Santana Rey created Business Solutions on October 1, 2019. The company has been successful, and its list of customers has grown. To accommodate the growth, the accounting system is modified to set up separate accounts for each customer. The following chart of accounts includes the account number used for each account and any balance as of December 31, 2019. Santana Rey decided to add a fourth digit with a decimal point to the 106 account number that had been used for the single Accounts Receivable account. This change allows the company to continue using the existing chart of accounts.

In response to requests from customers, S. Rey will begin selling computer software. The company will extend credit terms of 1/10, n/30, FOB shipping point, to all customers who purchase this merchandise. However, no cash discount is available on consulting fees. Additional accounts (Nos. 119, 413, 414, 415, and 502) are added to its general ledger to accommodate the company’s new merchandising activities. Its transactions for January through March follow:

The following additional facts are available for preparing adjustments on March 31 prior to financial statement preparation:

1. The March 31 amount of computer supplies still available totals $2,145.
2. Prepaid Insurance coverage of $663 expired during this 3-month period.
3. Lyn Addie has not been paid for seven days of work at the rate of $205 per day.
4. Prepaid rent of $2,535 expired during this 3-month period.
5. Depreciation on the computer equipment for January 1 through March 31 is $1,080.
6. Depreciation on the office equipment for January 1 through March 31 is $240.

The March 31 amount of merchandise inventory still available totals $564

1- Post the journal entries in part 1 to the accounts in the company’s general ledger. Note: Begin with the ledger’s post-closing adjusted balances as of December 31, 2019.------- Prepare a 6-column work sheet that includes the unadjusted trial balance, the March 31 adjustments (a) through (g), and the adjusted trial balance. Do not prepare closing entries and do not journalize the adjustments or post them to the ledger. ---------Prepare an income statement (from the adjusted trial balance in part 3) for the three months ended March 31, 2020. (a) Use a single-step format. List all expenses without differentiating between selling expenses and general and administrative expenses. (b) Use a multiple-step format that begins with gross sales (service revenues plus gross product sales) and includes separate categories for net sales, cost of goods sold, selling expenses, and general and administrative expenses. Categorize the following accounts as selling expenses: Wages Expense, Mileage Expense, and Advertising Expense. Categorize the remaining expenses as general and administrative. --------Prepare a statement of retained earnings (from the adjusted trial balance in part 3) for the three months ended March 31, 2020. ----------Prepare a classified balance sheet (from the adjusted trial balance) as of March 31, 2020.

A Ltd specialises in the distribution of pharmaceutical products. It buys from pharmaceutical companies and re-sells to each of the three different distribution channels: (i) General supermarket chains, (ii) Drug store chains, and (iii) Individual chemist shops. The company plans to use activity-based costing for analysing the profitability of its distribution channels. The following data relates to the quarter ending March 2020. Particulars General supermarket chains Drug store chains Individual chemist shops Average sales per delivery $96,500 $32,450 $6,225 Average cost of goods sold per delivery $94,650, $31,800, $5,950 Number of deliveries 960 ,2,470, 8,570 Number of orders 1,000, 2,650, 9,500 Average number of cartons shipped per delivery 250 75 12 Average number of hours of shelf stocking per delivery 2, 0.5, 0.1 The following information is available in respect of operating costs (other than cost of goods sold) for the quarter ending March 2020. Activity areas Cost Cost driver Customer purchase order processing $591,750 Purchase orders by customers Customer store delivery $960,000 Number of deliveries Cartons dispatched to customer stores $792,135 Number of cartons dispatched to customer stores Shelf stocking at customer location $80,240 Hours of shelf stocking Required: (a) Calculate the activity cost driver rates for each of the activity areas. (b) Prepare an income statement showing details of each distribution channel for the quarter ending March 2020 using activity-based costing.

Pharma Save Ltd specialises in the distribution of pharmaceutical products. It buys from pharmaceutical companies and re-sells to each of the three different distribution channels: (i) General supermarket chains, (ii) Drug store chains, and (iii) Individual chemist shops. The company plans to use activity-based costing for analysing the profitability of its distribution channels. The following data relates to the quarter ending March 2020.

The following information is available in respect of operating costs (other than cost of goods sold) for the quarter ending March 2020.

Required:

1. Calculate the activity cost driver rates for each of the activity areas.

2. Prepare an income statement showing details of each distribution channel for the quarter ending March 2020 using activity-based costing.

WQ2: (Question 2C) Assume Riddler Ltd (lessee) has entered into a leasing arrangement with Joker Ltd (lessor) for some land. The terms are as follows:

• The lease is for 7 years and commences on the 1 July 2020 The first payment of $85,000 is payable on 1 July 2020.

• There are 6 further payments of $85,000 payable on 1 July each year commencing from 1 July 2021.

? Assume as an incentive to enter in the lease the lessor agrees to pay for signage costs (i.e. costs to prepare and erect Riddlers Ltd signs with company details) of $22,000. These costs were paid by the lessor at the commencement on the lease on 1 July 2020. Assume that Riddler Ltd would expense signage costs when incurred.

• The fair value of the land was $2 million.

• The land is expected to appreciate in value and to have a fair value of $3.5 million at the end of the lease.

• The lessee’s incremental borrowing rate is 7%. • The lessee will vacate the land at the end of the lease. There is no option to purchase the land.

2 Required: (a) Determine the lease term.

(b) Calculate the present value of the lease payments. Show your calculations and basis for these.

(c) Determine the amount of the lease asset and liability initial recognised at the start of the lease. Show your calculations and basis for these.

(d) Prepare a schedule for the lease liability.

(e) Prepare the journal entries required by the lessee for the years ending: 30 June 2021 and 30 June 2022. Show any related calculations.

(f) Calculate the amounts for lease liability shown as non-current (and current) at 30 June 2024.

Before the audit report was signed, the audit team encountered the following situation. Treat each situation independently and assume the remaining financial statements are fine.

1) A property owned by Cook’s Furniture Ltd was sold to Lidia Preston, the wife of Howard Cook in June 2020. The property has a market value of four million and was sold at 3.2 million. Management did not disclose this in the financial statement because they believed this was a private matter. The disposal of this asset has been appropriately accounted for on the financial statements (e.g. the asset was removed from PPE and the loss of disposal was correctly recognised as an expense).

2) The subsequent selling price of the ready-made furniture range suggests the inventory valuation as at 30 June 2020 should be written down by $48,000 but management only wrote $38,000 off as per the financial statements because they were confident that they can increase the selling price again in 2021 after people settling back to normality.

3) Carl Cook decided to retire in 2021 due to health reasons, Carl is willing to sell his shareholding to the remaining shareholders. However, the BoD decided to explore the potential of selling the business. By the time to sign the 2020 financial statements, the company has not commenced a negotiation with any potential buyer. The BoD said to the auditor that they may not sell the business if they cannot get a good deal. Carl’s retirement decision is disclosed on the financial statements, but not the intention to sell the business.

REQUIRED: For each of the above situation:

a) Discuss the audit procedure that the auditor needs to perform in relation to each situation.

b) Explain which audit opinion is appropriate for each situation.

Question 4 Amy Dyken, controller at Marigold Pharmaceutical Industries, a public company, is currently preparing the calculation for basic and diluted earnings per share and the related disclosure for Marigold’s financial statements. Below is selected financial information for the fiscal year ended June 30, 2020.

Marigold Pharmaceutical Industries Selected Balance Sheet Information June 30, 2020

Long-term debt Notes payable, 10% $1,020,000

8% convertible bonds payable 5,080,000

10% bonds payable 6,110,000

Total long-term debt $12,210,000

Shareholders’ equity Preferred stock, 6% cumulative, $50 par value, 98,000 shares authorized, 24,500 shares issued and outstanding $1,225,000

Common stock, $1 par, 10,200,000 shares authorized, 1,020,000 shares issued and outstanding 1,020,000

Additional paid-in capital 3,990,000

Retained earnings 5,900,000

Total shareholders’ equity $12,135,000

The following transactions have also occurred at Marigold

. 1. Options were granted on July 1, 2019, to purchase 200,000 shares at $15 per share. Although no options were exercised during fiscal year 2020, the average price per common share during fiscal year 2020 was $20 per share.

2. Each bond was issued at face value. The 8% convertible bonds will convert into common stock at 50 shares per $1,000 bond. The bonds are exercisable after 5 years and were issued in fiscal year 2019.

3. The preferred stock was issued in 2019.

4. There are no preferred dividends in arrears; however, preferred dividends were not declared in fiscal year 2020.

5. The 1,020,000 shares of common stock were outstanding for the entire 2020 fiscal year.

6. Net income for fiscal year 2020 was $1,530,000, and the average income tax rate is 20%.

For the fiscal year ended June 30, 2020, calculate the following for Marigold Pharmaceutical Industries. (Round answers to 2 decimal places, e.g. $2.45.)

(a) Basic earnings per share.

(b) Diluted earnings per share.

Amy Dyken, controller at Marigold Pharmaceutical Industries, a public company, is currently preparing the calculation for basic and diluted earnings per share and the related disclosure for Marigold’s financial statements. Below is selected financial information for the fiscal year ended June 30, 2020.

The following transactions have also occurred at Marigold.

For the fiscal year ended June 30, 2020, calculate the following for Marigold Pharmaceutical Industries. (Round answers to 2 decimal places, e.g. $2.45.)

(a) Basic earnings per share.

(b) Diluted earnings per share.

Amy Dyken, controller at Waterway Pharmaceutical Industries, a public company, is currently preparing the calculation for basic and diluted earnings per share and the related disclosure for Waterway’s financial statements. Below is selected financial information for the fiscal year ended June 30, 2020.

Waterway Pharmaceutical Industries
Selected Balance Sheet Information
June 30, 2020
Long-term debt      
Notes payable, 10% $990,000
8% convertible bonds payable       5,030,000
10% bonds payable 5,880,000
Total long-term debt $11,900,000
       
Shareholders’ equity      
Preferred stock, 5% cumulative, $50 par value, 107,000 shares authorized, 26,750 shares issued and outstanding $1,337,500
Common stock, $1 par, 9,800,000 shares authorized, 980,000 shares issued and outstanding 980,000
Additional paid-in capital 3,940,000
Retained earnings 6,110,000
Total shareholders’ equity $12,367,500

The following transactions have also occurred at Waterway.

1.       Options were granted on July 1, 2019, to purchase 190,000 shares at $15 per share. Although no options were exercised during fiscal year 2020, the average price per common share during fiscal year 2020 was $20 per share.
2.       Each bond was issued at face value. The 8% convertible bonds will convert into common stock at 50 shares per $1,000 bond. The bonds are exercisable after 5 years and were issued in fiscal year 2019.
3.       The preferred stock was issued in 2019.
4.       There are no preferred dividends in arrears; however, preferred dividends were not declared in fiscal year 2020.
5.       The 980,000 shares of common stock were outstanding for the entire 2020 fiscal year.
6.       Net income for fiscal year 2020 was $1,490,000, and the average income tax rate is 20%.

For the fiscal year ended June 30, 2020, calculate the following for Waterway Pharmaceutical Industries. (Round answers to 2 decimal places, e.g. $2.45.)

(a) Basic earnings per share.

Basic earnings per share      
$ (?)

(b) Diluted earnings per share.

Diluted earnings per share      
$ (?)

Stellar Company in its first year of operations provides the following information related to one of its available-for-sale debt securities at December 31, 2020.

What is the amount of the credit loss that Stellar should report on this available-for-sale security at December 31, 2020?

Prepare the journal entry to record the credit loss, if any (and any other adjustment needed), at December 31, 2020. (Credit account titles are automatically indented when 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.)

Assume that the fair value of the available-for-sale security is $53,200 at December 31, 2020, instead of $40,200. What is the amount of the credit loss that Stellar should report at December 31, 2020?

Assume the same information as for part (c). Prepare the journal entry to record the credit loss, if necessary (and any other adjustment needed), at December 31, 2020. (Credit account titles are automatically indented when 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.)

Below is a table of the growth of the Corona Virus in USA and the requests for masks.

Using causal with masks being the dependent variable. Generate a forecast for the number of masks requested based on the number of Corona cases in the USA. Use a linear regression line. Write the equation as y-hat = a + bx. X is the number of Corona cases and y-hat is the number of masks requested.

What is the value of "a"?

What is the value of "b" ? (Three decimals for both answer.)