Champion Incorporated is a Canadian company that manufactures steel. On January 2, 2020, Champion purchased a building for $25,000,000 that it will use for manufacturing its products. The building has a useful life of 20 years with no estimated residual value. To comply with regulatory code, the government requires Champion to clean up the property on which the building is located at the end of the building’s useful life. Champion estimates that the clean up will cost $2,200,000. Assume that the clean up costs relate entirely to the purchase of the building, not to operations over the next 20 years.
The company’s discount rate is 5%. Champion adheres to IFRS and has a December 31 year end. Champion uses the straight-line method to depreciate all its buildings.
Required:
Prepare journal entries to record each of the following:
In: Finance
Cansela Corporation uses a periodic inventory system and the LIFO method to value its inventory. The company began 2018 with inventory of 6,100 units of its only product. The beginning inventory balance of $87,200 consisted of the following layers: 2,600 units at $12 per unit = $ 31,200 3,500 units at $16 per unit = 56,000 Beginning inventory $ 87,200 During the three years 2018–2020, the cost of inventory remained constant at $18 per unit. Unit purchases and sales during these years were as follows: Purchases Sales 2018 19,000 20,000 2019 25,000 27,500 2020 21,000 22,000 Required: 1. Calculate cost of goods sold for 2018, 2019, and 2020. 2. Disregarding income tax, determine the LIFO liquidation profit or loss, if any, for each of the three years. 3. Determine the effects of LIFO liquidation on cost of goods sold and net income for 2018, 2019, and 2020. Cansela’s effective income tax rate is 30%.
In: Accounting
Metlock Co. has the following postretirement benefit plan
balances on January 1, 2020.
| Accumulated postretirement benefit obligation | $2,239,000 | |
| Fair value of plan assets | 2,239,000 |
The interest (settlement) rate applicable to the plan is 10%. On
January 1, 2021, the company amends the plan so that prior service
costs of $177,000 are created. Other data related to the plan
are:
|
2020 |
2021 |
|||||
| Service costs | $75,000 | $85,000 | ||||
| Prior service costs amortization | 0 | 12,000 | ||||
| Contributions (funding) to the plan | 45,000 | 35,000 | ||||
| Benefits paid | 41,000 | 45,000 | ||||
| Actual return on plan assets | 142,000 | 119,000 | ||||
| Expected rate of return on assets | 8 | % | 6 |
% |
||
1. Prepare a worksheet for the postretirement plan in 2020.
2.Prepare any journal entries related to the postretirement plan that would be needed at December 31, 2020.
3.Prepare a worksheet for 2021
4.Prepare journal entries related to the postretirement plan as of December 31, 2021.
5. Indicate the postretirement-benefit–related amounts reported in the 2021 financial statements.
In: Accounting
Andrew Cousins is 63 years old and is employed as a personal tax planning advisor by PWMG LLP. Andrew is married to Ying Yue Cousins; Ying Yue is a pensions analyst at Falcons plc, a large investment bank.
Andrew owns an investment portfolio of tangible and intangible assets; he is also a keen collector of antique paintings and sculptures. Andrew intends to retire in the near future; he plans to acquire a retirement home in Nice, France. To finance this acquisition, he made a number of disposals from his investment portfolio during the tax year 2019/20.
Which of the following disposals would be exempt or wholly relieved from capital gains tax in 2019/20?
Sale of corporate bonds issued by Ravens plc, an engineering company that operates in the UK oil and gas sector
Sale of an oil painting to Ying Yue Cousins. The oil painting had a market value on disposal of £18,000, but Andrew sold it to Ying Yue for a total consideration of £10,000. The painting cost £3,000 when acquired on 6 December 1999
Sale of Andrew’s principal private residence (i.e. his main residence), a house in London, UK. Andrew acquired the house in 1996
Part disposal of 400 shares in Trubisky Inc., a company that is resident in Delaware, USA; the shares were acquired in two acquisitions of £23,000 for 259 shares on 7 October 1994 and £35,000 for 303 shares on 11 July 2001, respectively. Net disposal consideration on the part disposal were £516,000
Ahmed Benghazi owns and manages a bakery. Ahmed’s business, Benghazi Mediterranean Khabbaz, produces luxury bread, cakes and pastries for restaurants and delicatessens in Newcastle upon Tyne, UK.
During the tax year 2019/20, Benghazi Mediterranean Khabbaz’s taxable turnover (excluding capital items) was £222,070. The business’s VAT administration and payments of VAT liabilities are up-to-date. Ahmed Benghazi has never been convicted of a VAT offence or assessed to a penalty for VAT evasion involving dishonest conduct. Since the business started trading in 2012/13, Benghazi Mediterranean Khabbaz has participated in the flat-rate scheme for small businesses.
Which, if any, of the special schemes for VAT administration are available for Benghazi Mediterranean Khabbaz in 2019/20?
Cash accounting and annual accounting schemes only
Flat rate scheme for small businesses only
Cash accounting scheme, annual accounting scheme and flat-rate scheme for
small businesses
Annual accounting scheme and flat rate scheme for small businesses
5. Laura
Investment Services Ltd. Jackson Investment Services is a limited
company, incorporated under the UK Companies Act 2006. Laura
receives dividends from Jackson Investment Services Ltd.
Jackson Investment Services Ltd employs two investment analysts and an administrative assistant. Laura sub-contracts some of Jackson Investment Services Ltd’s work to Josh Dalton, a sole trader and self-employed tax specialist.
Jackson is an asset management advisor; she owns and manages Jackson
Which of the following are chargeable to Jackson Investment
Services Ltd for the year ended 31 March 2020?
Corporation tax, Class 4 National Insurance contributions and income tax
Income tax and corporation tax
Corporation tax and Class 1 secondary National Insurance contributions
4. Corporation tax, Class 1 primary National Insurance contributions and income tax
The badges of trade are the key factors in deciding whether an activity constitutes a trade.Josh Prescott is employed as an indirect taxation specialist by Falcons LLP, a large investment bank. Josh is also a talented mathematician and computer programmer: he provides risk analysis consultancy services to professional sports clubs in North America.
During the tax year 2019/20, Josh engaged in a number of transactions. Which of the following transactions would be used to determine if Josh’s risk analysis and consultancy services are a trading activity? A. Sale of risk analysis and management software to the Portland Panthers American Football Club. The software was originally designed for use in rugby; Josh adapted and improved the software for use in American football. B.Throughout the tax year 2019/20, Josh was supplied with a car by Falcons LLP. Josh used the car for both work and private use. Josh agreed to reimburse Falcons LLP for the full cost of any fuel used for private journeys: this amounted to £3,720, which Josh paid in a single instalment on 3 April 2019. C.Josh sold a licence for a risk analysis model for use in baseball to the Toronto Angels Baseball Club. Josh sold the licence for £70,000 on 1 July 2019. D. Previously, he had sold licences to use the risk analysis model to four other baseball clubs.
Josh acquired debt finance to fund the acquisition of digital recording technology. The technology was used to collect data that Josh then used as part of his risk analysis consultancy activities.
In: Accounting
| RAMBLE CORPORATION Statement of Financial Position |
||||||
| December 31 | ||||||
| Assets | 2020 | 2019 | ||||
| Cash | $78,000 | $34,800 | ||||
| Accounts receivable | 104,400 | 70,800 | ||||
| Inventory | 159,600 | 97,200 | ||||
| FV-OCI investments in shares | 75,600 | 100,800 | ||||
| Land | 78,000 | 123,600 | ||||
| Equipment | 468,000 | 516,000 | ||||
| Accumulated depreciation—equipment | (140,400 | ) | (103,200 | ) | ||
| Goodwill | 148,800 | 207,600 | ||||
| Total | $972,000 | $1,047,600 | ||||
| Liabilities and Shareholders’ Equity | ||||||
| Accounts payable | $14,400 | $61,200 | ||||
| Dividends payable | 18,000 | 38,400 | ||||
| Notes payable | 264,000 | 402,000 | ||||
| Common shares | 318,000 | 150,000 | ||||
| Retained earnings | 345,600 | 340,800 | ||||
| Accumulated other comprehensive income | 12,000 | 55,200 | ||||
| Total | $972,000 | $1,047,600 | ||||
Additional information:
| 1. | Net income for the fiscal year ending December 31, 2020, was $22,800. | |
| 2. | In March 2020, a plot of land was purchased for future construction of a plant site. In November 2020, a different plot of land with original cost of $103,200 was sold for proceeds of $114,000. | |
| 3. | In April 2020, notes payable amounting to $168,000 were retired through the issuance of common shares. In December 2020, notes payable amounting to $30,000 were issued for cash. | |
| 4. | FV-OCI investments were purchased in July 2020 for a cost of $18,000. By December 31, 2020, the fair value of Bramble’s portfolio of FV—OCI investments decreased to $75,600. No FV—OCI investments were sold in the year. | |
| 5. | On December 31, 2020, equipment with an original cost of $48,000 and accumulated depreciation to date of $14,400 was sold for proceeds of $25,200. No equipment was purchased in the year. | |
| 6. | Dividends on common shares of $38,400 and $18,000 were declared in December 2019 and December 2020, respectively. The 2019 dividend was paid in January 2020 and the 2020 dividend was paid in January 2021. Dividends paid are treated as financing activities. | |
| 7. | A loss on impairment was recorded in the year to reflect a decrease in the recoverable amount of goodwill. No goodwill was purchased or sold in the year. |
(a)
Prepare a statement of cash flows using the indirect method for
cash flows from operating activities.
| RAMBLE CORPORATION Statement of Financial Position |
||||||
| December 31 | ||||||
| Assets | 2020 | 2019 | ||||
| Cash | $78,000 | $34,800 | ||||
| Accounts receivable | 104,400 | 70,800 | ||||
| Inventory | 159,600 | 97,200 | ||||
| FV-OCI investments in shares | 75,600 | 100,800 | ||||
| Land | 78,000 | 123,600 | ||||
| Equipment | 468,000 | 516,000 | ||||
| Accumulated depreciation—equipment | (140,400 | ) | (103,200 | ) | ||
| Goodwill | 148,800 | 207,600 | ||||
| Total | $972,000 | $1,047,600 | ||||
| Liabilities and Shareholders’ Equity | ||||||
| Accounts payable | $14,400 | $61,200 | ||||
| Dividends payable | 18,000 | 38,400 | ||||
| Notes payable | 264,000 | 402,000 | ||||
| Common shares | 318,000 | 150,000 | ||||
| Retained earnings | 345,600 | 340,800 | ||||
| Accumulated other comprehensive income | 12,000 | 55,200 | ||||
| Total | $972,000 | $1,047,600 | ||||
Additional information:
| 1. | Net income for the fiscal year ending December 31, 2020, was $22,800. | |
| 2. | In March 2020, a plot of land was purchased for future construction of a plant site. In November 2020, a different plot of land with original cost of $103,200 was sold for proceeds of $114,000. | |
| 3. | In April 2020, notes payable amounting to $168,000 were retired through the issuance of common shares. In December 2020, notes payable amounting to $30,000 were issued for cash. | |
| 4. | FV-OCI investments were purchased in July 2020 for a cost of $18,000. By December 31, 2020, the fair value of Bramble’s portfolio of FV—OCI investments decreased to $75,600. No FV—OCI investments were sold in the year. | |
| 5. | On December 31, 2020, equipment with an original cost of $48,000 and accumulated depreciation to date of $14,400 was sold for proceeds of $25,200. No equipment was purchased in the year. | |
| 6. | Dividends on common shares of $38,400 and $18,000 were declared in December 2019 and December 2020, respectively. The 2019 dividend was paid in January 2020 and the 2020 dividend was paid in January 2021. Dividends paid are treated as financing activities. | |
| 7. | A loss on impairment was recorded in the year to reflect a decrease in the recoverable amount of goodwill. No goodwill was purchased or sold in the year. |
(a)
Prepare a statement of cash flows using the indirect method for
cash flows from operating activities.
In: Accounting
|
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In: Accounting
Habib Gulzar is planning to open new production line in Kabul, where they are going to produce variety of juices. They are hiring staff for the production unit like workers, cost accountants, production manager and managerial accountants. You are interested in the position of managerial accountant as they are offering good package. After your submitting application for the position you are called for an interview. In order to impress the interviewers, you are required to provide effective answers for the following questions asked during interview: 1. Can you explain with a help of an example how idle standards are different from practical standards? Being a managerial accountant which standard you will follow to standardize cost of product? 2. How does the content of reports and the verification of reports differ between managerial and financial accounting? 3. Decision making is management’s most important function.” Do you agree? Why or why not? 4. What will be the total manufacturing costs? Let’s say Habib Gulzar Manufacturing Inc. has beginning work in process AFN 26,000, direct materials used AFN 240,000, direct labor AFN 200,000, total manufacturing overhead AFN 180,000, and ending work in process AFN 32,000. 5. Which process you will follow as a managerial accountant to determine predetermined overhead rate/ standard overhead rate, in the process of standard costing? 6. What are the similarities and differences between standards cost and budgets
In: Accounting
Following are selected balance sheet accounts of Windsor Bros.
Corp. at December 31, 2020 and 2019, and the increases or decreases
in each account from 2019 to 2020. Also presented is selected
income statement information for the year ended December 31, 2020,
and additional information.
| Selected balance sheet accounts | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Assets |
2020 |
2019 |
Increase |
||||||
|
Accounts receivable |
$34,100 | $23,900 | $10,200 | ||||||
|
Property, plant, and equipment |
276,600 | 247,300 | 29,300 | ||||||
|
Accumulated depreciation—plant assets |
(179,700 | ) | (165,400 | ) | (14,300 | ) | |||
| Liabilities and stockholders’ equity |
2020 |
2019 |
Increase |
||||||
|
Bonds payable |
$ 48,800 | $46,200 | $2,600 | ||||||
|
Dividends payable |
7,900 | 4,900 | 3,000 | ||||||
|
Common stock, $1 par |
21,800 | 19,000 | 2,800 | ||||||
|
Additional paid-in capital |
8,900 | 2,900 | 6,000 | ||||||
|
Retained earnings |
103,500 | 90,400 | 13,100 | ||||||
| Selected income statement information for the year ended December 31, 2020: | |||||||||
|
Sales revenue |
$156,600 | ||||||||
|
Depreciation |
38,300 | ||||||||
|
Gain on sale of equipment |
14,700 | ||||||||
|
Net income |
31,000 | ||||||||
Additional information:
| 1. | During 2020, equipment costing $44,500 was sold for cash. | |
| 2. | Accounts receivable relate to sales of merchandise. | |
| 3. | During 2020, $20,100 of bonds payable were issued in exchange for property, plant, and equipment. There was no amortization of bond discount or premium. |
Determine the category (operating, investing, or financing) and the
amount that should be reported in the statement of cash flows for
the following items.
|
Activity |
||||||
|---|---|---|---|---|---|---|
| (a) |
Payments for purchase of property, plant, and equipment. |
select a kind of activity FinancingInvestingOperating |
$enter a dollar amount |
|||
| (b) |
Proceeds from the sale of equipment. |
select a kind of activity FinancingInvestingOperating |
$enter a dollar amount |
|||
| (c) |
Cash dividends paid. |
select a kind of activity FinancingInvestingOperating |
$enter a dollar amount |
|||
| (d) |
Redemption of bonds payable. |
select a kind of activity FinancingInvestingOperating |
$enter a dollar amount |
In: Accounting
Following are selected balance sheet accounts of Pharoah Bros. Corp. at December 31, 2020 and 2019, and the increases or decreases in each account from 2019 to 2020. Also presented is selected income statement information for the year ended December 31, 2020, and additional information.
| Selected balance sheet accounts | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Assets |
2020 |
2019 |
Increase |
||||||
|
Accounts receivable |
$34,100 | $23,900 | $10,200 | ||||||
|
Property, plant, and equipment |
277,700 | 247,800 | 29,900 | ||||||
|
Accumulated depreciation—plant assets |
(176,500 | ) | (168,200 | ) | (8,300 | ) | |||
| Liabilities and stockholders’ equity |
2020 |
2019 |
Increase |
||||||
|
Bonds payable |
$ 49,300 | $46,500 | $2,800 | ||||||
|
Dividends payable |
7,900 | 4,900 | 3,000 | ||||||
|
Common stock, $1 par |
22,200 | 19,200 | 3,000 | ||||||
|
Additional paid-in capital |
9,100 | 3,000 | 6,100 | ||||||
|
Retained earnings |
103,800 | 90,500 | 13,300 | ||||||
| Selected income statement information for the year ended December 31, 2020: | |||||||||
|
Sales revenue |
$156,300 | ||||||||
|
Depreciation |
37,700 | ||||||||
|
Gain on sale of equipment |
14,700 | ||||||||
|
Net income |
31,000 | ||||||||
Additional information:
| 1. | During 2020, equipment costing $45,000 was sold for cash. | |
| 2. | Accounts receivable relate to sales of merchandise. | |
| 3. | During 2020, $20,200 of bonds payable were issued in exchange for property, plant, and equipment. There was no amortization of bond discount or premium. |
Determine the category (operating, investing, or financing) and the
amount that should be reported in the statement of cash flows for
the following items.
|
Activity |
||||||
|---|---|---|---|---|---|---|
| (a) |
Payments for purchase of property, plant, and equipment. |
select a kind of activityFinancingInvestingOperating FinancingInvestingOperating |
$enter a dollar amount |
|||
| (b) |
Proceeds from the sale of equipment. |
select a kind of activityFinancingInvestingOperating FinancingInvestingOperating |
$enter a dollar amount |
|||
| (c) |
Cash dividends paid. |
select a kind of activityFinancingInvestingOperating FinancingInvestingOperating |
$enter a dollar amount |
|||
| (d) |
Redemption of bonds payable. |
select a kind of activityFinancingInvestingOperating FinancingInvestingOperating |
$enter a dollar amount |
In: Accounting
Following are selected balance sheet accounts of Sheridan Bros.
Corp. at December 31, 2020 and 2019, and the increases or decreases
in each account from 2019 to 2020. Also presented is selected
income statement information for the year ended December 31, 2020,
and additional information.
| Selected balance sheet accounts | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Assets |
2020 |
2019 |
Increase |
||||||
|
Accounts receivable |
$34,000 | $24,100 | $9,900 | ||||||
|
Property, plant, and equipment |
278,500 | 249,400 | 29,100 | ||||||
|
Accumulated depreciation—plant assets |
(176,300 | ) | (168,400 | ) | (7,900 | ) | |||
| Liabilities and stockholders’ equity |
2020 |
2019 |
Increase |
||||||
|
Bonds payable |
$ 49,000 | $45,900 | $3,100 | ||||||
|
Dividends payable |
8,000 | 5,100 | 2,900 | ||||||
|
Common stock, $1 par |
22,100 | 18,900 | 3,200 | ||||||
|
Additional paid-in capital |
9,100 | 3,000 | 6,100 | ||||||
|
Retained earnings |
104,600 | 90,600 | 14,000 | ||||||
| Selected income statement information for the year ended December 31, 2020: | |||||||||
|
Sales revenue |
$154,400 | ||||||||
|
Depreciation |
38,100 | ||||||||
|
Gain on sale of equipment |
14,700 | ||||||||
|
Net income |
30,900 | ||||||||
Additional information:
| 1. | During 2020, equipment costing $45,200 was sold for cash. | |
| 2. | Accounts receivable relate to sales of merchandise. | |
| 3. | During 2020, $20,100 of bonds payable were issued in exchange for property, plant, and equipment. There was no amortization of bond discount or premium. |
Determine the category (operating, investing, or financing) and the
amount that should be reported in the statement of cash flows for
the following items.
|
Activity |
||||||
|---|---|---|---|---|---|---|
| (a) |
Payments for purchase of property, plant, and equipment. |
select a kind of activity FinancingInvestingOperating |
$enter a dollar amount |
|||
| (b) |
Proceeds from the sale of equipment. |
select a kind of activity FinancingInvestingOperating |
$enter a dollar amount |
|||
| (c) |
Cash dividends paid. |
select a kind of activity FinancingInvestingOperating |
$enter a dollar amount |
|||
| (d) |
Redemption of bonds payable. |
select a kind of activity FinancingInvestingOperating |
$enter a dollar amount |
In: Accounting