On 1 July 2020, Brooklyn Ltd (lessor) leased Equipment to New Ltd (lessee).

The lease agreement contained the following:

What would be the journal entries on 1 July 2020 for the lessor (Brooklyn Ltd)?

X Company estimates the following for its only two products for 2020 - X and Y:

Total fixed costs in 2020 are expected to be $17,400. What is the expected weighted average contribution margin per unit in 2020 (rounded to two decimal places)?

Tia is married and is employed by Carrera Auto Parts. In 2019, established high-deductible health insurance for all its employees. The plan has a $2,700 deductible for married taxpayers. Carrera also contributes 5% of each employee’s salary to a Health Savings Account. Tia’s salary is $43,000 in 2019 and $45,000 in 2020. Tia makes the maximum allowable contribution to her HSA in 2019 and 2020. She received $600 from the HSA for her 2019 medical expenses. In 2020, she spends $2,000 on medical expenses from her HSA. The MSA earns $30 in 2019 and $48 in 2020.

Round intermediate computations and final tax liability to the nearest dollar.

a. What is the effect of the HSA transactions on Tia's adjusted gross income?

The maximum aggregate contribution to an HSA for a family in 2019 is $______. The earnings of an HSA, as well as medical reimbursements, are (excludable/included). Based on Carrera's contribution, in 2019, Tia (can/cannot deduct) for AGI $_______

b. What is the balance in Tia's HSA account at the end of 2020?

Tia has $_________ in her HSA account at the end of 2020.

Questions #2 Basic and diluted earnings per share

The following data are presented by Quentin Corp. for calendar 2020

Net income                                                                                                                                                                               $ 4,500,000

Common shares outstanding, 1,000,000 shares

10%, cumulative preferred shares, convertible into 120,000 common shares                             $ 1,600,000

8% convertible bonds; convertible into 105,000 common shares                                                        $ 7,500,000

360,000 call options exercisable at $ 25 per share

Additional information

1.       The common and preferred shares and the convertible bonds were outstanding from the beginning of the year.

2.       In 2020, a $ 500,000 dividend was declared and distributed; however, no dividends were declared in 2019.

3.       The average market price of the common shares in 2020 was $ 30. The stock price was $ 27 on January 1, 2020, and $ 35 on December 31, 2020.

4.       The convertible bonds were sold at par.

5.       The income tax rate for 2020 is 30%.

Instructions

a)      Calculate basic EPS.

b)      Calculate diluted EPS.

c)      Briefly discuss the usefulness of the EPS measure in general. What is the additional importance of reporting diluted EPS?

2. On January 1, 2020, Firm Lessor leased a building to Firm Lessee. The relevant information related to the lease is as follows.

1) The lease arrangement is for 2 years.

2) Equal rental payments are due on January 1 of each year, beginning in 2020.

3) The building’s fair value at commencement of the lease is $100,000. The building is depreciated on a straight-line basis. Its estimated economic life is 4 years with salvage value of $25,000 at the end of the lease and $0 at the end of the economic life.

4) The lease contains no renewal options. The building reverts to Firm Lessor at the termination of the lease.

5) Both firms use the discount factor of 10%. 6) Both the lessor and the lessee are on a calendar-year basis.

(a) Discuss whether this is an operating lease.

(b) Prepare the journal entries that Firm Lessee should make in 2020

For the dates 1/1/2020, 1/1/2020, 1/1/2021 & Include Lease Payment, Interest, Reduction of Lease Liability, Lease Liability

(c) Prepare the journal entries that Firm Lessor should make in 2020.

Cullumber Ltd. ended its first fiscal year on December 31, 2020, reporting a pretax income for accounting purposes of $1,320,000. All of Cullumber’s products were sold with a two-year warranty included. Cullumber recorded $268,000 of warranty expense for accounting purposes in 2020, including $158,000 of actual warranty costs incurred during the year plus $110,000 in estimated warranty liability for the remainder of the warranty period. Estimated liabilities are not deductable for tax purposes. Cullumber was subject to a 33% income tax rate and follows IFRS.

Calculate Cullumber Ltd.’s taxable income and income tax payable for 2020.

Taxable income for 2020 $

Income taxes payable for 2020 $

Prepare the journal entries to record the 2020 current and deferred income taxes. (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.)

Account Titles and Explanation Debit Credit

(To record current tax expense.)

(To record deferred tax expense.)

Ayayai Corp. experienced a fire on December 31, 2020, in which its financial records were partially destroyed. It has been able to salvage some of the records and has ascertained the following balances.

Additional information:

Compute the following for Ayayai Corp.. (Round all answers to 0 decimal places, e.g. 2,150.)

On January 1, 2020, Flounder Company issued 10-year, $2,060,000 face value, 6% bonds, at par. Each $1,000 bond is convertible into 15 shares of Flounder common stock. Flounder’s net income in 2020 was $459,000, and its tax rate was 20%. The company had 108,000 shares of common stock outstanding throughout 2020. None of the bonds were converted in 2020.

(a) Compute diluted earnings per share for 2020. (Round answer to 2 decimal places, e.g. $2.55.)

(b) Compute diluted earnings per share for 2020, assuming the same facts as above, except that $1,080,000 of 6% convertible preferred stock was issued instead of the bonds. Each $100 preferred share is convertible into 5 shares of Flounder common stock. (Round answer to 2 decimal places, e.g. $2.55.)

On January 1, 2020, Pearl Company issued 10-year, $2,020,000 face value, 6% bonds, at par. Each $1,000 bond is convertible into 16 shares of Pearl common stock. Pearl’s net income in 2020 was $475,300, and its tax rate was 20%. The company had 97,000 shares of common stock outstanding throughout 2020. None of the bonds were converted in 2020. (a) Compute diluted earnings per share for 2020. (Round answer to 2 decimal places, e.g. $2.55.) Diluted earnings per share $enter diluted earnings per share rounded to 2 decimal places (b) Compute diluted earnings per share for 2020, assuming the same facts as above, except that $970,000 of 6% convertible preferred stock was issued instead of the bonds. Each $100 preferred share is convertible into 5 shares of Pearl common stock. (Round answer to 2 decimal places, e.g. $2.55.) Diluted earnings per share $enter diluted earnings per share rounded to 2 decimal places

Q1: Assume you have that you have the following information when preparing the consolidated financial statements in 2020 (fiscal year end is 12/31/2020). The consolidated entity includes the parent company and an 80%-owned subsidiary.

1. On January 1, 2018, the subsidiary sold to its parent, for a sale price of $120,000, equipment that originally cost $180,000. The subsidiary originally purchased the equipment on January 1, 2015, and depreciated the equipment assuming a 12-year useful life (straight-line with no salvage value). The parent adopted the subsidiary’s depreciation policy and depreciates the equipment over the remaining useful life. The parent used the full equity method to account for its Equity Investment.

2. During 2020, the subsidiary sold goods to the parent company for $230,000 that cost $180,000. The parent company still owned 30% of the goods at the end of 2020. During 2019, the parent sold goods to the subsidiary for $200,000 that cost $170,000. The subsidiary sold 80% of goods in 2019 and the rest 20% in 2020.

Prepare the related consolidation entries for the year 2020 based on the above information.