Company had the following account balances, in random order, on December 31, 2020.

Additional Information:

• During the year, Sam Chiang invested $15,000 into the business.
• $7,500 of the notes payable is due this year.

Required:

1. Prepare an income statement for the company for the year ended December 31, 2020.
2. Prepare a statement of owner’s equity for the company for the year ended December 31, 2020.
3. Prepare a classified balance sheet at December 31, 2020.

1. Prepare income statement

2. Prepare statement of owner’s equity

3. Prepare balance sheet

The following data were taken from the records of Colbern Company for the fiscal year ending on July 31, 2020.

Raw Material Inventory 8/1/2019 $19,200

Raw Material Inventory 7/31/2020 $15,840

Finished Goods Inventory 8/1/2019 $38,400

Finished Goods Inventory 7/31/2020 $30,360

Work In Process Inventory 8/1/2019 $7,920 \

Work In Process Inventory 7/31/2020 $7,440

Direct Labor $55,700

Indirect Labor $9,784

Accounts Receivable $10,800

Factory Insurance $1,840

Factory Machinery Depreciation $6,400

Factory Utilities $11,040

Office & Admin Utilities Expense $3,460

Office & Admin Equipment Depreciation $2,120

Sales Revenue $213,600

Plant Manager's Salary $23,200

Factory Property Taxes $3,840

Indirect Materials $3,720

Raw Materials Purchases $38,560

Cash $12,800

Income Taxes for the Colbern Company are 35%

Prepare Colbern’s schedule of cost of goods manufactured for the year.

Prepare Colbern’s schedule of cost of goods sold for the year.

Prepare Colbern’s Income Statement for the year.

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 $31,000 and a cost of $11,000 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 $48,150, the cost-to-retail percentage for 2020 under the LIFO retail method was 42%, and the appropriate price index was 107% of the January 1, 2020, price level.
4. The retail value of the December 31, 2021, inventory was $43,450, the cost-to-retail percentage for 2021 under the LIFO retail method was 41%, and the appropriate price index was 110% of the January 1, 2020, price level.

Required:
1. Estimate ending inventory for 2019 using the conventional retail method. (Amounts to be deducted should be indicated with a minus sign.)

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 $31,000 and a cost of $11,000 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 $48,150, the cost-to-retail percentage for 2020 under the LIFO retail method was 42%, and the appropriate price index was 107% of the January 1, 2020, price level.
4. The retail value of the December 31, 2021, inventory was $43,450, the cost-to-retail percentage for 2021 under the LIFO retail method was 41%, and the appropriate price index was 110% of the January 1, 2020, price level

Required:
2. Estimate ending inventory for 2019 assuming Raleigh Department Store used the LIFO retail method

On January 1, 2020, Pearl Company sold 11% bonds having a maturity value of $600,000 for $622,744, which provides the bondholders with a 10% yield. The bonds are dated January 1, 2020, and mature January 1, 2025, with interest payable December 31 of each year. Pearl Company allocates interest and unamortized discount or premium on the effective-interest basis.

Prepare a schedule of interest expense and bond amortization for 2020–2022. (Round answer to 0 decimal places, e.g. 38,548.)

Prepare the journal entry to record the interest payment and the amortization for 2020. (Round answer to 0 decimal places, e.g. 38,548. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Prepare the journal entry to record the interest payment and the amortization for 2022. (Round answer to 0 decimal places, e.g. 38,548. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Exercise 20-23 (Algo) Error correction; three errors [LO20-6]

Below are three independent and unrelated errors.

1. On December 31, 2020, Wolfe-Bache Corporation failed to accrue salaries expense of $2,300. In January 2021, when it paid employees for the December 27–January 2 workweek, Wolfe-Bache made the following entry:
   

2. On the last day of 2020, Midwest Importers received a $100,000 prepayment from a tenant for 2021 rent of a building. Midwest recorded the receipt as rent revenue. The error was discovered midway through 2021.
3. At the end of 2020, Dinkins-Lowery Corporation failed to accrue interest of $9,000 on a note receivable. At the beginning of 2021, when the company received the cash, it was recorded as interest revenue.

Required:
For each error:

1. What would be the effect of each error on the income statement and the balance sheet in the 2020 financial statements?

error A

error B

error C

2. Prepare any journal entries each company should record in 2021 to correct the errors.

ACCOUNTING FOR FINANCIAL INSTRUMENTS     

1. Abacus Property Ltd bought shares in Texas Instruments on 15 August 2017 for $87,000. The intent of this investment was to make a gain. On 1 January 2020 the shares had a fair value and were recorded at $101,000. By the end of the year their fair value had fallen to $47,000. Record the appropriate journal entries for the year ending 31 December 2020. and Type any workings or justifications to the journal entries

2. Abacus Property Ltd also bought government bonds of the Kingdom of Enchancia for $2,000,333 accounted for using amortised cost on 1 January 2020. Due to uncertainty around royal succession, Abacus estimates that there is a 5% chance of default in the next 12 months which would result in a cash shortfall of $1,800,000 and a 10% chance of cash shortfall of $1,000,000. Record the appropriate journal entries for the year ending 31 December 2020.

3. Following from 2 above, explain how this differs from the measurement of most other accounting values and whether you view this as consistent with the conceptual framework.

Alsup Consulting sometimes performs services for which it receives payment at the conclusion of the engagement, up to six months after services commence. Alsup recognizes service revenue for financial reporting purposes when the services are performed. For tax purposes, revenue is reported when fees are collected. Service revenue, collections, and pretax accounting income for 2017–2020 are as follows:

There are no differences between accounting income and taxable income other than the temporary difference described above. The enacted tax rate for each year is 40%.

(Hint: You may find it helpful to prepare a schedule that shows the balances in service revenue receivable at December 31, 2017–2020.)

Required:
1. Prepare the appropriate journal entry to record Alsup's 2018 income taxes, Alsup’s 2019 income taxes and Alsup’s 2020 income taxes. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in thousands.)

Jay Company, as lessee, enters into a lease agreement on January 1, 2020, to lease equipment. The following data are relevant to the lease agreement.
- The term of the noncancellable lease is three years, with no renewal option. Payments of $12,000 are due on January 1, of each year.
- The fair value of the equipment on January 1, 2020 is $35,000. The equipment has an estimated economic life of five years, and an unguarenteed residual value of $4,000.
- The equipment reverts back to the lessor at the termination of the lease and is expected to have use to the lessor.
- The lessee is aware that the lessor used an implicit rate of 6%.
(Present Value & Future Value Tables are provided on pages 3 and 4)
Instructions:
1. Indicate the type of lease Jay has entered into and why (include a list of the Capital Lease Criteria)
(Present Value & Future Value Tables are provided on pages 3 and 4)
2. Prepare the journal entries on Jay’s books related to the lease agreement for the following dates: (round all amounts to the nearest dollar. Include a partial amortization schedule)
a. January 1, 2020
b. December 31, 2020
c. January 1, 2021

Blue Corp.’s income statement for the year ended December 31, 2020, had the following condensed information: Service revenue $775,500 Operating expenses (excluding depreciation) $491,000 Depreciation expense 66,000 Unrealized loss on FV-NI investments 5,000 Loss on sale of equipment 12,500 574,500 Income before income taxes 201,000 Income tax expense 50,000 Net income $151,000 There were no purchases or sales of trading (FV-NI) investments during 2020. Blue’s statement of financial position included the following comparative data at December 31: 2020 2019 FV-NI investments $21,800 $26,800 Accounts receivable 34,800 54,400 Accounts payable 45,500 31,900 Income tax payable 7,000 9,100 . Prepare the operating activities section of the statement of cash flows using the direct method. (Show amounts that decrease cash flow with either a - sign e.g. -15,000 or in parenthesis e.g. (15,000). Assume that Blue Corp.’s current cash debt coverage ratio in 2019 was 4.5. Calculate the company’s current cash debt coverage ratio in 2020. (Round answer to 1 decimal places, e.g. 7.5.)