Question one  

Under IFRS, where a right to return exists,

a) sales returns and allowances are recognized as contra accounts to Revenues and Accounts Receivable.

b) a refund liability is recognized.

c) this right is disclosed in the financial statements; no accrual necessary.

d) this right does not need to be disclosed or accrued anywhere.

Part B

Marlin Pools and Spas sold 80 hot tubs at $4,500 each. The cost of the hot tubs to Marlin is $2,600. The terms of the sale include a right to return for full refund within 30 days of purchase. Marlin expects that 3 of the hot tubs will be returned. Marlin follows IFRS 15.

Required:

1. Record the journal entries related to the above transactions. Assume 1 hot tub is returned within the 30 days.
2. Now assume Marlin uses ASPE, prepare the journal entries for the above transactions.

Question Two

Ace Company manufactures equipment. Ace’s products range from simple automated machinery to complex systems containing numerous components. Unit selling prices range from $130,000 to $1,100,000 and are quoted inclusive of installation. The installation process does NOT involve changes to the features of the equipment to perform specifications. Ace has the following relationship with Rose Inc.

• Rose can purchase equipment from Ace for a price of $500,000 and contracts with Ace to install the equipment. Using market data, Rose determines installation service is estimated to have a fair value of $50,000. The cost of the equipment is $200,000.
• Rose is obligated to pay Ace the $500,000 upon delivery and installation of the equipment.

Ace delivers the equipment on August 1, 2020, and completes the installation of the equipment on October 1, 2020. The equipment has a useful life of 7 years. Assume the equipment and the installations are two distinct performance obligations that should be accounted for separately.

Instructions

a)    How should the transaction price of $500,000 be allocated among the service obligations?

b)    Prepare the journal entries for Ace for this revenue arrangement for 2020, assuming Ace receives payment when installation is completed.

Question Three

On December 31, 2019, Resilient Company sells production equipment to Ready Corp. for $160,000. Resilient includes a one-year assurance warranty service with the sale of all its equipment. The customer receives and pays for the equipment on December 31, 2019. Resilient estimates the prices to be $156,000 for the equipment and $4,000 for the cost of the warranty.

Required:

1. Prepare the journal entry to record this transaction on December 31, 2019.
2. Repeat the requirements for (a) assuming that, in addition to the assurance warranty, Resilient sold an extended warranty (service type warranty) for an additional two year (2019 – 2020) for $1,600.

Question Four  

In January 2019, Miller Construction Corp. contracted to construct a building for $3,600,000. Construction started in early 2019 and was completed in 2020. The following additional information is available:

                                                                                          2019               2020

       Costs incurred...................................................... $1,458,000          $1,620,000

       Estimated costs to complete.................................. 1,560,000                         —

       Billed ……………………………………………….    1,700,000           1,900,000

       Collections during the year.................................... 1,440,000            2,160,000

Miller uses the percentage-of-completion method.

Instructions

Under the contract-based approach for percentage completion,

a) How much revenue should Miller report for 2019 and 2020?

b) Prepare all journal entries for 2019 and 2020 for this contract.

c)    What amounts would be presented on Miller’s December 31, 2019 Balance Sheet?

d)    What is the gross profit on the project for each of 2019 and 2020?

The country in question is Brazil.

        Now consider the possibility of applying tariffs to one of the goods or services imported from the partner country to the U.S. and analyze the perspectives of different groups in the U.S. by answering the following:

• Which good or service have you chosen to consider?
• What impact would a tariff on this good or service have on the production possibility curve in the U.S.? On Gross Domestic Product (GDP) in the U.S.? On the standard of living in the U.S.?
• Who in each country might benefit from such a tariff and in what way(s) might they benefit?
• Who in each country might be harmed by such a tariff and in what way(s) might they be harmed?

Prior to November 2007, the exchange rate between the U.S. Dollar (USD) and the Moroccan Dirham (MAD) was market determined, and the Bahraini Dinar (BHD) was pegged to the U.S. Dollar. The exchange rates stood at MAD8.2/USD and BHD0.3770/USD. The U.S. economy was expected to slow down during the early part of 2008, and so the Fed (U.S. central bank) was contemplating an expansionary monetary policy to provide some stimulus to the economy. Discuss the effects of a 4% increase in the U.S. money supply on the MAD/USD and the BHD/USD exchange rates. Clearly explain the effects using well labeled graphs for each exchange rate.

Locate the U.S. Business Judgment Rule

Then locate the rule in any other country.


Discuss the following:


1.   What part or parts of the U.S. rule do you either agree or disagree?
2.   Compare/contrast the U.S. with your selected country. If they are the same, why do you think they are stated in similar ways. If different, discuss the differences.

If you could change the U.S. rule, what would you change and why?

If you would not change anything in the U.S. rule, discuss what aspects of the rule you believe are most effective and why?

You MUST provide citations for all materials used.

Peace Computer Corporation acquired 75 percent of Symbol Software Company's stock on January 2, 20X3, by issuing bonds with a par value of $77,750 and a fair value of $95,250 in exchange for the shares. Summarized balance sheet data presented for the companies just before the acquisition follow:

Prepare a consolidated balance sheet immediately following the acquisition.

During 20X1, Craig Company had the following transactions:

A company incurred the following costs in year 1 to fulfill a contract that is expected to take two years to complete:

• Equipment required to complete the contract: $150,000
• Salaries and wages incurred to satisfy contract requirements: $300,000
• Supplies and materials directly used: $20,000
• Allocation of supervisory salaries: $15,000
• Allocation of general administrative costs: $35,000

Other information:

The equipment was acquired for the contract, but will have other use to the company when the contract is complete. It is expected to have a ten-year useful life with no residual value. The revenue from the contract will be recorded at the end of two years, when control transfers (i.e., point in time).

How will the above costs be accounted for in year 1? Does the answer change if period of time criteria is met?

"Cash Flow Statements and Cash Hoards" Please respond to the following: Apple Inc. and Microsoft Corp. are identified as companies that have accumulated substantial sums of cash. Microsoft and Apple increased dividend payouts and acquired treasury stock to return some of the excess cash to shareholders. Use the Internet and/or Strayer Learning Resource Center to identify one (1) additional large company which is currently accumulating a cash hoard. Next, evaluate how the company identified in your research can use the cash flow statement to project efficient uses of the cash hoard it has accumulated. Suggest at least two (2) advantages and two (2) disadvantages of companies accumulating cash hoards. Provide a rationale for your suggestion.

True Financial corporation is a financial services holding company headquartered in ithaca new york, that offers banking insurance and wealth management service. It pays cash dividends quarterly and also issues stock dividends periodically.

1. At March 31, 2012, True had 9,726,700 shares issued with a par value of $7.00 per share and $75,00 share held in treasury. On April 25, 2012, the company announced that its Board of Directors approved payment of a regular quarterly cash dividend of 3.50 per share , payable on May 15, 2012, to common shareholder of record on May 7,2012. Assume no shares were acquired or sold by the company after March 31. Give the journal entry to record the declaration of the cash dividend.

2. At December 31, 2009, True reported 5,918,200 shares issued with a par value of $7.00 per share and 11,200 share held in treasury. On January 27,2010, the company announced that its board of directors approved payment of a regular quarterly cash dividend of $3.60 per share, payable on February 25, 2010 to common shareholders of record on February 5, 2010. The board also approved the payment of 5% stock dividend distributable on February 25, 2010, to common shareholders of record on February 5, 2010. The share price was $50 when the stock dividend was issued. Assume no treasury shares were acquired or sold after June 30. Prepare the journal entry to record true 's stock dividend.

3. True issued 5% stock dividends in 1995, 2003, 2005, 2006, 2010. In 1998, True issued a three-for-one split. If an investor purchased 1,200 shares in 1994, how many shares would the investor have in 2012?

Eureka Design Bhd entered into a contract to deliver one of its fixtures and fittings to Creative Landscaping Bhd on 1st July 2020. The contract requires Creative Landscaping to pay the contract price of RM30,000 in advance on 15th July 2020. Creative pays Eureka on 15th July 2020 and Eureka delivers the fixtures and fittings (with cost of RM19,000) on 31st July 2020.

Required:

i) Explain the 5-step of revenue recognition as outlined in MFRS 15 Revenue from Contract With Customers.

ii) Prepare the journal entry on 1st July 2020 for Eureka Design Bhd.

iii) Prepare the journal entry on 15th July 2020 for Eureka Design Bhd.

iv) Prepare the journal entry on 31st July 2020 for Eureka Design Bhd.