Tomy is a key customer of Rubber (Pty) Ltd (hereafter Rubber), a well-established South
African shoe sole provider. The two companies share the same year-end.
When Tomy experienced the sudden increase in sales, Rubber extended an interest-free loan
of R2 050 000 on 1 February 2020 in order to enable Tomy to cater for the increase in supply.
Tomy used the loan immediately as follows:
 Purchase of land – R350 000
 Construction of factory building on land purchased (completed 1 July 2020 and brought
into use immediately after completion) – R1 200 000
 Purchase of Machine B (new) – R800 000 (brought into use on 1 July 2020)
 Deductible expenditure – R200 000
 Purchase of Trading Stock – R500 000 ( R50 000 still on hand on 31 December 2020)
Tomy was able to justify the loan and repayments of the loan as the company signed a contract
with a local customer on 15 December 2019 and delivered R1 200 000 of takkies on
1 February 2020. The local customer informed Tomy during August 2020 that they were
liquidated and that Tomy will not receive any further payment from them. Tomy has written off
the outstanding debt as bad debts at the end of the financial year.
In an attempt to raise cash reserves, Tomy issued 100 000 ordinary shares on
18 August 2020, of which Rubber purchased 88 000 shares. Rubber did not own any of Tomy’s
shares before this date. Tomy now has 120 000 ordinary shares in issue.
Tomy approached Rubber as Tomy was not able to repay the amount due on the outstanding
loan. The total amount was still due. Rubber acknowledged that Tomy’s financial situation was
due to unforeseen circumstances and agreed to write off 80% of each of the balances owing
by Tomy, except for the land that Rubber agreed to write off the full amount owing on
30 December 2020.

REQUIRED
Calculate and motivate the income tax consequences of the above transactions and events
for Tomy for the year of assessment ended on 31 December 2020

Acme Materials Company manufactures and sells synthetic coatings that can withstand high temperatures. Its primary customers are aviation manufacturers and maintenance companies. The following table contains financial information pertaining to cost of quality (COQ) in 2019 and 2020 (in thousands of dollars):

QUESTIONS:

1. Classify the cost items in the table into cost-of-quality (COQ) categories. Calculate the ratio of each COQ category to revenues in each of the 2 years.

2. Calculate the percentage change in each COQ category and total COQ and comment on the results:

Mr. Raju just appointed as an account manager at NH Sdn Bhd, a retail company selling merchandises for local market. Mr. Raju is being responsible to prepare and monitor the budget and expenses of the company business. Currently the company is preparing the quarterly budget as of 31 December 2020 and he has been asked by Ms. Sally, the owner of the company, to prepare a master budget. The sales forecast for the merchandises are provided as follows:

The average selling price and the average purchase price per unit are RM250 and RM120 respectively. As for desired ending inventory is expected 30% of next month’s unit sales. Collections from customers will be 20% in month of sale, 50% in month after sale and 30% two months after sale.

As for projected cash payments, inventory purchases will be paid in the month following acquisition. Meanwhile, variable cash expenses are equal to 35% of each month’s sales and paid in the month of sale. Fixed cash expenses are RM20,000 per month and are paid in the month incurred. Depreciation on equipment is RM2,000 per month. Desired ending cash balance per month will be RM20,000.

NH Sdn Bhd also has provided the following information at 30 September 2020

Balance Sheet as at 30 September 2020

Required:

Based on the information given, you are required to prepare the following budget** for the upcoming quarter ending 31 December 2020.

1. Sales Budget for each month of the quarter;
2. Purchases Budget for each month of the quarter;
3. Cash Budget for each month of the quarter;
4. Budgeted Income Statement; Quarter
5. Budgeted Balance Sheet.

On April 1, 2020, Blossom Ltd. paid $150 for a call to buy 530 shares of NorthernTel at a strike price of $25 per share any time during the next six months. The market price of NorthernTel’s shares was $25 per share on April 1, 2020. On June 30, 2020, the market price for NorthernTel’s stock was $35 per share, and the fair value of the option was $8,200.

Prepare the journal entry to record the purchase of the call option on April 1, 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.)

eTextbook and Media

List of Accounts

Prepare the journal entry to recognize the change in the call option’s fair value as at June 30, 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.)

eTextbook and Media

List of Accounts

Prepare the journal entry that would be required if Blossom Ltd. exercised the call option and took delivery of the shares as soon as the market opened on July 1, 2020. (Credit account titles are automatically indented when the amount is entered. Do not indent manually.)

Congress should retire, not reform, the Generalized System of Preferences BY MARC L. BUSCH, OPINION CONTRIBUTOR — THE HILL.com September 15, 2020 The United States’ Generalized System of Preferences (GSP) is set to expire at the end of the year. This trade program, which started up in 1976, grants developing countries zero-tariffs on eligible goods. U.S. Trade Representative Robert Lighthizer says he may want to reform GSP before renewing it. GSP can’t be reformed. Instead, Congress should start the process of retiring it. The U.S. extends one of 13 GSP programs in today’s global economy. All of them aim to help poor nations boost their exports through tariff preferences. U.S. GSP, in particular, comes with political conditionality and caps annual import growth. The U.S. “suspends” recipients that fall short on labor standards or intellectual property rights, for example, and has “competitive limitations” on a recipients’ year-on-year exports. These design features rub poor nations the wrong way, but the main problem with GSP is what it does inside developing countries. At first blush, GSP sounds like a free lunch because developing countries get tariff cuts without having to give them. But it’s not. One indication is that GSP is underused: The average utilization rate is a respectable 72 percent, but for some of the poorest nations, such as Ghana, Lesotho and Sierra Leone, it’s only 27 percent, 38 percent and 36 percent, respectively. The reason for this underuse is that GSP’s margin of preference, in relation to the most-favored nation (MFN) tariffs under the World Trade Organization (WTO), isn’t big. It’s certainly not big enough to take on the risk of being suspended or staying below competitive limitations. Things were different in the 1970s. Most recipients didn’t belong to the General Agreement on Tariffs and Trade (GATT), so GSP’s margin of preference was sizable. Today, far more recipients are members of the WTO, such that GSP’s preference margin over MFN averages a mere 2.4 percent. This underutilization of GSP isn’t the problem. The problem is that GSP does bad things to the domestic trade politics of recipients that belong to the WTO. The issue lies with the exporters. They get market access abroad regardless of whether their government liberalizes. That’s because GSP is nonreciprocal. But conditionality still looms large. That’s where the WTO comes in. Although not a WTO obligation, GSP is permitted by the WTO and has been the subject of litigation. The ruling says that conditionality has to be applied the same way across recipients in similar situations. The WTO, in other words, helps to insulate exporters from ad hoc conditionality, and thus reduces their incentive to lobby against tariffs at home. This leads the recipient to import less, hurting consumers and industries that make use of imported inputs. So, what is there to reform? GSP works exactly as intended. It’s just that GSP happens to distort trade politics in recipients that belong to the WTO. This wasn’t entirely unanticipated. In 1968, at a conference in New Delhi that brought the idea of GSP to life, developing countries asked how the program would work with the GATT’s multilateral rules. It didn’t fit back then, and it can’t be made to fit now. Proponents of GSP will push back. One line of argument is that developing countries are unable to go without GSP. This is a stretch. GSP covers only about 3 percent of U.S. imports. Even India, a relatively large user of GSP, reported little change in exports to the U.S. after being suspended in 2019. India also wants a free trade deal with the U.S. That’s the future, not GSP. Another line of argument is that GSP is a useful foreign policy tool for dealing with labor standards. This is also a stretch. Not one measure of labor standards, conditional on the margin of preference, predicts GSP utilization. This says recipients that are weak on labor standards are enticed by the same margins as those that are strong on labor standards, suggesting that they don’t see themselves as being at greater risk of suspension. GSP doesn’t need to be shut down overnight. But this December, Congress should begin to retire this antiquated program. Do you agree with the author that Congress should retire, not reform, the United States’ Generalized System of Preferences? Why or why not?

$6,000

$7,000

$0

None of the other answers is correct

$4,500

a. The Australian dollar against the US dollar (and against other major currencies) has appreciated in recent months (mid-March 2020 to early June 2020). Identify the underlying drivers and the implications of this rising exchange rate in Australia.

The World would not be same again. In the last 15 Pandemic events from the 14^th century, the world has never remain the same and Covid-19 would not be an exception. The long term economic hangover is just beginning to birth. Though monetary and fiscal measures have been ramped up to ease the short term effect historical trend suggest the long term adverse economic distributional effects could persist for a generation or more. Covid-19 has created huge financing gaps reflecting dwarf domestic mobilisation and elevated health related and economic stimulus intervention.

The International Monetary Fund (IMF) (2020) states “more than ever, Sub-Saharan African countries also need large-scale external financing. The International Monetary Fund and the World Bank estimate that the region faces a government financing gap (assuming a modestly supportive fiscal stance) of at least $114 billion in 2020. African governments cannot mobilize this amount domestically”. The World Bank and the African Development Bank (AfDB) despite the uncertainty surrounding the AfDB presidency have been stepping up financing. Recently, G20 announced an important initiative to suspend debt-service payments until the end of 2020 for poor countries that request relief though some countries have expressed reservations and their unwillingness to sign up for this initiative.

Here in Ghana, the macro-fiscal impact of Covid-19 is well documented reflecting in the projected GDP decelerating from 6.8% in the 2020 budget to worst scenario of 1.5% given the partial lockdown and the fiscal deficit escalating to GHS 30.2 billion from GHS 18.9 billion. Bank of Ghana has in response to the impact of Covid-19 given the elevated fiscal deficit adopted Asset Purchase arrangement under a Quantitative Easing (QE). The Central Bank indicated it stands ready to support government with GHS 10 billion in the wake of the coronavirus pandemic. Out of this, the Bank has already purchased a Government of Ghana COVID-19 relief bond with a face value of GH¢5.5 billion at the Monetary Policy Rate with a 10-year tenor and a moratorium of two (2) years (principal and interest). Ghana like many other countries is in the second stage of the Covid-19 where we have decided to live with the virus unlike the first stage where the focus was on containment and the last stage when vaccine is developed hopefully.

Kindly Attempt the following questions

1. Critically examine why some countries are unwilling to take advantage of the G20 Sponsored Debt Relief Arrangement
2. Given the fiscal and monetary policy response to covid-19 and the global outlook presented recently by IMF, Critically discuss the outlook price development with particular reference to exchange rate for the rest of the year and the first quarter of 2021
3. Discuss the implications of the widespread disruptions to global, regional supply for Ghana’s Balance of Payments

The World would not be same again. In the last 15 Pandemic events from the 14^th century, the world has never remain the same and Covid-19 would not be an exception. The long term economic hangover is just beginning to birth. Though monetary and fiscal measures have been ramped up to ease the short term effect historical trend suggest the long term adverse economic distributional effects could persist for a generation or more. Covid-19 has created huge financing gaps reflecting dwarf domestic mobilisation and elevated health related and economic stimulus intervention.

The International Monetary Fund (IMF) (2020) states “more than ever, Sub-Saharan African countries also need large-scale external financing. The International Monetary Fund and the World Bank estimate that the region faces a government financing gap (assuming a modestly supportive fiscal stance) of at least $114 billion in 2020. African governments cannot mobilize this amount domestically”. The World Bank and the African Development Bank (AfDB) despite the uncertainty surrounding the AfDB presidency have been stepping up financing. Recently, G20 announced an important initiative to suspend debt-service payments until the end of 2020 for poor countries that request relief though some countries have expressed reservations and their unwillingness to sign up for this initiative.

Here in Ghana, the macro-fiscal impact of Covid-19 is well documented reflecting in the projected GDP decelerating from 6.8% in the 2020 budget to worst scenario of 1.5% given the partial lockdown and the fiscal deficit escalating to GHS 30.2 billion from GHS 18.9 billion. Bank of Ghana has in response to the impact of Covid-19 given the elevated fiscal deficit adopted Asset Purchase arrangement under a Quantitative Easing (QE). The Central Bank indicated it stands ready to support government with GHS 10 billion in the wake of the coronavirus pandemic. Out of this, the Bank has already purchased a Government of Ghana COVID-19 relief bond with a face value of GH¢5.5 billion at the Monetary Policy Rate with a 10-year tenor and a moratorium of two (2) years (principal and interest). Ghana like many other countries is in the second stage of the Covid-19 where we have decided to live with the virus unlike the first stage where the focus was on containment and the last stage when vaccine is developed hopefully.

Kindly Attempt the following questions

1. Critically examine why some countries are unwilling to take advantage of the G20 Sponsored Debt Relief Arrangement.
2. Given the fiscal and monetary policy response to covid-19 and the global outlook presented recently by [1] IMF, Critically discuss the outlook price development with particular reference to exchange rate for the rest of the year and the first quarter of 2021.
3. Discuss the implications of the widespread disruptions to global, regional supply for Ghana’s Balance of Payments.

Kimble, Sykes, and Gerard open an accounting practice on January 1, 2019, in Chicago, Illinois, to be operated as a partnership. Kimble and Sykes will serve as the senior partners because of their years of experience. To establish the business, Kimble, Sykes, and Gerard contribute cash and other properties valued at $228,000, $190,000, and $102,000, respectively. An articles of partnership agreement is drawn up stipulating the following:

• Personal drawings are allowed annually up to an amount equal to 10 percent of the partner's beginning capital balance for the year.
• Profits and losses are allocated according to the following plan:

1. Each partner receives an annual salary allowance of $55 per billable hours worked.
2. Interest is credited to the partners’ capital accounts at the rate of 12 percent of the beginning capital balance for the year.
3. Kimble and Sykes are eligible for an annual bonus of 10 percent of net income after subtracting the bonus, salary allowance, and interest. The agreement also states that there will be no bonus if there is a net loss or if salary and interest result in a negative remainder of net income to be distributed.
4. Any remaining partnership profit or loss is to be divided evenly among all partners.

On January 1, 2020, the partners admit Nichols to the partnership. Nichols contributes cash directly to the business in an amount equal to a 25 percent interest in the book value of the partnership property subsequent to this contribution. The partnership profit and loss sharing agreement is not altered upon Nichols' entrance into the firm; the general provisions continue to be applicable.

The billable hours for the partners during the first three years of operation follow:

The partnership reports net income (loss) for 2019 through 2021 as follows:

Each partner withdraws the maximum allowable amount each year.

1. Prepare schedules that allocate each year's net income to the partners.

2. Prepare in appropriate form a statement of partners’ capital for the year ending December 31, 2021.

Prepare schedules that allocate for 2019 net income to the partners. (Loss amounts should be indicated with a minus sign.)