La Extended, S.A. sold specialized equipment at a price of $ 900,000 each, with a unit cost of $ 400,000.
On March 1, 2020, it sold 2 pieces of equipment on credit that include a one-year warranty for defects in their components, with the commitment to replace those that present failures. It is estimated that $ 120,000 could be claimed for defects in these components. Both clients took the extended warranty offered and handed in $ 30,000 in cash each to cover an extra year.
On March 25, 2020, one of the customers claimed that the equipment's system was not working properly. La Extended, S.A. replaced the component that had failures, which had a cost of $ 20,000 and discarded the previous one.
On October 20, 2021, the other client claimed equipment failures, so La Extended, S.A. discarded the failed component and replaced it with a new one at a cost of $ 8,000.

a. The record (s) corresponding to the month of March 2020 will increase Net Income by:

b. The record (s) corresponding to the month of March 2020 will increase Net Income by:

On January 1, 2020, ABC Co. paid $800,000 to acquire common shares of XYZ Co., which

represented 30% of XYZ Co.’s shares outstanding. The value of XYZ’s net assets was

$1,850,000 on that date. The excess of the purchase price over ABC’s share of XYZ’s net assets

is attributed to unrecorded intangibles with a 20-year life. XYZ earned net income and

comprehensive income of $400,000 in 2020 and paid dividends of $80,000. The investment in

XYZ had a fair value of $1,025,000 at December 31, 2020. XYZ incurred a net loss and

comprehensive loss of $425,000 in 2021 and paid no dividends. At December 31, 2021, the fair

value of the investment was $720,000 and the recoverable amount was $765,000. Assume that

ABC follows IFRS.

Prepare all the journal entries that ABC is required to make related to the XYZ shares in

2020 and 2021, assuming ABC has no significant influence over XYZ, and uses the FV-NI

model for the investment

Prepare all the journal entries that ABC is required to make related to the XYZ shares in

On January 1, 2020, Bristol Corporation issued one 3-year, 10% (stated rate), $20,000 bond at a price which would yield the purchaser an 9% return. Payment of interest is made on December 31. The year end is December 31. The company uses the ‘effective interest’ method to account for bond interest.

1. Prepare the entry to record the sale of the bond on January 1, 2020.
2. Prepare a bond amortization schedule in good form for the bond.
3. Prepare the entry on December 31, 2020.
4. Assume that Bristol used the ‘straight-line’ method to account for bond interest. Record the journal entry for 2022 to account for interest.
5. Assume that Bristol repurchased the bond for $20,600 on January 1, 2021. Prepare the journal entry to record the repurchase. (Company had used the ‘effective interest’ method.)
6. Calculate the price of the bond if the bond had been issued on Oct. 1, 2020. Prepare the entry on that date for the issue of the bond. (Assume same rates as per information above.)

Stevens Ltd is the leading retailer of Gym equipment. The following information occurred during May 2020. Stevens Ltd had an opening inventory balance of $8,400,000.

May:

1            Returned to the suppliers $80,000 of the opening inventory and received cash.

12          Purchased additional inventory on credit from the supplier for $12,000,000.

18          Sold inventory for $6,000,000 cash (Cost price to Stevens Ltd $2,400,000).

19          Paid the suppliers the account from 12 May.

31          The closing stocktake at year-end revealed an inventory balance of $17,800,000.

Required:

1. Record the above information for the month of May 2020 in the general journal using the perpetual inventory method. Narrations are not required. Ignore GST.

2. Record the above information for the month of May 2020 in the general journal using the physical inventory method. Narrations are not required. Ignore GST.

3. Present the Income Statement extract for Stevens Ltd using the periodic inventory method for the month ended 31 May 2020.

4. Briefly explain two advantages of the perpetual inventory method for Stevens Ltd.

Use the following Adjusted Trial Balance and Statement of Retained Earnings to prepare the CLASSIFIED BALANCE SHEET for Hang in There Company for April 30, 2020

Hang in There Company

Statement of Retained Earnings

April 30, 2020

Retained Earnings, May 1, 2019                   $18,200

Net Income for the Year         10,200

Dividends0        

Retained Earnings, April 30, 2020                  $28,400

Blue Company in its first year of operations provides the following information related to one of its available-for-sale debt securities at December 31, 2020. Amortized cost $51,700 Fair value 43,400 Expected credit losses 12,900

What is the amount of the credit loss that Blue should report on this available-for-sale security at December 31, 2020?

Prepare the journal entry to record the credit loss, if any (and any other adjustment needed), at December 31, 2020. (Credit account titles are automatically indented when 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.)

Assume the same information as for part (c). Prepare the journal entry to record the credit loss, if necessary (and any other adjustment needed), at December 31, 2020. (Credit account titles are automatically indented when 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.)

On 1 July 2020 Mango Ltd acquired all the issued shares (cum div.) of Cream Ltd for $450,000. At date of acquisition the equity of Cream was recorded at:

• Share Capital              $200,000
• Reserves                     $100,000
• Retained earnings      $100,000

The fair value of land was $220,000 (carrying amount $200,000).

The fair value of equipment was $230,000 (cost $240,000 and carrying amount $210,000).

On this date the records of Cream Ltd showed goodwill at cost of $10,000 and dividends payable of $15,000. All other assets and liabilities were carried at amounts equal to fair values.

The land was sold on 1 January 2021 and equipment has a useful life of 5 years.

The dividend was paid on 31 August 2020.

Assume a tax rate of 30%

Required:

1. Prepare the acquisition analysis to determine goodwill or gain on bargain purchase on 1 July 2020.
2. Prepare the consolidation worksheet entries immediately after the combination on 1 July 2020.  
3. Prepare the consolidation entries for the equipment on 30 June 2021.

Bridgeport Corporation ended its first fiscal year on December 31, 2020, reporting a pretax income for accounting purposes of $2,538,000. All of Bridgeport’ products were sold with a two-year warranty included. Bridgeport recorded $626,000 of warranty expense for accounting purposes in 2020, including $376,000 of actual warranty costs incurred during the year plus $250,000 in estimated warranty liability for the remainder of the warranty period. Estimated liabilities are not deductible for tax purposes. Bridgeport was subject to a 25% income tax rate and follows IFRS.

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

Taxable Income $

Income Taxes Payable $

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.)

McCombs Contractors received a contract to construct a mental health facility for $2,500,000. Construction was begun in 2020 and completed in 2021. Cost and other data are presented below:

2020 2021

Costs incurred during the year $1,500,000 $1,300,000

Estimated costs to complete 1,200,000 0

Billings during the year 1,200,000 1,300,000

Cash collections during the year 1,000,000 1,500,000

Part 1: Assume that McCombs recognizes revenue on this contract over time according to percentage of completion. Required: Compute the amount of gross profit recognized during 2020 and 2021.

Part 2: Assume that McCombs recognizes revenue on this contract over time according to percentage of completion. Required: Prepare all journal entries to record costs, billings, collections, and profit (loss) recognition. Round your answers to the nearest whole dollar.

Part 3: Assume that McCombs recognizes revenue upon project completion. Required: Compute the amount of gross profit recognized by McCombs during 2020 and 2021.