1. The adjusted entry was done as of December 30th, 2020. As a result, prepaid rent account was decreased and correct rent expense was recorded. The mentioned entry had the following effect on the Balance Sheet equation

A. Decrease in Assets, Decrease in Equity

B. Decrease in Assets, Decrease in Liability

C. Decrease in Assets, Increase in Equity

D. No change in Assets, Equity and Liabilities

2. On December 31, 2020, FunAccounting Company's Accounts Receivable balance was $10,000 and the balance in the Allowance for Doubtful Accounts was $3,000 and Bad debt expense for 2020 was 1,000. What was net realizable value of accounts receivable as of December 31, 2020

A. 7,000

B. 9,000

C. 10,000

D. 6,000

3. An aging of a company's accounts receivable indicates that $11,000 is estimated to be uncollectible. If the Allowance for Doubt Accounts has a $3,500 balance already, the adjustment to record bad (uncollectible) debts for period will require a(n):

A. Increase to Bad Debt Expense for $7,500

B. Decrease in Bad Debt Expense for $7,500

C. Increase to Allowance for Doubtful Accounts for $11,000

D. Increase to Bad Debt Expense for $11,000

E. Decrease in Allowance for Doubtful Accounts for $7,500

Vaughn Company began operations late in 2019 and adopted the conventional retail inventory method. Because there was no beginning inventory for 2019 and no markdowns during 2019, the ending inventory for 2019 was $13,869 under both the conventional retail method and the LIFO retail method. At the end of 2020, management wants to compare the results of applying the conventional and LIFO retail methods. There was no change in the price level during 2020. The following data are available for computations.

Compute the cost of the 2020 ending inventory under both:

(a) The conventional retail method. (Round ratios for computational purposes to 0 decimal places, e.g. 78% and final answer to 0 decimal places, e.g. 28,987.)

(b) The LIFO retail method. (Round ratios for computational purposes to 0 decimal places, e.g. 78% and final answers to 0 decimal places, e.g. 28,987.)

On October 1, 2020, Mertag Company (a U.S.-based company) receives an order from a customer in Poland to deliver goods on January 31, 2021, for a price of 1,028,000 Polish zlotys (PLN). Mertag enters into a forward contract on October 1, 2020, to sell PLN 1,028,000 in four months (on January 31, 2021). U.S. dollar–Polish zloty exchange rates are as follows:

Mertag designates the forward contract as a fair value hedge of a foreign currency firm commitment. The fair value of the firm commitment is measured by referring to changes in the forward rate, and, therefore, forward points are included in assessing hedge effectiveness. Mertag must close its books and prepare financial statements on December 31. Discounting to present value can be ignored.

1. Prepare journal entries for the foreign currency forward contract, foreign currency firm commitment, and export sale.
2. Determine the net benefit, if any, realized by Mertag from entering into the forward contract.

Skysong Company began operations late in 2019 and adopted the conventional retail inventory method. Because there was no beginning inventory for 2019 and no markdowns during 2019, the ending inventory for 2019 was $13,708 under both the conventional retail method and the LIFO retail method. At the end of 2020, management wants to compare the results of applying the conventional and LIFO retail methods. There was no change in the price level during 2020. The following data are available for computations.

Compute the cost of the 2020 ending inventory under both:

(a) The conventional retail method. (Round ratios for computational purposes to 0 decimal places, e.g. 78% and final answer to 0 decimal places, e.g. 28,987.)

(b) The LIFO retail method. (Round ratios for computational purposes to 0 decimal places, e.g. 78% and final answers to 0 decimal places, e.g. 28,987.)

Wingfoot Co. began operations on July 1, 2019. By the end of its first fiscal year, ended June 30, 2020, Wingfoot had sold 10,000 wingers. Selected data on operations for the year ended June 30, 2020, follow. (Any balance sheet figures are as at June 30, 2020.)

Additional information:

• 1.Each winger requires 2 kg of direct materials, 0.5 machine hours, and one direct labour hour.

• 2.Except for machinery depreciation of $5,000 and a $1,000 miscellaneous fixed cost, all manufacturing overhead is variable.

• 3.Except for $4,000 in advertising expenses, all selling and administrative expenses are variable.

• 4.The tax rate is 40%.

Instructions

Assume that the company uses variable costing and prepare a contribution-method income statement in good form for the year ended June 30, 2020.

Laura Leasing Company signs an agreement on January 1, 2020, to lease equipment to Crane Company. The following information relates to this agreement.

1. The term of the non-cancelable lease is 3 years with no renewal option. The equipment has an estimated economic life of 5 years.

2. The fair value of the asset at January 1, 2020, is $70,000.

3. The asset will revert to the lessor at the end of the lease term, at which time the asset is expected to have a residual value of $7,000, none of which is guaranteed.

4. The agreement requires equal annual rental payments of $21,827.58 to the lessor, beginning on January 1, 2020.

5. The lessee’s incremental borrowing rate is 4%. The lessor’s implicit rate is 3% and is unknown to the lessee.

6. Crane uses the straight-line depreciation method for all equipment.

Click here to view factor tables. Prepare all of the journal entries for the lessee for 2020 to record the lease agreement, the lease payments, and all expenses related to this lease. Assume the lessee’s annual accounting period ends on December 31. (For calculation purposes, use 5 decimal places as displayed in the factor table provided

Lo 9-7, 9-8

37. On October 1, 2020, Mertag Company ( a U.S.-based comany) receives an order from a customer in Poland to deliver goods on January 31,2021, for a price of 1,000,000 Polish zotys (PLN). Mertag enters into a forward contract on October 1, 2020, to sell PLN 1,000,000 in four months ( on January 31, 2021). U.S. dollar-Polis zioty exchange rates are follows:

October 1, 2020 $0.25 $0.29

December 31, 2020 0.28 0.31

January 31, 2021 0.30 N/A

Mertag designates the forward contract as a fair value hedge of a foreign currency firm commitment. The fair value of the firm commitment is measured b referring to changes in the forward rate, and, therefore, forward points are included in assessing hedge effectiveness. Mertag must close its books and prepare financial statements on December 31. Discounting to present value can be ignored.

a. Prepare journal entries for the foreign currency forward contract, foreign currency firm commitment and export sale.

b. Determine the net benefit, if any, realized by Mertag from entering into the forward contract.

Given below are the Statements of Financial Position and the Statement of Profit or Loss for BA107 Trading Bhd:

2020

(RM)

Sales 505,000

Cost of sales (105,000)

Gross profit 400,000   

Expenses   (252,000)

Profit before tax 148,000

Taxation (40,000)

Profit after tax   108,000

2020 2019

(RM) (RM)

Property, plant and equipment 355,000 300,000

Trade receivables 80,000 75,000

Inventory 145,000 120,000

Bank balance   24,500      15,000

604,500    510,000

Ordinary share capital 250,000 250,000

Retained profits 222,500    140,000

472,500 390,000

Other payables 87,000 90,000

Trade payable 45,000      30,000

604,500    510,000

Additional information:

(a) Dividend paid by the Company was RM25,500.

(b) The dividend declared have all been paid. Included in other payables of 2020 is an amount of current tax payable of RM20,000.

  
(c) Depreciation was RM32,000 and a non-current asset with carrying amount of RM12,500 was disposed of for a cash consideration of RM40,500 during the year. The depreciation and gain on disposal of property, plant and equipment are included in “Expenses”.

Required:

Prepare the Statement of Cash Flows for the year ended 31 December 2020 by using the direct and indirect methods.

Zekany Corporation would have had identical income before taxes on both its income tax returns and income statements for the years 2018 through 2021 except for differences in depreciation on an operational asset. The asset cost $280,000 and is depreciated for income tax purposes in the following amounts:

2018 $ 92,400

2019 123,200

2020 42,000

2021 22,400

The operational asset has a four-year life and no residual value. The straight-line method is used for financial reporting purposes. Income amounts before depreciation expense and income taxes for each of the four years were as follows. 2018 2019 2020 2021 Accounting income before taxes and depreciation $ 150,000 $ 170,000 $ 160,000 $ 160,000 Assume the average and marginal income tax rate for 2018 and 2019 was 30%; however, during 2019 tax legislation was passed to raise the tax rate to 40% beginning in 2020. The 40% rate remained in effect through the years 2020 and 2021. Both the accounting and income tax periods end December 31. Required: Prepare the journal entries to record income taxes for the years 2018 through 2021.