On March 1, 2020, Reed hired a contractor to construct a new office building. The construction work commenced on April 1, 2020, and it is expected to continue through July 31, 2022, the estimated completion date. Reed made progress payments to the contractor in 2020 as follows:

As stated in A5 above, Reed took a 1-year, 9%, $225,000 construction loan to help fund the work on this project. The company also has a 6-year, 5%, $559,165 loan that is not related to the construction project. Give the adjusting entry needed at December 31, 2020 to record the capitalization of interest for this project.

(A5)The Notes Payable balance of $784,165 results from two loans the company has taken. On September 1, 2019, Reed took a 6-year, 5%, $559,165 loan. The interest on this loan is payable annually, on each August 31. Also, on April 1, 2020, Reed took a 1-year, 9%, $225,000 construction loan (see A7 below). The interest on the construction loan is payable on the loan’s maturity date, March 31, 2021. (Note – Reed already recorded the interest paid on these loans in 2020. For this adjustment, consider any accrued interest on the loans at the December 31, 2020 reporting date.)

Ayayai Windows manufactures and sells custom storm windows for three-season porches. Ayayai also provides installation service for the windows. The installation process does not involve changes in the windows, so this service can be performed by other vendors. Ayayai enters into the following contract on July 1, 2020, with a local homeowner. The customer purchases windows for a price of $2,480 and chooses Ayayai to do the installation. Ayayai charges the same price for the windows irrespective of whether it does the installation or not. The customer pays Ayayai $2,010 (which equals the standalone selling price of the windows, which have a cost of $1,140) upon delivery and the remaining balance upon installation of the windows. The windows are delivered on September 1, 2020, Ayayai completes installation on October 15, 2020, and the customer pays the balance due.

Prepare the journal entries for Ayayai in 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 answer to 0 decimal places, e.g. 5,125.)

[The following information applies to the questions displayed below.]

Raleigh Department Store uses the conventional retail method for the year ended December 31, 2019. Available information follows:

1. The inventory at January 1, 2019, had a retail value of $45,000 and a cost of $27,500 based on the conventional retail method.
2. Transactions during 2019 were as follows:
   

Sales to employees are recorded net of discounts.

3. The retail value of the December 31, 2020, inventory was $56,100, the cost-to-retail percentage for 2020 under the LIFO retail method was 62%, and the appropriate price index was 102% of the January 1, 2020, price level.
4. The retail value of the December 31, 2021, inventory was $48,300, the cost-to-retail percentage for 2021 under the LIFO retail method was 61%, and the appropriate price index was 105% of the January 1, 2020, price level.

Required:
3. Assume Raleigh Department Store adopts the dollar-value LIFO retail method on January 1, 2020. Estimate ending inventory for 2020 and 2021.

Total ending inventory at dollar-value LIFO retail cost, 2021 = ?

Total ending inventory at dollar-value LIFO retail cost, 2020 = ?

Leopard Ltd's financial year ended on 30 June 2020. The following events occurred between the end of the reporting period and the date the directors of Leopard Ltd expect to authorise the financial statements for issue:

1. On 25 July 2020, directors proposed a final dividend of $180 000 which requires approval at the annual general meeting.
2. On 15 July 2020, the financial cost of inventory shipped from overseas is determined. The inventory was received in June 2020 and the cost was estimated for accounting purposes. The revised cost is $80 000 greater than the prior estimate.
3. A customer of Leopard Ltd, is declared insolvent on 16 August 2020 as the customer’s uninsured premises were destroyed by a cyclone. The customer owed Leopard Ltd $600 000 as at 30 June.
4. The government announced an increase in tax rates from 30 per cent to 33 per cent for the year commencing 1 July 2020 the deferred tax liability account is $250 000.

REQUIRED

For each of the above material after-reporting-period events, state the reason why an adjustment or disclosure may or may not be required in the 30 June 2020 financial statements. Assume the above events would not significantly affect the going-concern assumption for Leopard Ltd. You are not required to draft any financial statement notes or provide any journal entries for adjustments.

PRACTICAL QUESTION   

Tiger Construction Ltd signs a contract on 1 May 2018 to build a theme park. The construction is scheduled to commence on 1 July 2018 and the estimated date of completion is 30 June 2021. The total contract price is $5m and the cost of the park is initially estimated at $4.5m. The following data relates to the construction period:

Assume that cost (an input measure) is used as the basis for assessing progress on the construction contract.

Required

Determine the percentage of completion for 2019, 2020 and 2021.              

Calculate revenue and gross profit for 2019, 2020 and 2021.                          

Using the percentage of completion method, provide the journal entries for 2019, 2020 and 2021.                                                                                                              

PRACTICAL QUESTION                                                                                         

Tiger Construction Ltd signs a contract on 1 May 2018 to build a theme park. The construction is scheduled to commence on 1 July 2018 and the estimated date of completion is 30 June 2021. The total contract price is $5m and the cost of the park is initially estimated at $4.5m. The following data relates to the construction period:

Assume that cost (an input measure) is used as the basis for assessing progress on the construction contract.

Required

Determine the percentage of completion for 2019, 2020 and 2021.               

Calculate revenue and gross profit for 2019, 2020 and 2021.                           

Using the percentage of completion method, provide the journal entries for 2019, 2020 and 2021.                                                                                                              

PRACTICAL QUESTION                                                                                         

Tiger Construction Ltd signs a contract on 1 May 2018 to build a theme park. The construction is scheduled to commence on 1 July 2018 and the estimated date of completion is 30 June 2021. The total contract price is $5m and the cost of the park is initially estimated at $4.5m. The following data relates to the construction period:

Assume that cost (an input measure) is used as the basis for assessing progress on the construction contract.

Required

Determine the percentage of completion for 2019, 2020 and 2021.               

Calculate revenue and gross profit for 2019, 2020 and 2021.                           

Using the percentage of completion method, provide the journal entries for 2019, 2020 and 2021.                                                                                                              

P5–5A Buono Adventures, which uses the perpetual inventory system, has the following account balances (in alphabetical order) on July 31, 2020:

Accounts Payable.......................................................................$ 21,600Accounts Receivable..................................................................23,200Accumulated Amortization—Equipment..............................64,600Cash..............................................................................................8,400Cost of Goods Sold.....................................................................687,000E. Buono, Capital........................................................................402,000E. Buono, Withdrawals..............................................................92,000Equipment..............................180,000Interest Earned..........................................................................4,000Inventory....................................................................................143,000Operating Expenses..................................................................355,000Sales Discounts..........................................................................10,300Sales Returns and Allowances................................................32,900Sales Revenue............................................................................1,045,200Supplies......................................................................................14,600Unearned Sales Revenue..........................................................9,000

NOTE: For simplicity, all operating expenses have been summarized in the account Operating Expenses.

Additional data at July 31, 2020:

A physical count of items showed $3,000 of supplies on hand. (Hint: Use the account Operating Expenses in the adjusting journal entry.)

An inventory count showed inventory on hand at July 31, 2020, of $140,000.

The equipment has an estimated useful life of eight years and is expected to have no scrap or residual value at the end of its life. (Hint: Use the account Operating Expenses in the adjusting journal entry.)

Unearned sales revenue of $5,600 was earned by July 31, 2020.

Required

Record all adjustments and closing entries that would be required on July 31, 2020.

Prepare the multi-step income statement and statement of owner’s equity for the year ended July 31, 2020, and the classified balance sheet in report format as at July 31, 2020.

The following information was obtained from the accounting records and financial statements of Fairbanks Inc.

Additional information:

• On February 1, 2020, Fairbanks issued common shares for machinery and equipment. The common shares had a current market value of $20,000.
• On March 1, 2020, Fairbanks sold equipment that cost $200,000, with a book value of $90,000, for $95,000.
• On August 15, 2020, Fairbanks sold land with an original cost of $200,000 for $189,000.
• On September 27, 2020, Fairbanks issued a stock dividend to shareholders valued at $10,000.
• On December 31, 2020, Fairbanks declared and paid cash dividends of $3,000.

Required:

1. Prepare the cash flow statement, using the indirect method, for Fairbanks for the year ended December 31, 2020.

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.

Appliance Repair

Worksheet

For the year ended 30 June 2020