1. On January 1, 2020, Blossom Ltd. had 498,000 common shares outstanding. During 2020, it had the following transactions that affected the common share account:

The company’s year end is December 31.Determine the weighted average number of shares outstanding as at December 31, 2020. (Round answer to 0 decimal places, e.g. 5,275.)

Assume that Blossom earned net income of $3,000,000 during 2020. In addition, it had 80,000 of 7%, $100 par, non-convertible, non–cumulative preferred shares outstanding for the entire year. Because of liquidity limitations, however, the company did not declare and pay a preferred dividend in 2020.

Calculate earnings per share for 2020, using the weighted average number of shares determined above. (Round answer to 2 decimal places, e.g. 15.25.)

Assume that Blossom earned net income of $3,000,000 during 2020. In addition, it had 80,000 of 7%, $100 par, non-convertible, non–cumulative preferred shares outstanding for the entire year. Because of liquidity limitations, however, the company did not declare and pay a preferred dividend in 2020. Assume that net income included a loss from discontinued operations of $400,000, net of applicable income taxes.

Calculate earnings per share for 2020. (Round answers to 2 decimal places, e.g. 15.25.)

Tomy is a key customer of Rubber (Pty) Ltd (hereafter Rubber), a well-established South
African shoe sole provider. The two companies share the same year-end.
When Tomy experienced the sudden increase in sales, Rubber extended an interest-free loan
of R2 050 000 on 1 February 2020 in order to enable Tomy to cater for the increase in supply.
Tomy used the loan immediately as follows:
 Purchase of land – R350 000
 Construction of factory building on land purchased (completed 1 July 2020 and brought
into use immediately after completion) – R1 200 000
 Purchase of Machine B (new) – R800 000 (brought into use on 1 July 2020)
 Deductible expenditure – R200 000
 Purchase of Trading Stock – R500 000 ( R50 000 still on hand on 31 December 2020)
Tomy was able to justify the loan and repayments of the loan as the company signed a contract
with a local customer on 15 December 2019 and delivered R1 200 000 of takkies on
1 February 2020. The local customer informed Tomy during August 2020 that they were
liquidated and that Tomy will not receive any further payment from them. Tomy has written off
the outstanding debt as bad debts at the end of the financial year.
In an attempt to raise cash reserves, Tomy issued 100 000 ordinary shares on
18 August 2020, of which Rubber purchased 88 000 shares. Rubber did not own any of Tomy’s
shares before this date. Tomy now has 120 000 ordinary shares in issue.
Tomy approached Rubber as Tomy was not able to repay the amount due on the outstanding
loan. The total amount was still due. Rubber acknowledged that Tomy’s financial situation was
due to unforeseen circumstances and agreed to write off 80% of each of the balances owing
by Tomy, except for the land that Rubber agreed to write off the full amount owing on
30 December 2020.

REQUIRED
Calculate and motivate the income tax consequences of the above transactions and events
for Tomy for the year of assessment ended on 31 December 2020

Acme Materials Company manufactures and sells synthetic coatings that can withstand high temperatures. Its primary customers are aviation manufacturers and maintenance companies. The following table contains financial information pertaining to cost of quality (COQ) in 2019 and 2020 (in thousands of dollars):

QUESTIONS:

1. Classify the cost items in the table into cost-of-quality (COQ) categories. Calculate the ratio of each COQ category to revenues in each of the 2 years.

2. Calculate the percentage change in each COQ category and total COQ and comment on the results:

Mr. Raju just appointed as an account manager at NH Sdn Bhd, a retail company selling merchandises for local market. Mr. Raju is being responsible to prepare and monitor the budget and expenses of the company business. Currently the company is preparing the quarterly budget as of 31 December 2020 and he has been asked by Ms. Sally, the owner of the company, to prepare a master budget. The sales forecast for the merchandises are provided as follows:

The average selling price and the average purchase price per unit are RM250 and RM120 respectively. As for desired ending inventory is expected 30% of next month’s unit sales. Collections from customers will be 20% in month of sale, 50% in month after sale and 30% two months after sale.

As for projected cash payments, inventory purchases will be paid in the month following acquisition. Meanwhile, variable cash expenses are equal to 35% of each month’s sales and paid in the month of sale. Fixed cash expenses are RM20,000 per month and are paid in the month incurred. Depreciation on equipment is RM2,000 per month. Desired ending cash balance per month will be RM20,000.

NH Sdn Bhd also has provided the following information at 30 September 2020

Balance Sheet as at 30 September 2020

Required:

Based on the information given, you are required to prepare the following budget** for the upcoming quarter ending 31 December 2020.

1. Sales Budget for each month of the quarter;
2. Purchases Budget for each month of the quarter;
3. Cash Budget for each month of the quarter;
4. Budgeted Income Statement; Quarter
5. Budgeted Balance Sheet.

On April 1, 2020, Blossom Ltd. paid $150 for a call to buy 530 shares of NorthernTel at a strike price of $25 per share any time during the next six months. The market price of NorthernTel’s shares was $25 per share on April 1, 2020. On June 30, 2020, the market price for NorthernTel’s stock was $35 per share, and the fair value of the option was $8,200.

Prepare the journal entry to record the purchase of the call option on April 1, 2020. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

eTextbook and Media

List of Accounts

Prepare the journal entry to recognize the change in the call option’s fair value as at June 30, 2020. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

eTextbook and Media

List of Accounts

Prepare the journal entry that would be required if Blossom Ltd. exercised the call option and took delivery of the shares as soon as the market opened on July 1, 2020. (Credit account titles are automatically indented when the amount is entered. Do not indent manually.)

DigitalHall operates three divisions within the same building, namely, Print, Video and Sound. The following information has been obtained from DigitalHall:

The common costs of RM160, 000 are allocated across all three divisions, based on divisional sales.

Required:

1. Prepare a divisional performance report.
2. Sarah, the manager of the Video division, suggests that the Print division should be closed, because this division is making losses. Kim, the manager of the Print division, indicates that DigitHall will have lower overall profits if the Print division is closed, unless certain steps are put in place. Kim knows that the Print division needs to be downsized because print media is becoming less popular, rather than closed, to serve some regular customers who are dependent on this division. In addition, alternative actions should be pursued to protect overall profit, and she wants to oversee this process. Patricia, the general manager, suggests that Kim should prepare a brief report explaining why overall profits would drop and suggest two strategies that DigitalHall could pursue to prevent a drop in overall profits. You are interning at DigitalHall, and Kim asks for your help in preparing this report.

Required:

Prepare a brief report for Kim that she could present to Patricia.

Start typing here

(15 + 6 = 21 marks)

Harold Dean became Chief Executive Officer of Wriston Manufacturing two years ago. At that
time, the company was reporting lagging profits, and Harold was brought in to “stir things up.”
The company has three divisions; electronics, fiber optics, and plumbing supplies. Harold has no
interest in plumbing supplies, and one of the first things he did was to put pressure on his
accountants to reallocate some of the company’s fixed costs away from the other two divisions to
the plumbing division. This had the effect of causing the plumbing division to report losses
during the last two years; in the past it has always reported low, but acceptable, net income.
Harold felt that this reallocation would shine a favorable light on him in front of the board of
directors because it meant that the electronics and fiber optics divisions would look like they were
improving. Given that these are “businesses of the future,” he believed that the stock market
would react favorably to these increases, while not penalizing the poor results of the plumbing
division. Without this shift in the allocation of fixed costs, the profits of the electronics and fiber
optics divisions would not have improved. But now the board of directors has suggested that the
plumbing division be closed because it is reporting losses. This would mean that nearly 500
employees, many of whom have worked for Wriston their whole lives, would lose their jobs.

a) If a division is reporting losses, does that necessarily mean that it should be closed? Explain.
b) Was the reallocation of fixed costs across divisions unethical? Explain.
c) What should Harold do now that the plumbing division may be closed?

Hammond Manufacturing Inc. was legally incorporated on January 2, 2017. Its articles of incorporation granted it the right to issue an unlimited number of common shares and 100,000 shares of $14.0 noncumulative preferred shares. The following transactions are among those that occurred during the first three years of operations: