for 1 stock split

September 1, 2020 – purchased 60,000 shares for treasury stock

Preferred Stock- As of the end of 2020, Sosa had 30,000 shares of 6%, $10 par value, cumulative, convertible preferred stock outstanding. The stock had been outstanding all year and the conversion ratio was each share of preferred stock is convertible into 3 shares of common stock.

Bonds Payable-As of the end of 2020, Sosa had $800,000, 7% bonds payable outstanding. The bonds had been outstanding for the entire year and each $1,000 bond was convertible into 10 shares of common stock.

Options-Sosa also had 10,000 common stock options outstanding all year. Each option allowed the holder to purchase 1 share of Sosa’s common stock for $45. During 2020, the average market price of Sosa’s common stock was $48 per share.

Additional Information Sosa’s 2020 net income was $580,000, and the company’s income tax rate was 34%.

REQUIRED

1. Compute the weighted average number of common shares Sosa will use to compute basic earnings per share.

2. Compute 2020 basic earnings per share

3. Identify which of the potentially dilutive securities (preferred stock, bonds, options) are dilutive (support must be shown to receive credit for this question)

4. Compute diluted earnings per share

please show work, thank you!!!

Problem Facts Information related to the Sosa Company for the year 2020:

Common Stock- As of the end of 2020, Sosa had 240,000 shares of common stock outstanding. The shares are due to the following common stock transactions:

january 1, 2020 – 100,000 shares of common stock outstanding

April 1, 2020 – issued an additional 50,000 shares for cash

July 1, 2020 - issued a 2 for 1 stock split

September 1, 2020 – purchased 60,000 shares for treasury stock

Preferred Stock- As of the end of 2020, Sosa had 30,000 shares of 6%, $10 par value, cumulative, convertible preferred stock outstanding. The stock had been outstanding all year and the conversion ratio was each share of preferred stock is convertible into 3 shares of common stock.

Bonds Payable-As of the end of 2020, Sosa had $800,000, 7% bonds payable outstanding. The bonds had been outstanding for the entire year and each $1,000 bond was convertible into 10 shares of common stock.

Options-Sosa also had 10,000 common stock options outstanding all year. Each option allowed the holder to purchase 1 share of Sosa’s common stock for $45. During 2020, the average market price of Sosa’s common stock was $48 per share.

Additional Information Sosa’s 2020 net income was $580,000, and the company’s income tax rate was 34%.

REQUIRED

1. Compute the weighted average number of common shares Sosa will use to compute basic earnings per share.

2. Compute 2020 basic earnings per share

3. Identify which of the potentially dilutive securities (preferred stock, bonds, options) are dilutive (support must be shown to receive credit for this question)

4. Compute diluted earnings per share

please show work, thank you!!!

Problem Facts Information related to the Sosa Company for the year 2020:

Common Stock- As of the end of 2020, Sosa had 240,000 shares of common stock outstanding. The shares are due to the following common stock transactions:

january 1, 2020 – 100,000 shares of common stock outstanding

April 1, 2020 – issued an additional 50,000 shares for cash

July 1, 2020 - issued a 2 for 1 stock split

September 1, 2020 – purchased 60,000 shares for treasury stock

Preferred Stock- As of the end of 2020, Sosa had 30,000 shares of 6%, $10 par value, cumulative, convertible preferred stock outstanding. The stock had been outstanding all year and the conversion ratio was each share of preferred stock is convertible into 3 shares of common stock.

Bonds Payable-As of the end of 2020, Sosa had $800,000, 7% bonds payable outstanding. The bonds had been outstanding for the entire year and each $1,000 bond was convertible into 10 shares of common stock.

Options-Sosa also had 10,000 common stock options outstanding all year. Each option allowed the holder to purchase 1 share of Sosa’s common stock for $45. During 2020, the average market price of Sosa’s common stock was $48 per share.

Additional Information Sosa’s 2020 net income was $580,000, and the company’s income tax rate was 34%.

REQUIRED

1. Compute the weighted average number of common shares Sosa will use to compute basic earnings per share.

2. Compute 2020 basic earnings per share

3. Identify which of the potentially dilutive securities (preferred stock, bonds, options) are dilutive (support must be shown to receive credit for this question)

4. Compute diluted earnings per share

please show work, thank you!!!

Problem Facts Information related to the Sosa Company for the year 2020:

Common Stock- As of the end of 2020, Sosa had 240,000 shares of common stock outstanding. The shares are due to the following common stock transactions:

january 1, 2020 – 100,000 shares of common stock outstanding

April 1, 2020 – issued an additional 50,000 shares for cash

July 1, 2020 - issued a 2 for 1 stock split

September 1, 2020 – purchased 60,000 shares for treasury stock

Preferred Stock- As of the end of 2020, Sosa had 30,000 shares of 6%, $10 par value, cumulative, convertible preferred stock outstanding. The stock had been outstanding all year and the conversion ratio was each share of preferred stock is convertible into 3 shares of common stock.

Bonds Payable-As of the end of 2020, Sosa had $800,000, 7% bonds payable outstanding. The bonds had been outstanding for the entire year and each $1,000 bond was convertible into 10 shares of common stock.

Options-Sosa also had 10,000 common stock options outstanding all year. Each option allowed the holder to purchase 1 share of Sosa’s common stock for $45. During 2020, the average market price of Sosa’s common stock was $48 per share.

Additional Information Sosa’s 2020 net income was $580,000, and the company’s income tax rate was 34%.

REQUIRED

1. Compute the weighted average number of common shares Sosa will use to compute basic earnings per share.

2. Compute 2020 basic earnings per share

3. Identify which of the potentially dilutive securities (preferred stock, bonds, options) are dilutive (support must be shown to receive credit for this question)

4. Compute diluted earnings per share

please show work, thank you!!!