A company issues term bonds totaling $300,000 on January 1, 2014. The bonds have a coupon rate of 5%, pay interest semi-annually on Jan 1st and July 1st of each year, and mature in 10 years. The bonds are issued at an effective market rate of 4%, which corresponds to a price of 108.176 ($324,527). The company incurred bond issue costs totaling $35,000. Given this information calculate the following for January 1, 2020:

Bonds Payable-Face Value:

Premium on Bonds Payable:

Unamortized Bond Issue Costs:

*Problem 1-4A (Video)

The following data were taken from the records of Clarkson Company for the fiscal year ended June 30, 2020.

Raw Materials Inventory

7/1/19 $48,900 Factory Insurance $5,100

Raw Materials Inventory

6/30/20 46,900

Factory Machinery

Depreciation 18,000

Finished Goods

Inventory 7/1/19 97,700 Factory Utilities 30,000

Finished Goods

Inventory 6/30/20 21,600

Office Utilities

Expense 9,350

Work in Process

Inventory 7/1/19 25,200 Sales Revenue 558,900

Work in Process

Inventory 6/30/20 23,700 Sales Discounts 5,000

Direct Labor 142,050

Plant Manager’s

Salary 65,200

Indirect Labor 25,360

Factory Property

Taxes 9,710

Accounts Receivable 35,500 Factory Repairs 2,200

Raw Materials

Purchases 96,700

Cash 40,700

Prepare a cost of goods manufactured schedule. (Assume all raw materials used were direct materials.)

CLARKSON COMPANY

Cost of Goods Manufactured Schedule

$

$

:

$

:

$

Prepare an income statement through gross profit.

CLARKSON COMPANY

(Partial) Income Statement

$

:

$

:

$

Prepare the current assets section of the balance sheet at June 30, 2020. (List Current Assets in order of liquidity.)

CLARKSON COMPANY

(Partial) Balance Sheet

$

$

$

Background Information Note the following:

• Acme Corporation is a publicly listed company

• ACME’s Fiscal year end is December 31

• In addition to the cash account being reconcile here; ACME has a separate Revolving Credit account.

  This is a revolving credit facility where interest is accrued on the average balance outstanding during the month. The interest amount is required to be paid on a monthly basis. The correct is amount calculated and taken from the account automatically by the bank.

• The facility has an annual interest rate of 4%

• Management has set-out in the Financial Statements that the average balance outstanding in this

  revolving credit facility is normally at around $ 150,000.

• The Audit Committee has also informed the Partner that the CRA audited ACME in the previous year

  and levied a penalty of $50,000 and has informed the Board that they plan continue their audit in the new year.

  Required

  Part 1

1. a) From the information provided in EXHIBIT A, perform and document a Bank Reconciliation. - 20 marks

2. b) From the Background info. provided above, identify potential errors and disclosure requirements - 5 marks

Part 2

1. a) Identify the financial assertions relating to the Cash account addressed by the Bank Reconciliation and explain how. – 5 marks

2. b) Identify what type of activity the Bank Reconciliation is. – 5 marks

3. c) Identify the 6 possible characteristics (of the activity above) and which apply to the Bank Rec. – 5 marks

BONUS
How would the Auditor test the identified characteristics. – 4 marks

EXHIBIT A

If the British pound depreciates against the U.S. dollar

Select one:

A. British consumers lose by a decrease in the pound price of U.S. exports to Britain.

B. British consumers gain by a decrease in the pound price of U.S. exports to Britain.

C. British businesses gain by an increase in the dollar price of exports to the United States.

D. U.S. consumers win by a decrease in the dollar price of British exports to the United States.

True or False:

1) Purchasing-power parity says that the nominal exchange rate must equal the real exchange rate.

2) If prices in Mexico rise at a higher rate than prices in the U.S., then according to purchasing-power parity the U.S. nominal exchange rate with Mexico should rise.

3) If the U.S. real exchange rate with Japan is greater than 1, then U.S. goods are relatively cheap.

In a random sample of 440 U.S. adults, 76% said that they believe that the U.S. Congress fails to pass laws that benefit the lives of all Americans. Use these sample statistics to construct a 90% confidence interval for the proportion of all U.S. adults who believe that the U.S. Congress fails to pass laws that benefit the lives of all Americans.

Give your answers as decimals, rounded to three decimal places.

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Assume that a U.S. firm expects to make a payment of SF3,500,000 in 6 months and wants to execute a money market hedge. The following information is available:

U.S. borrowing interest rate = 5%; U.S. lending interest rate = 4%;

Swiss borrowing interest rate = 8%;Swiss lending interest rate = 6%;

Spot rate is $0.95/SF; The U.S. firm's weighted average cost of capital (WACC) is 10%.

Explain very well if the U.S. firm intends to use the money market hedge to cover the payment of SF2,500,000, what shall it do and what will be the total cost in USD in 6 months?

Assume that a U.S. firm expects to make a payment of SF3,500,000 in 6 months and wants to execute a money market hedge. The following information is available: U.S. borrowing interest rate = 5%; U.S. lending interest rate = 4%; Swiss borrowing interest rate = 8%;Swiss lending interest rate = 6%; Spot rate is $0.95/SF; The U.S. firm's weighted average cost of capital (WACC) is 10%. Explain very well if the U.S. firm intends to use the money market hedge to cover the payment of SF2,500,000, what shall it do, and what will be the total cost in USD in 6 months?

Hannah Legaleagle is an attorney. She is an Irish citizen who vacationed in the U.S. for 14 days in 2017. Because of her fondness for living in the U.S., Hannah’s Irish employer law firm, gave her a temporary assignment in the U.S. from August 1 through December 31, 2018. She earned $120,000 while working in the U.S. , earned $220,000 for the year working in Ireland, and she also earned about $40,000 in interest and dividends, all from Irish banks and publicly traded Irish companies.

Hannah asks you to advise her of the U.S. tax consequences for 2018.