On December 31, 2019, Sumner Company held Wall Company bonds in its portfolio of trading securities. The bonds have a par value of $40,000, carry a 10% annual interest rate, mature in 2026, and had originally been purchased at par. The market value of the bonds on December 31, 2019 was $38,000.

On January 1, 2020, Sumner acquired bonds of Doherty Company with a par value of $30,000 for $30,200. The Doherty Company bonds carry an annual interest rate of 12% and mature on December 31, 2024. Additionally, on the same date, Sumner acquired Maggio Company bonds with a face value of $20,000 for $19,500. The Maggio Company bonds carry an 8% annual interest rate and mature on December 31, 2029. At the end of 2020, the respective market values of the bonds were: Wall, $39,000; Doherty, $31,000; and Maggio, $21,000. Sumner classifies all of the debt securities as trading. Assume that Sumner uses the straight-line method to amortize any discounts or premiums.

Required:

Complete the following worksheet for Appliance Repair for the year ended 30 June 2020.

Additional information to complete the worksheet:

1. The equipment of $67,500 was purchased on 1 March 2020. The straight-line depreciation method is used with a useful life of 3 years and a scrap value of $2,700. No depreciation is ever recorded.
2. The $75,000 bank loan was borrowed on 1 May 2020. It is an interest only loan. The interest rate is 0.8% per month. No interest is ever paid or recorded.
3. The supplies on hand at 30 June 2020 were $650.
4. The prepaid insurance balance represents the annual premium paid on 1 April 2020.
5. $2,500 of unearned revenue has been earned by 30 June 2020.

   	trial balance (unadjusted)		adjustments		trial balance(adjusted)		Incomestatement
   account title	debit	credit	debit	credit	debit	credit	debit	credit
   cash at bank	37,500
   account payable	127,500
   prepaid insurance	1,800
   suppliers	900
   equipment	67,500
   accumulated depreciation -equipmeny
   accounts payable		2,700
   unearned revenue		3,150
   interest payable
   bank loan (due in 2028)		75,000
   capital		49,950
   service revenue		157,500
   wages expense	52,500
   supplies expense	600
   depreciation expense - equipment
   insurance expense
   interest expense
   	288,300	288,300

DigitalHall operates three divisions within the same building, namely, Print, Video and Sound. The following information has been obtained from DigitalHall:

The common costs of RM160, 000 are allocated across all three divisions, based on divisional sales.

Required:

1. Prepare a divisional performance report.
2. Sarah, the manager of the Video division, suggests that the Print division should be closed, because this division is making losses. Kim, the manager of the Print division, indicates that DigitHall will have lower overall profits if the Print division is closed, unless certain steps are put in place. Kim knows that the Print division needs to be downsized because print media is becoming less popular, rather than closed, to serve some regular customers who are dependent on this division. In addition, alternative actions should be pursued to protect overall profit, and she wants to oversee this process. Patricia, the general manager, suggests that Kim should prepare a brief report explaining why overall profits would drop and suggest two strategies that DigitalHall could pursue to prevent a drop in overall profits. You are interning at DigitalHall, and Kim asks for your help in preparing this report.

Required:

Prepare a brief report for Kim that she could present to Patricia.

Start typing here

(15 + 6 = 21 marks)

Harold Dean became Chief Executive Officer of Wriston Manufacturing two years ago. At that
time, the company was reporting lagging profits, and Harold was brought in to “stir things up.”
The company has three divisions; electronics, fiber optics, and plumbing supplies. Harold has no
interest in plumbing supplies, and one of the first things he did was to put pressure on his
accountants to reallocate some of the company’s fixed costs away from the other two divisions to
the plumbing division. This had the effect of causing the plumbing division to report losses
during the last two years; in the past it has always reported low, but acceptable, net income.
Harold felt that this reallocation would shine a favorable light on him in front of the board of
directors because it meant that the electronics and fiber optics divisions would look like they were
improving. Given that these are “businesses of the future,” he believed that the stock market
would react favorably to these increases, while not penalizing the poor results of the plumbing
division. Without this shift in the allocation of fixed costs, the profits of the electronics and fiber
optics divisions would not have improved. But now the board of directors has suggested that the
plumbing division be closed because it is reporting losses. This would mean that nearly 500
employees, many of whom have worked for Wriston their whole lives, would lose their jobs.

a) If a division is reporting losses, does that necessarily mean that it should be closed? Explain.
b) Was the reallocation of fixed costs across divisions unethical? Explain.
c) What should Harold do now that the plumbing division may be closed?

Hammond Manufacturing Inc. was legally incorporated on January 2, 2017. Its articles of incorporation granted it the right to issue an unlimited number of common shares and 100,000 shares of $14.0 noncumulative preferred shares. The following transactions are among those that occurred during the first three years of operations:

1. On January 1, 2020, Blossom Ltd. had 498,000 common shares outstanding. During 2020, it had the following transactions that affected the common share account:

The company’s year end is December 31.Determine the weighted average number of shares outstanding as at December 31, 2020. (Round answer to 0 decimal places, e.g. 5,275.)

Assume that Blossom earned net income of $3,000,000 during 2020. In addition, it had 80,000 of 7%, $100 par, non-convertible, non–cumulative preferred shares outstanding for the entire year. Because of liquidity limitations, however, the company did not declare and pay a preferred dividend in 2020.

Calculate earnings per share for 2020, using the weighted average number of shares determined above. (Round answer to 2 decimal places, e.g. 15.25.)

Assume that Blossom earned net income of $3,000,000 during 2020. In addition, it had 80,000 of 7%, $100 par, non-convertible, non–cumulative preferred shares outstanding for the entire year. Because of liquidity limitations, however, the company did not declare and pay a preferred dividend in 2020. Assume that net income included a loss from discontinued operations of $400,000, net of applicable income taxes.

Calculate earnings per share for 2020. (Round answers to 2 decimal places, e.g. 15.25.)

On April 1, 2020, Blossom Ltd. paid $150 for a call to buy 530 shares of NorthernTel at a strike price of $25 per share any time during the next six months. The market price of NorthernTel’s shares was $25 per share on April 1, 2020. On June 30, 2020, the market price for NorthernTel’s stock was $35 per share, and the fair value of the option was $8,200.

Prepare the journal entry to record the purchase of the call option on April 1, 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.)

eTextbook and Media

List of Accounts

Prepare the journal entry to recognize the change in the call option’s fair value as at June 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.)

eTextbook and Media

List of Accounts

Prepare the journal entry that would be required if Blossom Ltd. exercised the call option and took delivery of the shares as soon as the market opened on July 1, 2020. (Credit account titles are automatically indented when the amount is entered. Do not indent manually.)

$6,000

$7,000

$0

None of the other answers is correct

$4,500

a. The Australian dollar against the US dollar (and against other major currencies) has appreciated in recent months (mid-March 2020 to early June 2020). Identify the underlying drivers and the implications of this rising exchange rate in Australia.