Rooey Ltd, the retailer of Zara clothing, is preparing its end of year financial statements at 31 December 2020. The balance sheet shows only two non-current assets, buildings and equipment. After depreciation entries were completed for the year ending 31 December 2020, the accumulated depreciation of its non-current assets were as follows:

                                                                                                       $

                                 Buildings                                                 24,200,000

                                 Accumulated Depreciation                     (5,000,000)

                                 Equipment                                                7,000,000

                                 Accumulated Depreciation                      (3,800,000)

The company applies the revaluation model to buildings and the cost model to equipment. At 31 December 2020, the following values relating to the assets have been determined:

Required:

1. Prepare the necessary general journal entries in relation to the equipment for the year ended 31 December 2020 and justify in accordance with appropriate accounting standards. Show all workings (narrations are not required).

2. Prepare the necessary general journal entries in relation to the buildings for the year ended 31 December 2020 and justify in accordance with appropriate accounting standards. Show all workings (narrations are not required).

3. Prepare the necessary general journal entries in relation to the buildings for the year ended 31 December 2021 and justify in accordance with appropriate accounting standards. Assume the depreciation for the year is $1,000,000 and the fair value of the buildings at 31 December 2021 was $25,000,000. Show all workings (narrations are not required).

Cheyenne Inc. had the following balance sheet at December 31, 2019.

During 2020, the following occurred.

Prepare a statement of cash flows for 2020

Prepare an unclassified balance sheet as it would appear at December 31, 2020. (List Assets in order of liquidity.)

Compute two cash flow ratios

1. Complete the pension worksheet using the information provided below:

2020 records of Lexxus Company provided the following data related to its noncontributory defined benefit pension plan.

ACCOUNT BALANCES (‘000s)    Jan. 1, 2020                Activity (‘000s)                                              2020

Projected Benefit Obligation $300 cr                                    Service cost                                                     $ 50

Plan Assets                             170 dr                                    Contributions                                                  110

Accumulated OCI – PSC            40 dr                                    Actual return on plan assets                                 8

Accumulated OCI - G/L            25 dr                                    Amortization of PSC                                          4

Remaining Service Life              10 years                               Pension benefits paid to retirees                       124

OTHER                                                         

Expected rate of return on plan assets            6%

Discount/Settlement rate                                8%

2. Perform the corridor test of OCI-Gains/Losses. Show your work here:
3. Provide the end of year journal entry based on worksheet amounts.
4. Explain the difference between a defined contribution pension plan and a defined benefit pension plan. Explain how the employer’s obligation differs between the two types of plans.

Brady Construction Company contracted to build an apartment complex for a price of $6,300,000. Construction began in 2018 and was completed in 2020. The following is a series of independent situations, numbered 1 through 6, involving differing costs for the project. All costs are stated in thousands of dollars. Estimated Costs to Complete Costs Incurred During Year (As of the End of the Year) Situation 2018 2019 2020 2018 2019 2020 1 1,630 2,520 1,290 3,810 1,290 — 2 1,630 1,290 2,920 3,810 2,920 — 3 1,630 2,520 2,640 3,810 2,540 — 4 630 3,130 1,260 4,410 940 — 5 630 3,130 2,210 4,410 2,540 — 6 630 3,130 3,100 5,855 2,870 — Required: Complete the following table. (Do not round intermediate calculations. Enter answers in dollars. Round your final answers to the nearest whole dollar. Negative amounts should be indicated by a minus sign.)

Shamrock Leasing Company agrees to lease equipment to Bridgeport Corporation on January 1, 2020. The following information relates to the lease agreement.

(Assume the accounting period ends on December 31.)

1.Calculate the amount of the annual rental payment required.

Can you explain to me what the differnce is between 1 and 2

3.Prepare the journal entries Bridgeport would make in 2020 and 2021 related to the lease arrangement.

4.Prepare the journal entries Shamrock would make in 2020 and 2021 related to the lease arrangement.

The Humpty Doo Rare Earths Mining Company started mining operations on 1 July 2019. In the year to the 30^th June 2020 three areas were explored, Europium, Gadolinium, and Terbium. The following costs were incurred:

Rare earths were discovered at Europium on 17^th January 2020. In April 2020 after a review of the prospects for the Gadolinium site it was decided to abandon operations there. Exploration was still a work in progress at the Terbium site, but no decision had been made about the commercial potential of that site. Development of the Europium site had continued during the year and at 30^th June 2020 $36 million had been incurred. These costs are to be written off on a production basis.

This cost relates to the construction of plant and equipment. It is estimated that there are 150,000 tonnes of rare earth which has a current sale price of $3,500 per tonne. By the 30^th June 2020 15,000 tonnes had been extracted at a production cost of $6 million of which 12,000 tonnes were sold.

Required

Record this first year’s transactions by journal entry using the area of interest method.

The Humpty Doo Rare Earths Mining Company started mining operations on 1 July 2019. In the year to the 30^th June 2020 three areas were explored, Europium, Gadolinium, and Terbium. The following costs were incurred:

Rare earths were discovered at Europium on 17^th January 2020. In April 2020 after a review of the prospects for the Gadolinium site it was decided to abandon operations there. Exploration was still a work in progress at the Terbium site, but no decision had been made about the commercial potential of that site. Development of the Europium site had continued during the year and at 30^th June 2020 $36 million had been incurred. These costs are to be written off on a production basis.

This cost relates to the construction of plant and equipment. It is estimated that there are 150,000 tonnes of rare earth which has a current sale price of $3,500 per tonne. By the 30^th June 2020 15,000 tonnes had been extracted at a production cost of $6 million of which 12,000 tonnes were sold.

Required

Record this first year’s transactions by journal entry using the area of interest method.

Culver Leasing Company agrees to lease equipment to Larkspur Corporation on January 1, 2020. The following information relates to the lease agreement. 1. The term of the lease is 7 years with no renewal option, and the machinery has an estimated economic life of 9 years. 2. The cost of the machinery is $575,000, and the fair value of the asset on January 1, 2020, is $755,000. 3. At the end of the lease term, the asset reverts to the lessor and has a guaranteed residual value of $50,000. Larkspur estimates that the expected residual value at the end of the lease term will be 50,000. Larkspur amortizes all of its leased equipment on a straight-line basis. 4. The lease agreement requires equal annual rental payments, beginning on January 1, 2020. 5. The collectibility of the lease payments is probable. 6. Culver desires a 9% rate of return on its investments. Larkspur’s incremental borrowing rate is 10%, and the lessor’s implicit rate is unknown. Discuss the nature of this lease for both the lessee and the lessor. Calculate the amount of the annual rental payment required. Compute the value of the lease liability to the lessee. Prepare the journal entries Larkspur would make in 2020 and 2021 related to the lease arrangement. Prepare the journal entries Culver would make in 2020 and 2021 related to the lease arrangement. Suppose Larkspur expects the residual value at the end of the lease term to be $40,000 but still guarantees a residual of $50,000. Compute the value of the lease liability at lease commencement.