A1 Distributors Pty Ltd is a wholesale distributor business which acts as agent for distribution electronic products. Alex, Sue and Peter are three directors of the company and equal shareholders in the company.  Sue recently represented the company at a marketing seminar in Japan.  During the seminar she was introduced to a leading distribution company which is looking to acquire business in Australia. Sue was told the Japanese based company would pay 4 times the current value of the shares in A1 Distributors and to start the relationship would supply at a substantial discount on a line of fridges.  Sue advised that A1 Distributors would not have the capacity to take on the line of fridges but put forward her family company Sue’s Electronics Pty Ltd as a service provider who could deliver on the contract.  

When Sue returned to Australia she offered to buy Alex’s and Peter’s shares at 2 times their current market value.  Once she acquired their shares she then sold them to the Japanese company for the agreed 4 times value.

Alex and Peter discovered what Sue had done.

a)      Provide advice on the rights of A1 Distributors Pty Ltd have against Sue.

b)      Discuss whether Sue has a fiduciary relationship with respect to Alex and Peter in acquiring their shares in A1 Distributors Pty Ltd.   

A1 Distributors Pty Ltd is a wholesale distributor business which acts as agent for distribution electronic products. Alex, Sue and Peter are three directors of the company and equal shareholders in the company. Sue recently represented the company at a marketing seminar in Japan. During the seminar she was introduced to a leading distribution company which is looking to acquire business in Australia. Sue was told the Japanese based company would pay 4 times the current value of the shares in A1 Distributors and to start the relationship would supply at a substantial discount on a line of fridges. Sue advised that A1 Distributors would not have the capacity to take on the line of fridges but put forward her family company Sue’s Electronics Pty Ltd as a service provider who could deliver on the contract.

When Sue returned to Australia she offered to buy Alex’s and Peter’s shares at 2 times their current market value. Once she acquired their shares she then sold them to the Japanese company for the agreed 4 times value.

Alex and Peter discovered what Sue had done.

a)       Provide advice on the rights of A1 Distributors Pty Ltd have against Sue.

b)       Discuss whether Sue has a fiduciary relationship with respect to Alex and Peter in acquiring their shares in A1 Distributors Pty Ltd.   

A1 Distributors Pty Ltd is a wholesale distributor business which acts as agent for distribution electronic products. Alex, Sue and Peter are three directors of the company and equal shareholders in the company. Sue recently represented the company at a marketing seminar in Japan. During the seminar she was introduced to a leading distribution company which is looking to acquire business in Australia. Sue was told the Japanese based company would pay 4 times the current value of the shares in A1 Distributors and to start the relationship would supply at a substantial discount on a line of fridges. Sue advised that A1 Distributors would not have the capacity to take on the line of fridges but put forward her family company Sue’s Electronics Pty Ltd as a service provider who could deliver on the contract.

When Sue returned to Australia she offered to buy Alex’s and Peter’s shares at 2 times their current market value. Once she acquired their shares she then sold them to the Japanese company for the agreed 4 times value.

Alex and Peter discovered what Sue had done.

a)    Provide advice on the rights of A1 Distributors Pty Ltd have against Sue.

b)    Discuss whether Sue has a fiduciary relationship with respect to Alex and Peter in acquiring their shares in A1 Distributors Pty Ltd.   

Based on the attached article and relevant references, complete the following two tasks. a) Explain why U-Ming signed the 25-year Contract of Affreightment (COA).

b) Discuss how the delivery of two very large ore carriers (VLOC) may affect UMing’s operations and the shipping market.

U-MING ORDERS TWO VLOCS FROM QINGDAO BEIHAI

U-Ming Marine Transport (Singapore), a subsidiary of U-Ming Marine Transport Corporation, has signed a 25-year Contract of Affreightment (COA) with Vale International SA of Switzerland.
The COA is the biggest and longest commitment in U-Ming’s history and the total contract value is anticipated to be more than USD 600 million.
In order to support the contract, U-Ming has ordered two 325,000 dwt very large ore carriers (VLOC) from China’s Qingdao Beihai Shipbuilding Heavy Industry. The two ore carriers will feature an LNG-Ready design for retrofitting to dual-fuel in the future. The vessels are expected to be delivered in 2020.
U-Ming added that each vessel will be equipped with an ecoefficient main engine, SO2 scrubber features, digital optimization systems, and comply with the International Maritime Organization’s 2020 sulphur cap of 0.5% with effect from 2020.
“The signing of this long-term contract has further enhanced the cooperation and relationship between Vale International SA and U-Ming. The COA will commence in 2020 until 2045 for transporting Brazilian iron ore to China. We have been able to secure a bigger portion of long-term charters with stabilized revenue and profit for the company,” a U-Ming spokesman said.
The company added that the deal comes on the back of a significant recovery of the dry bulk shipping market in 2017, driven by higher demand from China and increasing iron production from mining companies in Australia and Brazil.
“This COA is contracted to meet the iron ore demand growth especially in China and other developing countries; and with UMing’s prudent management and customer service oriented vision to create a win-win for both parties,” the company’s spokesperson added.
According to Australia official estimates, the world iron ore total export in 2019 will reach 1.378 billion tons, a 7 pct growth as compared to 2017, of which Vale’s new S11D mine will reach a nominal capacity of 90 million tons per annue by 2020 with an iron content of up to 66.7 percent.
The total iron ore export from Brazil in 2019 is expected to be 10 percent higher than in 2017.
(Source: World Maritime News, January 31, 2018. https://worldmaritimenews.com/archives/242460/u-ming-orders-two-vlocs-from-qingdaobeihai/)

Nutrition Corporation manufactures and sells healthy foods products online to consumers and delivers the products ordered online by shipping the goods directly to customers in all 50 states. Nutrition does not have a brick-and-mortar store presence in any state, but does operate distribution centers in various states across the country, including Virginia. Consistent with its practice in all 50 states, Nutrition does not collect or remit sales tax to Virginia. In recent court rulings, the state of Virginia has taken the position that operating a distribution center within a state constitutes nexus and this would subject that company to collect and remit sales tax on all sales within that state.
As of December 31, 2019, Nutrition has operated its distribution center in Virginia for five years and has never collected or remitted sales tax to Virginia. Although the company considers the risk of detection to not be probable, Nutrition has estimated the total amount of sales tax payable to the state for the past five years to be $50 million plus $6 million in interest and $4 million in penalties. On March 15, 2020, Governor Janson, the governor of Virginia, established a tax amnesty program. The program provides that any unregistered taxpayer who voluntarily registers to collect sales tax on a prospective basis will be forgiven (1) 50 percent of all unpaid sales tax and (2) all interest and penalties on unpaid taxes. Nutrition management decides to take advantage of this program.
On June 15, 2020, Nutrition completes the necessary paperwork and other actions to participate in the program and pays Virginia $25 million to settle its obligation through December 31, 2019.

Required:
You are a staff accountant working on the audit of Nutrition Corp. You have been asked by the audit partner to write a memo on the appropriate accounting treatment for Virginia sales tax.
Your analysis should include (1) the accounting treatment for the unpaid sales tax included in the financial statements for the year-ended December 31, 2019 (assume the 2019 financial statements were issued on February 28, 2020), (2) the accounting treatment for Nutrition’s decision to participate in the tax amnesty program announced on March 15, 2020, and (3) the accounting treatment for the $25 million payment made on June 15, 2020.

When discussing any of the accounting treatments, you should reference the appropriate FASB guidance which dictates the treatment (see case instructions). Journal entries can be included to assist with your description of the appropriate treatment.

1. Gabriel Ltd leases a siphoning filter from Logan Ltd. The terms of the lease is to commence on 1 July 2020. The lease is to last for 4 years. Lease payments are to be made annually in arrears. The first payment to be made on 30 June 2021. Each lease payment is to amount to $5,000. At the end of the lease, the expected residual value of the filter is $3000. Gabriel Ltd guarantees $2000 of the residual value. The interest rate implicit in the lease is 4%. At the start of the lease, at what amount should Gabriel Ltd record the right to use asset in their books?

a.$19,859

b.$20,585

c.$18,149

d.$20,714

2. White Ltd owned a boat that has an economic useful life of 6 years as at 1 July 2020. On 1 July 2020 the company leased one boat to River Ltd for three years. White Ltd recognised this lease as a finance lease and recorded a lease receivable valued at $61,507. In the lease agreement, River Ltd agreed to guarantee $4,000 residual value, $1,000 less than what White had estimated. The lease payment is $20,000. Lease payments are to be made annually and in advance. The interest rate implicit in the lease is the same for both companies at 5%. What is the amount of River Ltd’s lease liability on the commencement day of the lease?

a.$40,644   b.$60,644   c.$61,507    d.$41,507

3.White Ltd owns a boat that has an economic useful life of 6 years as at 1 July 2020. On 1 July 2020 the company leases the boat to River Ltd. The right to use asset recorded by River Ltd is valued at $61,507. The lease payment id $20,000 for three years. Lease payments are to be made annually and in advance. River Ltd guarantees the $5,000 residual value of the boat. What is the amount of River Ltd’s annual depreciation expense?

a.$18,836 b.$9,418    c.$13,836    d.$12,169

4.According to AASB16, which of these is NOT a valuation model which can be applied to any type of leased asset?

a. The cost model b. the fair value model c.The revaluation model d.The lower of cost and net realisable value model

5. According to AASB16, at the commencement date of a lease, how is the lessee to measure the lease liability?

a. The fair value of the leased asset

b. The present value of all lease payments over the life of the lease

c. The present value of all lease payments to be made after the commencement date

d. The present value of the cash flows to be generated by the leased asset

Access www.ahrq.gov/clinic/prevenix.htm and compile a list of screenings appropriate for both men and women aged 50 and over. Based on Health People 2020 (https://www.healthypeople.gov/2020/topics-objectives/topic/older-adults) choose one screening tool that would assist in addressing Healthy People 2020.

Using the 2019 trial balance and additional information below, prepare the projected (2020) financial statements for Walnut Grove. The prior year data (provided) is the starting point for your projections, and then each of the assumptions listed below will also be used.

Prepare an Excel workbook which contains the following information:

• Tab 1: 2019 Trial Balance (provided in this document)

• Tab 2: 2020 Projected Income Statement

• Tab 3: 2020 Projected Balance Sheet

• Tab 4: 2020 Projected Statement of Cash Flows Assumptions:

1. Sales will change as follows:

   1. Material & Supplies Sales will increase 8.5%

   2. Small Tool Sales will increase 10%

   3. Tool Rental Revenue will continue throughout the 2020 year. An average of 20

      tools will be rented each week. The weekly rental per tool is $60. Assume that

      the average number of tools given will be rented for all 52 weeks.

2. Vendor Compensation will increase consistently with the sum increase of Material &

   Supplies Sales and Small Tools Sales.

3. Cost of sales for materials and supplies and small tools will increase proportionately based

   on their current percentage of sales, respectively. (HINT: You will need to use vertical

   analysis.)

4. Small tools, including blades and other items, is expected to total $8,000 in 2020.

5. Office supplies and postage are expected to increase by 35% during 2020.

6. On January 1st, the company will invest $135,000 in new equipment for its custom cabinet

   division.
   a. This equipment will have a 5-year life and should be depreciated using the

   straight-line method. This purchase represents the only expected change to property, plant, and equipment.

b. The company will finance the equipment purchased with a 5 year note at 3.65% interest. You will need to use an amortization schedule to find the principle and interest payment amounts. The loan is paid monthly.

7. In relation to #6 above, the custom cabinet sales division begins operations in 2020. The following assumptions must be used to project the impact on the financial statements. (Hint: You may need to add accounts to the trial balance.)

1. Walnut Grove anticipates that it will sell 110 cabinets at an average selling price of $2,700.

2. Direct materials per cabinet are $850 per unit.

3. The direct labor per cabinet is 5 hours, and Walnut Grove pays $30.00/hour for

   this labor.

4. Factory overhead is calculated at 65% of direct labor.

8. The building is being depreciated over a 39-year life.

9. Because of the new cabinet division, yearly insurance costs will increase by $29,500,

   effective January 1. The company prepaid 2 years of this insurance and received a 5%

   discount for the 2-year prepayment.

10. On January 1, a new cabinet division manager will be hired at a cost of $55,500. In

    additional to the new cabinet division manager, 3 new employees will be hired at an average wage of $18.50 per hour, employees work an average of 40 hours per week. Payroll taxes should be calculated at 20% of wages.

11. With 22 weeks remaining in the year, 3 additional employees will be hired at a rate of $16.50 per hour, based on an average of 36 hours per week.

12. The income tax rate is 21%.

13. At the end of the year, Walnut Grove will have $68,000 in ending inventory.

14. In relation #13, purchases are made evenly throughout the year and are paid in full in the

    month following purchase.

15. Sales are collected in full the month following the sale. During the month of December,

    invoiced sales totaled $142,500.

16. The sales tax rate is 6.3%.

17. At the end of the year, Walnut Grove has received full payment for 25 custom cabinet

    orders that will be completed in January 2021.

The information below was provided by Phil’s Retail at 31 December 2020.

Required:

(a) Prepare an income statement for Phil’s Retail for the year ending 31 December 2020.
(b) Prepare a balance sheet for Phil’s Retail as at 31 December 2020.
(c)Calculate the following ratios for Phil’s Retail for the year ending 31 December 2020:
(i)Profit margin
(ii) Return on assets  
Note: total assets at 31 December 2020 amounted to $650,000.