Answer for 8 and 9

On October 15, 2016, Koala, Inc. issued a 10 year bond (with a typical $1000 face value) that had an annual coupon value of $60. [We are assuming that the 2020 coupon has just been redeemed.]

• Initially, the bond was sold for the premium price of $1,025.
• On October 15, 2020, this bond was selling for only $975.
• The market rate of interest for a riskless corporate bond, of this maturity, was 4.5% on October 15, 2016, which reflects market expectations about future rates of inflation.
• The market rate of interest for a riskless corporate bond, of this maturity, was 4.0% on October 15, 2020, which reflects market expectations about future rates of inflation.

1. What was the nominal yield on this bond on October 15, 2016? 6% [To 1 decimal place.]

2. What was the current yield on this bond on October 15, 2016?5.36% [To 2 decimal places.]

3. What was the yield to maturity for this bond on October 15, 2016? 5.679% [To 3 decimal places.]

4. What was the risk premium for this bond on October 15, 2016? 1.179% [To 3 decimal places.]

5. What was the nominal yield on this bond on October 15, 2020?6% [To 1 decimal place.]

6. What was the current yield on this bond on October 15, 2020?6.15% [To 2 decimal place.]

7. What was the yield to maturity for this bond on October 15, 2020?6.346% [To 3 decimal places.]

8. What was the risk premium for this bond on October 15, 2020? [To 3 decimal places.]

9. It is now October 15, 2020 and suddenly the Federal Reserve announces a massive program to reduce inflation. Instantly, the market rate of interest for a riskless corporate bond that would apply to this bond, falls from 4.0% to 2.5%. If there is no change in the risk premium expected for this Koala, Inc. bond, what will be this bond’s yield to maturity? [To 3 decimal places.]

Part C Question 3 Accounting for Income Taxes                                                   

Reed Ltd is a manufacturer of surfboards which commenced operations on 1 July 2019. The Statement of Comprehensive Income and the Statement of Financial Position were compiled on 30 June 2020. The following information was available:

Statement of Comprehensive Income for the year ended 30 June 2020

  $                      $

Following information was extracted from the Statement of Financial Position at 30 June 2020:

Other information was available for the year ended 30 June 2020:

1. Sales are recorded for income tax purpose at the time the sales are made.
2. Cost of Goods Sold and administrative expense incurred have been paid. They are allowed as a tax deduction at the year end.
3. Warranty expense was accrued. Deduction for income tax purpose is available only when the amount is paid.
4. The machine was purchased two years ago at a value of $400,000. It is depreciated evenly over its useful life and it has no residual value. The useful life is ten years based on accounting policy, but it is depreciated over eight years according to the taxation rule.
5. Insurance is allowed as a tax deduction when it is paid.
6. Income tax rate is 30%.

Required: (Narrations are not required in this question)

1. Determine the amount of taxable income for the year ended 30 June 2020.
2. Determine the amount of income tax expense for the year ended 30 June 2020.
3. Prepare a journal entry to record current tax liability on 30 June 2020.
4. Determine the amount of tax base for machine.
5. Determine the amount of temporary difference for machine.
6. The temporary difference for machine is deductible in this question, is this correct? Explain.
7. Provide journal entry to record DTA or DTL for machine.

Question 3 Accounting for Income Taxes                                                   

Reed Ltd is a manufacturer of surfboards which commenced operations on 1 July 2019. The Statement of Comprehensive Income and the Statement of Financial Position were compiled on 30 June 2020. The following information was available:

Statement of Comprehensive Income for the year ended 30 June 2020

  $                      $

Following information was extracted from the Statement of Financial Position at 30 June 2020:

Other information was available for the year ended 30 June 2020:

1. Sales are recorded for income tax purpose at the time the sales are made.
2. Cost of Goods Sold and administrative expense incurred have been paid. They are allowed as a tax deduction at the year end.
3. Warranty expense was accrued. Deduction for income tax purpose is available only when the amount is paid.
4. The machine was purchased two years ago at a value of $400,000. It is depreciated evenly over its useful life and it has no residual value. The useful life is ten years based on accounting policy, but it is depreciated over eight years according to the taxation rule.
5. Insurance is allowed as a tax deduction when it is paid.
6. Income tax rate is 30%.

Required: (Narrations are not required in this question)

1. Determine the amount of taxable income for the year ended 30 June 2020.
2. Determine the amount of income tax expense for the year ended 30 June 2020.
3. Prepare a journal entry to record current tax liability on 30 June 2020.
4. Determine the amount of tax base for machine.
5. Determine the amount of temporary difference for machine.
6. The temporary difference for machine is deductible in this question, is this correct? Explain.
7. Provide journal entry to record DTA or DTL for machine.

Part C Question 3 Accounting for Income Taxes                                                   

Reed Ltd is a manufacturer of surfboards which commenced operations on 1 July 2019. The Statement of Comprehensive Income and the Statement of Financial Position were compiled on 30 June 2020. The following information was available:

Statement of Comprehensive Income for the year ended 30 June 2020

  $                      $

Following information was extracted from the Statement of Financial Position at 30 June 2020:

Other information was available for the year ended 30 June 2020:

1. Sales are recorded for income tax purpose at the time the sales are made.
2. Cost of Goods Sold and administrative expense incurred have been paid. They are allowed as a tax deduction at the year end.
3. Warranty expense was accrued. Deduction for income tax purpose is available only when the amount is paid.
4. The machine was purchased two years ago at a value of $400,000. It is depreciated evenly over its useful life and it has no residual value. The useful life is ten years based on accounting policy, but it is depreciated over eight years according to the taxation rule.
5. Insurance is allowed as a tax deduction when it is paid.
6. Income tax rate is 30%.

Required: (Narrations are not required in this question)

1. Determine the amount of taxable income for the year ended 30 June 2020.
2. Determine the amount of income tax expense for the year ended 30 June 2020.
3. Prepare a journal entry to record current tax liability on 30 June 2020.
4. Determine the amount of tax base for machine.
5. Determine the amount of temporary difference for machine.
6. The temporary difference for machine is deductible in this question, is this correct? Explain.
7. Provide journal entry to record DTA or DTL for machine.

Action Items

1. Read the article below: Information Systems and Internal Control.
2. Write: Develop a bulleted list of five to seven (5-7) issues or best practices that you identified based on your reading of this article and how it may impact you while performing in an accounting position.

Information Systems and Internal Control.:

G1.05 Functions That Benefit from IS

Functions that benefit from IS have increased remarkably from the simple military and government uses in the early years. Computers are used to process accounting and financial information of all types. It is not unusual to find entities whose financial records exist only in machine-readable form. Hence, financial statements, general ledgers, and original entry records (e.g., payroll registers, cash receipts, and disbursements journals) are all computerized. Most of these used to be processed in a batch mode, meaning that all homogeneous transactions were grouped together in batches that were submitted to the data center, which then set up and processed the data according to applicable instructions. Most applications have since been converted to the faster, cheaper, and more useful online processing mode involving networks and applications that take advantage of databases and object-oriented software.

While the applicability of computers to financial information has been substantial, the ultimate worth of the computer to management goes far beyond finance functions. In fact, advances in computer technology are usually adopted first by the scientific and technical community. Thus, unique applications that employ some or all advances described are being used for such diverse fields as medical science, nuclear physics, aerospace, computer technology, semiconductors, and telecommunications. Products that feature three-dimensional design capability, imaging, graphics, and simulation offer researchers, designers, and engineers powerful and flexible tools to speed creative processes and make them more reliable.

Functions outside the laboratory have also enjoyed the advantages of advanced computer technology. Manufacturing is a good example. Computer-integrated manufacturing (CIM), a concept that has gained in popularity, represents the ultimate goal of many companies: to achieve a totally automated factory environment in which such functions as engineering, purchasing, manufacturing, and quality control are integrated, through online database-oriented systems, such as MRP II (discussed in Chapter F3 ). The automation of CIM transcends MRP II to encompass submanufacturing applications, such as scheduling, process planning, manufacturing cell control, and maintenance. CIM also incorporates the innovation of using EDI to extend electronic links beyond the company to include major suppliers.

Chapter F6 describes how marketing data warehouses are being developed to enhance the reliability and success of marketing strategies. Some of these involve the use of expert systems, which managements use to check the effectiveness of sales promotions and inducements, sales force compensation, pricing strategies, and marketing forecasting and targeting techniques. The integrated databases that form the nucleus of marketing information systems are becoming strategic assets that give companies a competitive advantage.

Competitive advantage is the aim of companies everywhere as they apply advanced systems technology. For example, companies in the retail industry are perfecting point-of-sale systems and sophisticated electronic storefronts; in the oil and gas industry, the major companies are applying expert systems to the challenges of geological analysis, process control, and chemical spills; life insurers are reducing file storage through electronic filing and are using computers and telecommunications to improve links with agents; electronics companies are designing products, such as computers, by using workstations united through LANs and WANs; and in the banking and finance arena, companies are using advanced systems technologies to speed transaction processing and to improve documentation management.⁴

The application of advanced IS technology is notable, but less dramatic for traditional accounting systems, such as payrolls, general ledgers, cost ledgers, fixed assets, accounts receivable, and accounts payable processing. Although more modern products are available, many companies are still using systems designed in the 1980s to perform these functions. A high percentage of these require inordinate support from IS departments to keep them running, are difficult to change, and are poorly documented. During the late 1980s, the opportunity for change grew in earnest. Independent software developers successfully designed software packages to permit real-time data entry and editing and updating of certain files, and to allow interactive query and reporting capabilities. Those systems also offered enhanced control and auditing features that home-grown systems frequently lacked. In the 1990s, this trend continued, with centralized systems being totally rewritten and deployed across decentralized platforms.

Government units are striving to take advantage of advancing systems technology to streamline their operations. Examples of this include the SEC's electronic data gathering, analysis, and retrieval system, more familiarly known as EDGAR. Since 1996, all companies have been required to use EDGAR in the electronic filing of required SEC reports. The IRS continues to encourage the electronic filing of income tax returns, and, in the Department of Defense, disbursing offices continue to enable the electronic handling of billings and payments through EDI.

To support the IS needs of business and government, a multi-billion-dollar industry has evolved, consisting of manufacturers of very large mainframe computers; sophisticated network equipment, virtualized servers that rival mainframes in their sheer computing power, and a host of desktops, laptops, and mobile computing devices that place state-of-the-art computing power in the palm of one's hand. The advent of affordable computing, combined with the universal availability of the Internet, has further accelerated both the revolution in IS and the decentralization of IS capability and responsibility.

Fill in the blanks. In a pool of identical fixed rate, fully amortizing loans, as the mortgages become more seasoned, the WAM ____________; the WAL ____________; and the WAC ___________.

Fill in the blanks. In a pool of identical fixed rate, fully amortizing loans, as the mortgages become more seasoned, the WAM ____________; the WAL ____________; and the WAC ___________.

Q3 Foreign currency translation A: 20 marks

On January 1, 2020, in an effort to diversify, Bauman Corp. (a Canadian company that sells decorative cedar branches), purchased 80% of Noskova Inc, an American company that manufacturers nitrous oxide, for US$50,000.

Noskova’s book values approximated its fair values on that date except for plant and equipment, which had a fair value of US$30,000 with a remaining life expectancy of 5 years.   A goodwill impairment loss of US$1,000 occurred during 2020. Noskova’s January 1, 2020, Balance Sheet is shown below (in U.S. dollars):

The following exchange rates were in effect during 2020:

Sales, purchases and other expenses occurred evenly throughout the year.
Dividends declared and paid December 31, 2020.
The financial statements of Bauman (in Canadian dollars) and Noskova (in U.S. dollars) are shown below:

Balance Sheets

Translate Noskova’s 2020 Income Statement into Canadian dollars if the functional currency is the Canadian dollar (i.e. the same functional currency as the parent).