explore the economic changes which occurred in the United states related to the industrial revolution, urbanization and developments in technology/mass culture

Chapter 9 Adjusting and Closing Entries for Governmental Activities, Government-wide Level; Preparation of Government-wide and Major Fund Financial Statements

1. Prior to preparing financial statements at the end of FY 2020, it is necessary to record depreciation expense for the year for governmental activities at the government-wide level.

Based on general capital assets assigned to specific functions, depreciation expense related to equipment and infrastructure is allocated to functions as shown below:

                                                        Equipment               Infrastructure

      General Government                  $   53,320

      Public Safety                                 213,408

      Public Works                                 138,715                   $   98,620

      Health and Welfare                         53,320

      Culture and Recreation                   74,357                                 

                      Totals                           $533,120                   $   98,620

In addition, depreciation expense for buildings in the amount of $188,900 is allocated to functions according to the percentage of total floor space of buildings used by each function. The Public Works director has provided the following information for the current year:

                                                Percentage of Building

                                                    Floor Space Used

      General Government                         20%                                   

      Public Safety                                     35

      Public Works                                     22

      Health and Welfare                           10

      Culture and Recreation                    13                                            

                  Total                                     100%

Required: [Para. 9-a] Record depreciation expense for the year 2020 in the governmental activities general journal at the government-wide level. Verify accuracy of the adjusting entries and post to the general ledger by clicking [Post entries].

b.   Closing Entries. Although closing entries were made in each fund in Chapters 4 through 6 of this cumulative problem, they have not yet been recorded at the government-wide level.

Required: Record the journal entries required on December 31, 2020, to close all temporary accounts for governmental activities at the government-wide level. These entries should also recognize changes in the accounts Net Position—Net Investment in Capital Assets, Net Position—Restricted for Public Safety (see General Fund), Net Position—Restricted for Capital Projects (see Capital Projects Fund to calculate net position), and Net Position—Restricted for Debt Service (see Debt Service Fund to calculate net position). (Note: Be sure to deduct accrued interest on long-term debt in calculating the December 31, 2020 balance of Net Position—Restricted for Debt Service. If accrued interest is greater than net position there is no restriction on net position.) For each account to be closed or reclassified, be sure to click on the checkbox for [Closing entry] to select it. The [Closing Entry] checkbox appears next to the [Add credit] field. Post the closing entries to the general ledger by clicking on [Post entries].

3. Use the exportable trial balances used in Chapters 2 through 7 of this problem and export the pre-closing trial balance and post-closing trial balance for governmental activities to prepare required government-wide, governmental fund financial statements, and reconciliations that the City of Smithville must present for its basic financial statements to be in conformity with generally accepted accounting principles. (See Illustrations 9-3 through 9-8 and A2-1 through A2-9 of the Reck, Lowensohn, and Neely textbook for examples of these statements.) We recommend that you use Excel to prepare these financial statements. Since the Solid Waste Disposal Fund is the only fund in the proprietary funds category, you may reprint the statement of net assets; statement of revenues, expenses, and changes in net assets; and the statement of cash flows prepared for the Solid Waste Disposal Fund as the required statements for the proprietary fund basic financial statements, with appropriate changes to the titles of the statements. The information for the Solid Waste Disposal Fund can also be used to complete the Business-type Activities columns of the government-wide financial statements.

[Notes: The City of Smithville is a primary government and has no other organizations for which it is accountable as component units. Also, the FY 2021 financial information for the Street Improvement Debt Service Fund is not included in any of the basic financial statements you are preparing, as the statements you are preparing pertain only to FY 2020.]

On February 1, 2020, Concord Ltd. began selling electric scooters that it purchased exclusively from Ionone Motors Inc. Ionone Motors offers volume rebates based on the volume of annual sales to its customers and calculates and pays the rebates at its fiscal year end, December 31. Concord has a September fiscal year end and uses a perpetual inventory system. The rebate offer that Concord received is for a $75 rebate on each scooter that is purchased in excess of 150 units in the calendar year, ending December 31. An additional rebate of $30 is given for all units purchased in excess of 175 units in the same year. By September 30, 2020, Concord had purchased 170 units from Ionone Motors and had sold all but 35. Although it only made its first purchase on February 1, 2020, Concord expects to purchase a total of 205 electric scooters from Ionone Motors by December 31, 2020. Before arriving at the estimate of 205 electric scooters, Concord’s management looked carefully at trends in purchases by its competitors and the strong market for sales of electric scooters in the coming months; sales are especially strong among environmentally conscious customers in suburban areas. Management is very confident the 205 electric scooters will be purchased by December 31, 2020.

Assuming that Concord follows the reporting requirements under ASPE, answer the following questions.

Calculate the amount of any accrued rebate to be recorded by Concord at September 30, 2020, assuming that the rebate is not discretionary and that management has a high degree of confidence in its estimate of the amount of purchases that will occur by December 31, 2020. (Round per unit rate to 2 decimal places, e.g. 1.25 and final answer to 0 decimal places, e.g. 5,275.)

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Assistance Used

List of Accounts

Record the accruals that are needed at Concord’s fiscal year end of September 30, 2020. (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. Round answers to 0 decimal places, e.g. 5,125.)

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List of Accounts

How would your response change if Concord followed the reporting requirements of IFRS?

Ivanhoe Corporation’s trial balance at December 31, 2020, is presented below. All 2020 transactions have been recorded except for the items described below.

Unrecorded transactions and adjustments:

(Ignore income taxes.)

The following information was disclosed during the audit of Shawna Inc.:

1. On January 1, 2020, equipment was purchased for $400,000. For financial reporting purposes, the company uses straight-line depreciation over a five-year life, with no residual value. For tax purposes, the CCA rate is 25%. Assume the equipment is considered “eligible equipment” for purposes of the Accelerated Investment Incentive (under the AII, instead of using the half-year rule, companiesare allowed a first-year deduction using 1.5 times the standard CCA rate).
2. In January 2021, $225,000 was collected in advance for the rental of a building for the next three years. The entire $225,000 is reported as taxable income in 2021, but $150,000 of the $225,000 is reported as unearned revenue on the December 31, 2021 SFP. The $150,000 of unearned revenue will be earned equally in 2022 and 2023.
3. The tax rate is 30% in 2020 and all subsequent periods.
4. No temporary differences existed at the end of 2019. Shawna expects to report taxable income in each of the next five years. Its fiscal year ends December 31.

Shawna Inc. follows IFRS.

Instructions

a. Calculate the amount of capital cost allowance and depreciation expense for 2020 and 2021, and the corresponding carrying amount and undepreciated capital cost of the depreciable assets at December 31, 2020 and 2021.

b. Determine the balance of the Deferred Tax Asset or Deferred Tax Liability account at December 31, 2020, and indicate the account's classification on the SFP.

c. Prepare the journal entry(ies) to record income taxes for 2020.

d. Draft the bottom of the income statement for 2020, beginning with “Income before income tax.”

e. Determine the balance of the Deferred Tax Asset or Deferred Tax Liability account at December 31, 2021, and indicate the account's classification on the December 31, 2021 SFP.

f. Prepare the journal entry(ies) to record income taxes for 2021.

g. Prepare the bottom of the income statement for 2021, beginning with “Income before income tax.”

h. Provide the comparative SFP presentation for the deferred tax accounts at December 31, 2020 and 2021. Be specific about the classification.

i. Is it possible to have more than two accounts for deferred taxes reported on an SFP? Explain.

j. How would your response to part (h) change if Shawna Inc. reported under the ASPE future/deferred income taxes method?

In February 2020, Cullumber Construction signed a contract and commenced construction on a parking garage. The total contract price was $89.4 million and was expected to be completed in July 2024 at a total estimated cost of $82.1 million. Payment by the customer was to be made in several stages, based on significant events and dates throughout the construction timeline. The customer was to have control over the parking garage and was able to make major changes to the project during the construction process. Cullumber’s year-end was September 30.
By the end of September, 2020, Cullumber had incurred $20,525,000 in costs and had invoiced $10,000,000 in progress billings. $7,700,000 of the progress billings had been collected.

By September 30, 2021, Cullumber had incurred $35,190,000 in total costs and had invoiced $45,900,000 in progress billings, including the progress billings in 2020. Of the total billings, $30,700,000 in total had been collected. Also, Cullumber reviewed its cost estimates on the project, and now believed the parking garage would cost $78.2 million in total to complete.

Prepare all journal entries required for the year ended September 30, 2020. Use Materials, Cash, Payables for costs incurred to date. (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.)

Prepare all journal entries required for the year ended September 30, 2021. Use Materials, Cash, Payables for costs incurred to date. (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.)

Bramble Manufacturing Ltd. has signed a lease agreement with LPN Leasing Inc. to lease some specialized manufacturing equipment. The terms of the lease are as follows:

Click here to view the factor table PRESENT VALUE OF 1.
Click here to view the factor table PRESENT VALUE OF AN ANNUITY DUE.

From Bramble Manufacturing’s perspective, is this a capital or operating lease?

Prepare a lease amortization schedule for this lease. (Round answers to 0 decimal places, e.g. 5,275.)

Prepare the journal entries on Bramble Manufacturing’s books on January 1, 2020.

(To record lease payment.)(To record inception of lease.)

Prepare the journal entries on LPN Leasing’s books on January 1, 2020.

(To record inception of lease
and cost of goods sold.)

(Collection of lease payment.)

Prepare the journal entries for Bramble Manufacturing on December 31, 2020.

(To record interest.)

(To record depreciation expense.)

Prepare the journal entry on LPN Leasing’s books on December 31, 2020.

(To record interest.)

Record the following transactions on the books of Hope Hospital, which follows FASB (not-for-profit) and AICPA standards. The year is 2020. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.)

1. Hope received $69,000 in cash from pledges made in the previous year that were unrestricted as to purpose but intended to be received and expended in 2020.
2. Hope received $113,000 in pledges that indicated the money would be received in 2021. The donors imposed no restrictions other than it could be used for any purpose desired by the board.
3. Hope expended $64,000 for nursing training, using $58,000 of donor restricted resources received in 2019 for that purpose.
4. On June 15, 2020, Hope was awarded a $75,000 grant for cancer research by the U.S. Department of Agriculture. During 2020, Hope had qualified expenses under the grant totaling $55,000. This is cost reimbursement, grant.
5. Hope received $306,000 in cash. The board decided to invest the funds for future plant expansion.

Complete the Journal entrys.

1aHope received $69,000 in cash from pledges made in the previous year that were unrestricted as to purpose but intended to be received and expended in 2020. Record the cash from the pledges made in the previous year.

1bHope received $69,000 in cash from pledges made in the previous year that were unrestricted as to purpose but intended to be received and expended in 2020. Record the reclassification of the pledges received in the previous year.

02Hope received $113,000 in pledges that indicated the money would be received in 2021. The donors imposed no restrictions other than it could be used for any purpose desired by the board.

3aRecord the expense on nursing training.

3bRecord the transfer from donor restricted resources that had been given in 2019 for the purpose of nurse training.

4aOn June 15, 2020, Hope was awarded a $75,000 grant for cancer research by the U.S. Department of Agriculture.

4bDuring 2020, Hope had qualified expenses under the grant totaling $55,000.

4cRecord the expenses reimbursed under the grant totaling $55,000.

5aRecord the receipt in cash.

5bRecord the investment of the funds for future plant expansion.

5cRecord the demarcation of net assets-unrestricted for plant expansion.

Question 4 Amy Dyken, controller at Marigold Pharmaceutical Industries, a public company, is currently preparing the calculation for basic and diluted earnings per share and the related disclosure for Marigold’s financial statements. Below is selected financial information for the fiscal year ended June 30, 2020.

Marigold Pharmaceutical Industries Selected Balance Sheet Information June 30, 2020

Long-term debt Notes payable, 10% $1,020,000

8% convertible bonds payable 5,080,000

10% bonds payable 6,110,000

Total long-term debt $12,210,000

Shareholders’ equity Preferred stock, 6% cumulative, $50 par value, 98,000 shares authorized, 24,500 shares issued and outstanding $1,225,000

Common stock, $1 par, 10,200,000 shares authorized, 1,020,000 shares issued and outstanding 1,020,000

Additional paid-in capital 3,990,000

Retained earnings 5,900,000

Total shareholders’ equity $12,135,000

The following transactions have also occurred at Marigold

. 1. Options were granted on July 1, 2019, to purchase 200,000 shares at $15 per share. Although no options were exercised during fiscal year 2020, the average price per common share during fiscal year 2020 was $20 per share.

2. Each bond was issued at face value. The 8% convertible bonds will convert into common stock at 50 shares per $1,000 bond. The bonds are exercisable after 5 years and were issued in fiscal year 2019.

3. The preferred stock was issued in 2019.

4. There are no preferred dividends in arrears; however, preferred dividends were not declared in fiscal year 2020.

5. The 1,020,000 shares of common stock were outstanding for the entire 2020 fiscal year.

6. Net income for fiscal year 2020 was $1,530,000, and the average income tax rate is 20%.

For the fiscal year ended June 30, 2020, calculate the following for Marigold Pharmaceutical Industries. (Round answers to 2 decimal places, e.g. $2.45.)

(a) Basic earnings per share.

(b) Diluted earnings per share.

The 2020 inventory data for Garden Corporation’s patio furniture Bermuda set is presented below. Assume that Garden uses periodic inventory tracking.

When Garden examines the actual units in ending inventory, they see that 15 of the units are from 2020 beginning inventory, 20 units are from the 1/20/20 purchase, and 60 units are from the 6/15/20 purchase.  

1. What is Inventory on the 12/31/20 Balance Sheet if Garden uses Specific Identification?
   1. $223,500
   2. $221,600
   3. $29,400
   4. $27,500

2. What is Gross Profit on the 2020 Income Statement if Garden uses Weighted Average Cost?
   1. $251,000.00
   2. $221,193.75  
   3. $201,806.25   
   4. $29,806.25

3. In a period of falling prices, which of the following statements is true?
   1. FIFO produces a lower amount of net income than LIFO
   2. LIFO produces a lower cost for ending inventory than FIFO
   3. Average cost produces a higher net income than FIFO or LIFO
   4. LIFO produces a higher cost of goods sold than FIFO

4. Heavenly Rest, Inc. uses a periodic inventory system. When a warehouse supervisor counts the inventory on December 31, 2019, he accidentally counts one pile of blankets twice, resulting in 2019 ending inventory being overstated by $100,000. The warehouse supervisor counts the December 31, 2020 inventory correctly. Which of the following statements is true related to Heavenly Rest's 2019 and 2020 financial statements?
   1. 2019 Cost of Goods Sold will be understated by $100,000.
   2. 2020 Beginning Inventory will be understated by $100,000.
   3. 2020 Cost of Goods Sold will be overstated by $100,000.
   4. All of the above are true.
   5. Both a and c are true.