Seahawks’ Touchdowns, Inc. reported the following on its December 31, 2019 balance sheet (000’s omitted):

Accounts Receivable, net of allowance for doubtful accounts of $462                           $1,788

The company makes its adjusting entry for bad debts at the end of the year. During 2020, cash collections were $3,432. In addition, $368 in accounts receivable were written off and $3 was collected from an account written off in 2018. An aging of accounts receivable reveals the following:

Show your work and highlight your answer. T-accounts are included above if needed.

A. What were credit sales during 2020? _________________________

The next two questions are independent of each other.

B. If the company records bad debts based on the aging analysis, what is the 12/31/20 adjusting entry? NRV of A/R? Show your work and highlight your answers.

Adjusting Journal Entry:

Net Realizable Value of Accounts Receivable 12/31/20: _________________________

C. If the company records bad debts as 12.0% of credit sales, what is the 12/31/20 adjusting entry? NRV of A/R? Show your work and highlight your answers.

Adjusting Journal Entry:

Net Realizable Value of Accounts Receivable 12/31/20: _________________________

Marketing Scenario

You are the director of marketing for a company based out of Chicago IL and your firm sells custom-built athletic braces for college and pro athletes. The company wants to expand your customer base into senior citizens and begins to design and sell a new knee brace that will help older folks.

1. The new brace goes on sale JULY 1st 2020. Your company advertises on social media, their website, and senior citizens can buy the brace at local retailers like Target or Wal-Mart. The prices range from $19.99 to $34.99

2. Your company's key marketing message during the product launch is this: "Golden Brace is made for seniors who need additional support to stay active! We care about you!"

3. On September 1st 2020, your social media platform is flooded with complaints that the brace is starting to shred or fall apart after repeated use. Thankfully no person has been injured but a few customers are upset and they are sounding off.

4. Your boss tells you that they were aware of a possible manufacturing defect but decided to let it go. In addition, you are told that the marketing for the brace never stated that it should be worn all the time...only when senior citizens were choosing to be active.

5. Your boss finally tells you that it is YOUR JOB to find a solution. If not, you may be replaced.

So....

1. What is your DETAILED solution to the problem?

2. What is ethically wrong in this scenario?

In recent years, investors have agreed that the market portfolio consists of more than just U.S. stocks and bonds. If you are an investor who invests in only U.S. stocks and bonds, describe the effects on risk in your portfolio:

True or False--- In the Hartford Fire Insurance Co. case, the U.S. Supreme Court determined that it could not assert jurisdiction over European companies in competition matters unless the companies had a direct physical presence in a U.S. state.

The Cares act provided cash payments to the majority of households in the U.S. Using AD-AS model, explain how it would affect the U.S. economy. What would determine the effectiveness of this policy. Does it matter if the economy is closed or open?

The ground meat came from the shoulder of the animal (in the U.S.) and was then ground and packaged. The animal carcass had been examined for any signs of disease and stamped by the U.S. Dept of Agriculture inspector. Where might the contamination of the beef originate?

name a U.S. firm confronting the negative consequences of tariffs from the U.S.-China trade war. In your discussion of the first article, you must explain the strategies employed by the firm to manage the negative effects of trade tariffs

Kremlin Spirits Pty Ltd (Kremlin) operates a business from premises it owns in Brisbane importing premium quality vodka. Its directors are Vasili and Svetlana (his niece). Kremlin has three shareholders: Vasili, Svetlana and Mikhail. Mikhail has lent considerable amounts of money to Kremlin over the years. Vasili controls the company’s business activities, while Svetlana does not concern herself with the day-to-day management of Kremlin’s business so that she does not really understand the business or its finances. Svetlana is currently undertaking a Bachelor of Commerce on a part-time basis and Vasili has told her that he would like her to take over the accounting side of the business when she finishes her degree in 2021. Due to the popularity of Australian wines, the vodka business falls into a slump. By early March 2020, Vasili is selectively paying trade creditors of Kremlin, having insufficient funds to pay all debts as they fall due. To prop up the company’s fortunes, however, Vasili arranges for the company to obtain a loan of $30,000 from an old friend to spend on advertising in April 2020. Despite the advertising campaign, a liquidator was appointed to wind up the company in June 2020.

Advise the liquidator in respect of the following matters under the Australian Corporations Act 2001 Cth:

(a) Whether there is any basis for recovering funds from the directors personally? If so, are there any defences that Vasili and/or Svetlana can rely on?

(b) In January 2020, Mikhail demanded that Kremlin should repay him some of the money it owed him. Vasili and Svetlana decided that Kremlin should pay half of the debt back to Mikhail.

(c) When Kremlin was established, it borrowed $100,000 from Large Bank. The loan was secured by a non-circulating security interest over the company’s premises and a circulating security interest over its assets and undertaking. Vasili and Svetlana also provided personal guarantees to the bank. When the circulating security interest was granted, neither Kremlin nor the Bank registered it on the Personal Property Securities (PPS) register. The necessary forms were provided to the bank, but a clerk at the bank lost the forms before they could be lodged.

The following condensed income statements of the Jackson Holding Company are presented for the two years ended December 31, 2021 and 2020:

On October 15, 2021, Jackson entered into a tentative agreement to sell the assets of one of its divisions. The division qualifies as a component of an entity as defined by GAAP. The division was sold on December 31, 2021, for $5,480,000. Book value of the division’s assets was $4,720,000. The division’s contribution to Jackson’s operating income before-tax for each year was as follows:

Assume an income tax rate of 25%.

Required: (In each case, net any gain or loss on sale of division with annual income or loss from the division and show the tax effect on a separate line.)
1. Prepare revised income statements according to generally accepted accounting principles, beginning with income from continuing operations before income taxes. Ignore EPS disclosures.
2. Assume that by December 31, 2021, the division had not yet been sold but was considered held for sale. The fair value of the division’s assets on December 31 was $5,480,000. Prepare revised income statements according to generally accepted accounting principles, beginning with income from continuing operations before income taxes. Ignore EPS disclosures.
3. Assume that by December 31, 2021, the division had not yet been sold but was considered held for sale. The fair value of the division’s assets on December 31 was $4,060,000. Prepare revised income statements according to generally accepted accounting principles, beginning with income from continuing operations before income taxes. Ignore EPS disclosures.

P11.14  Roland Corporation uses special strapping equipment in its packaging business. The equipment was purchased in January 2019 for $10 million and had an estimated useful life of eight years with no residual value. In early April 2020, a part costing $875,000 and designed to increase the machinery's efficiency was added. The machine's estimated useful life did not change with this addition. By December 31, 2020, new technology had been introduced that would speed up the obsolescence of Roland's equipment. Roland's controller estimates that expected undiscounted future net cash flows on the equipment would be $6.3 million, and that expected discounted future net cash flows on the equipment would be $5.8 million. Fair value of the equipment at December 31, 2020, was estimated to be $5.6 million. Roland intends to continue using the equipment, but estimates that its remaining useful life is now four years. Roland uses straight-line depreciation. Assume that Roland is a private company that follows ASPE.

Instructions

a. Prepare the journal entry to record asset impairment at December 31, 2020, if any.

b. Fair value of the equipment at December 31, 2021, is estimated to be $5.9 million. Prepare any journal entries for the equipment at December 31, 2021.

c. Repeat part (b), assuming that on December 31, 2021, Roland's management decides to dispose of the equipment. As at December 31, 2021, the asset is still in use and not ready for sale in its current state. In February 2022, Roland's management will meet to outline an active program to find a buyer.

d. Repeat part (b), assuming that the equipment is designated as “held for sale” as of January 1, 2021, and that the equipment was not in use in 2021 but was still held by Roland on December 31, 2021.

e. For each situation in parts (b), (c), and (d), indicate where the equipment will be reported on the December 31, 2021 balance sheet.

f. Repeat parts (a) and (b), assuming instead that Roland is a public company that prepares financial statements in accordance with IFRS.

g.  From the perspective of a financial statement user, discuss the importance of frequent impairment testing in producing relevant and faithfully representative financial statements. Do IFRS and ASPE differ in the required frequency? Explain briefly.