The information below relates to ABC Company for the year ended 30 June 2020.

Sales revenue 352,000
Accrued wages 15,000
Bank balance 1 July 2019 ($22,000)
Cash paid to suppliers 192,200
Cash receipts from customers 294,000
Payments to employees and for expenses 25,000
Bank loan received 6,600
Property taxes paid 20,000
Depreciation of equipment 45,600
Interest received 20,500
Cash received from sale of share market investments 55,000
Cash paid to purchase computer hardware 40,000
Issued shares in exchange for block of land 100,000
Dividends paid 29,000
Interest paid 30,000
Net profit after tax 76,000

Required:
a) Prepare ABC Statement of Cash Flows for the year ended 30 June 2020.

b) What is the most important section in ABC's Statement of Cash Flow? Explain.

Martin Company expects to have a cash balance of $135,100 on January 1, 2020. Relevant monthly budget data for the first 2 months of 2020 are as follows:

(a)

Correct answer iconYour answer is correct.

Prepare a cash budget for January and February.

B). Martin Company’s chief financial officer feels that it is important to have data for the entire quarter especially since their financial forecasts indicate some difficult economic periods in the coming year. March information has been budgeted as follows:

Prepare a cash budget for March assuming that the company does not sell the marketable securities.

1. On January 1, 2020, Scottsdale Company issued its 12% bonds in the face amount of $3,000,000, which mature on January 1, 2032. The bonds were issued for $$3,408,818 to yield 10%. Scottsdale uses the effective-interest method of amortizing bond premium. Interest is payable annually on December 31. Interest Expense for 2023 is:

Submit the assignment in Excel using one page

On December 31, 2020, Tamarisk Bank enters into a debt restructuring agreement with Barkley Company, which is now experiencing financial trouble. The bank agrees to restructure a 12%, issued at par, $2,200,000 note receivable by the following modifications:

Barkley pays interest at the end of each year. On January 1, 2024, Barkley Company pays $1,440,000 in cash to Tamarisk Bank.

Answer the following questions related to Tamarisk Bank (creditor).

1. Compute the loss Tamarisk Bank will suffer under this new term modification (Loss on restructuring of debt)

2. Prepare the journal entry to record the loss on Tamarisk’s books

3. Prepare the interest receipt schedule for Tamarisk Bank after the debt restructuring.

4. Prepare the interest receipt entry for Tamarisk Bank on December 31, 2021, 2022, and 2023.

5. What entry should Tamarisk Bank make on January 1, 2024?

On January 1, 2020, Sunland Company leased equipment to Flynn Corporation. The following information pertains to this lease. 1. The term of the non-cancelable lease is 6 years. At the end of the lease term, Flynn has the option to purchase the equipment for $2,000, while the expected residual value at the end of the lease is $6,000. 2. Equal rental payments are due on January 1 of each year, beginning in 2020. 3. The fair value of the equipment on January 1, 2020, is $180,000, and its cost is $150,000. 4. The equipment has an economic life of 8 years. Flynn depreciates all of its equipment on a straight-line basis. 5. Sunland set the annual rental to ensure a 5% rate of return. Flynn’s incremental borrowing rate is 6%, and the implicit rate of the lessor is unknown. 6. Collectibility of lease payments by the lessor is probable. Both the lessor and the lessee’s accounting periods end on December 31. Prepare all the necessary journal entries for Flynn for 2020. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. Round answers to 0 decimal places, e.g. 5,275.

Record journal entries in the order presented in the problem.) Date Account Titles and Explanation Debit Credit Right-of-Use Asset Lease Liability (To record the lease) Lease Liability Cash (To record the lease payment) Amortization Expense Right-of-Use Asset (To record amortization of the right-of-use asset) Interest Expense Interest Payable (To record interest expense)

Krause Company on January 1, 2020, enters into a five-year noncancelable lease for equipment having an estimated useful life of 6 years and a fair value to the lessor, Daly Corp., at the inception of the lease of $4,000,000. The cost to manufacture the equipment was $3,000,000. Daly’s required rate of return is 8%. Krause’s incremental borrowing rate is 10% and is aware of Daly’s required rate of return. Krause uses the straight-line method to amortize its assets. Daly is reasonably confident that Krause will make the lease payments and has no material cost uncertainties.

The lease contains the following provisions:

1. Rental payments of $896,050 are payable at the beginning of each year.
2. A guarantee by Krause Company that Daly Corp. will realize $200,000 from selling the asset at the expiration of the lease. However, the actual residual value is expected to be $120,000.

Round your numbers to the nearest whole numbers.

Required:

1. According to the FASB, how should the lease be classified by both Krause (lessee) and Daly (lessor)? Why?
2. Calculate the present value of lease liability and lease receivable on lease signing date.
3. Prepare lease amortization schedules up to 1/1/2021 for both Krause and Daly
4. Prepare the journal entries to record the inception of the lease and the first lease payment on January 1, 2020 for both Krause and Daly.
5. Prepare all appropriate adjusting journal entries for both Krause and Daly at December 31, 2020.

Ratchet Company uses budgets in controlling costs. The August 2020 budget report for the company’s Assembling Department is as follows.

The monthly budget amounts in the report were based on an expected production of 59,000 units per month or 708,000 units per year. The Assembling Department manager is pleased with the report and expects a raise, or at least praise for a job well done. The company president, however, is unhappy with the results for August because only 57,000 units were produced.

(a) State the total monthly budgeted cost formula.

(b) Prepare a budget report for August using flexible budget data.

(c) In September, 63,000 units were produced. Prepare the budget report using flexible budget data, assuming (1) each variable cost was 10% higher than its actual cost in August, and (2) fixed costs were the same in September as in August.

Ratchet Company uses budgets in controlling costs. The August 2020 budget report for the company’s Assembling Department is as follows.

The monthly budget amounts in the report were based on an expected production of 61,000 units per month or 732,000 units per year. The Assembling Department manager is pleased with the report and expects a raise, or at least praise for a job well done. The company president, however, is unhappy with the results for August because only 59,000 units were produced.

(a) State the total monthly budgeted cost formula.

(b) Prepare a budget report for August using flexible budget data.

(c) In September, 65,000 units were produced. Prepare the budget report using flexible budget data, assuming (1) each variable cost was 10% higher than its actual cost in August, and (2) fixed costs were the same in September as in August.

Assume it is Sept 1, 2020. Company ABC using AUD as functional currency is concerned about currency risk. The company imports goods from the US and sells them in the Australian market with expected revenues for 2021 of AUD 11.5 million. The contract price for these goods from US suppliers is USD 6.5 million payable in one payment on March 1, 2021. The company has a target profit margin (profit as percentage of revenue) of 20%. The minimum acceptable profit margin below which the company will have difficulties servicing its debt is 15%. The spot AUD/USD rate on Sept 1, 2020 is 0.70. The Australian and US six-month interest rates are 2.5% and 2.0%, respectively. Furthermore, the following option contracts expiring on March 1, 2021 are currently available:

Strike AUD/USD rate           Premium

AUDCall 0.73                        0.015

AUDCall 0.68                        0.021

AUDCall 0.70                        0.017

AUDPut 0.72                       0.0125

AUDPut 0.68                        0.008

AUDPut 0.65                        0.005

Based on this information and the knowledge you gained while studying the FRM unit, respond to the questions below. Give all your answers for profit margins and currency rates with 4 (four) decimal places Problem

1. The company analyses the following hedging strategies for managing currency risk:
Strategy I: No hedge at all.
Strategy II: Hedging 100% of the currency exposure with a forward contract.
Strategy III: Hedging 40% of the currency exposure with a forward contract and leaving the remaining 60% unhedged.
Strategy IV: A strategy to meet the target rate and benefit from favourable exchange rate movements.
Strategy V: A strategy for worst-case protection only.

Strategy VI: Using a collar involving the put with the AUD/USD strike rate at 0.68 and the call with the AUD/USD strike rate at 0.73.
For each of these strategies:
 Calculate the profit margin and effective currency rate if the AUD/USD spot exchange rate on 1 March 2021 is:
a) 0.75,
b) 0.63.
 What are the advantages and disadvantages of each hedging strategy?
 If a strategy includes options, state clearly which option contract should be used, whether as a long or short position, and why.

2. Apart from the information provided above and the conducted analysis of the six hedging strategies, what further information would the company need in order to decide which hedging strategy should be adopted?

Firm A uses a process-costing system. For September 2020, the company had the following activities:

Direct materials are placed into production at the beginning of the process. Beginning WIP is 100% complete as to direct materials and 30% complete as to conversion. All spoilage is detected at the end of the process. Normally, spoiled units are 10% of good units completed. Ending WIP is 60% completed as to conversion and 100% complete as to direct materials. The company decides to use the first-in, first-out (FIFO) method.

(26-1) Compute the physical units of normal spoilage and started and completed during current period. Then compute equivalent units for direct materials and conversion costs. (12 points)

(26-2) Summarize costs to account for and calculate cost per equivalent-unit for direct materials and conversion costs (Round cost per equivalent-unit calculations to the nearest hundredth). (4 points)

(26-3) Assign total costs (7 points)

(26-4) Calculate cost per good unit completed and normal spoilage rate. (4 points)

(26-5) Please briefly describe how does the job-costing system account for spoilage. (3 points)

(26-6) Please briefly explain why do we split completed units into completed units from beginning WIP and completed units from started and completed in current period under FIFO? (3 points)