Louise works in a foreign branch of her employer's business. She earned $5,000 per month throughout the relevant period. Which of the following is correct?

a.If Louise worked in the foreign branch from May 1, 2019 until October 31, 2020, she may exclude $40,000 from gross income in 2019 and exclude $50,000 in 2020.

b.If Louise began work in the foreign country on May 1, 2019, she must work through November 30, 2020 in order to exclude $55,000 from gross income in 2020 but none in 2019.

c.If Louise worked in the foreign branch from May 1, 2019 until October 31, 2020, she cannot exclude anything from gross income because she was not present in the country for 330 days in either year.

d.Louise will not be allowed to exclude any foreign earned income because she made less than $107,600.

Ivan Manufacturing purchased equipment and a delivery van on January 1, 2020. The equipment cost $95,000 and has an estimated useful life of 8 years with a residual value of $10,000.

The delivery van cost $125,000 and has an estimated life of 5 years or 200,000 kilometres and a residual value of $20,000. The delivery truck is expected to be driven 25,000 and 50,000 kilometres in 2019 and 2020, respectively.

Required

1. Ivan has decided to depreciate the equipment using either the straight-line method or double declining method. Calculate depreciation for the equipment for 2020 and 2021 using the straight-line method AND the double declining method.
2. Ivan has decided to depreciate the delivery van using the units-of-production method. Calculate depreciation for the delivery truck for 2020 and 2021.

On 30 June 2017 You Can Cook Pty Ltd purchased equipment at a cost of $625,000 (GST exclusive) with an estimated useful life of 10 years and no residual value. On 30 June 2020, the equipment had a carrying amount of $437 500.

On 30 June 2020 the same item of equipment was determined as having a recoverable amount of $350 000 and a remaining useful life of 7 years.

On 30 June 2023, the equipment was assessed as having a recoverable amount of $260 000 and a remaining useful life of 3 years.

All equipment is carried under the cost model.

Prepare the general journal entries to record the impairment of equipment and depreciation

under the cost model on 30 June 2020, 30 June 2023 and 30 June 2024.

Please note the depreciation expense for the equipment has not been recorded for the year 2020 (ended 30 June 2020).

Narrations are not required

The comparative balance sheets of Larkspur Inc. at the beginning and the end of the year 2020 are as follows.

Net income of $48,260 was reported, and dividends of $29,340 were paid in 2020. New equipment was purchased and none was sold.

Prepare a statement of cash flows for the year 2020. (Show amounts that decrease cash flow with either a - sign e.g. -15,000 or in parenthesis e.g. (15,000).)

Selected ledger account balances for Business Solutions follow.

Required:
1. Assume that Business Solutions does not acquire additional office equipment or computer equipment in 2020. Compute amounts for the year ended December 31, 2020, for Depreciation expense—Office equipment and for Depreciation expense—Computer equipment (assume use of the straight-line method).
2. Given the assumptions in part 1, what is the book value of both the office equipment and the computer equipment as of December 31, 2020?
3. Compute the three-month total asset turnover for Business Solutions as of March 31, 2020.

Computing Diluted EPS: Convertible Bonds and Convertible Preferred Stock

Jones Corporation's capital structure follows.

During 2020, Jones declared and paid dividends of $3.00 per share on its preferred stock. The preferred shares are convertible in 44,000 shares of common stock. The 8% bonds are convertible into 66,000 shares of common stock. Net income for 2020 is $1,955,000. Assume that the income tax rate is 25%.

Required

a. Compute basic EPS for 2020.

b. Compute diluted EPS for 2020.

• Note: Round earnings per share amounts to two decimal places.

1. Suppose you are confronted with the following accounting dilemmas. In each case, what decision would you make and what accounting principles are relevant to the resolution:

   1. An employee has been discharged and this month is being paid severance pay equal to two months’ salary. Should this severance pay be considered an expense of this month, or should it be split between the next two months?

   2. Certain items have been in inventory for more than a year; there is only a 30 percent probability that they will ever be sold or used. Should their value be removed from the total inventory value?

   3. A manufacturer of sophisticated analysis instruments ships a new model to an important customer; the customer agrees to try the new model for two months and then either return the instrument or pay full price for it. Should this shipment be counted as a sale this month? If not, should you account for a decrease in inventory value and, if so, how?

   4. The company president purchases 1,000 shares of stock from a former employee of the company. How should the company account for this transaction?

   5. The company provides a $1,000 travel advance to the sales manager, who is about to depart on a business trip to Japan. What entries, if any, would you make?

   6. A major customer with a $400,000 outstanding account receivable declares bankruptcy. What entries, if any, would you make?

   7. Your company purchases $500 of merchandise from a vendor who offers a 10% discount if your company pays the invoice within 15 days. In the past, your company has always taken such lucrative discounts for prompt payment. At what value should you record this inventory and the corresponding account payable?

   8. Your company pays $120 for telephone classified advertising for the coming year. Should you treat that as an advertising expense of the current period? If yes, why? If not, how might you account for it?

   9. Annual interest charges on your five-year loan are $1,200, payable at the end of each calendar quarter. Should you recognize any interest expense in February? If so, how?

   10. Your company owns a computer for which it paid $8,000 two years ago. The computer is still carried at that value in your fixed asset valuation. You now believe that the computer will be worthless in two more years. Should you adjust the value of the computer at this time? If so, how?

3. Problems and Applications Q3

A recent study found that the demand and supply schedules for flying disks are as follows:

Complete the first row of the following table by indicating the equilibrium price and the equilibrium quantity of flying disks in the absence of any price controls.

Flying disk manufacturers persuade the government that flying disk production improves scientists' understanding of aerodynamics and thus is important for national security. A concerned Congress votes to impose a price floor $1 above the equilibrium price.

Complete the second row of the previous table by indicating the new price and quantity of flying disks when Congress imposes a price floor $1 above the equilibrium price. Then indicate whether the price floor is binding or not binding.

Irate college students march on Washington and demand a reduction in the price of flying disks. An even more concerned Congress votes to repeal the price floor and impose a price ceiling $2 below the former price floor.

Complete the final row of the previous table by indicating the new price and quantity of flying disks when Congress imposes a price ceiling $2 below the former price floor. Then indicate whether the price ceiling is binding or not binding.

Background:  As a district sales representative for a medical supplies vendor, "Mark Price" sold medical supplies directly to doctors at local hospitals.  

1. Identify the internal control(s) involved for each activity.

2. Describe the internal control you would implement to prevent the fraudulent activity from occurring in the future.

Mark's Activities

a. Mark had a falling-out with his employer and was fired.

Internal Control:

Description of new control:

b. Mark continued to work with his district hospitals as if he were still a representative of the vendor, while his former employer searched for a new sales rep. Mark hand-delivered false invoices printed on stationery he had kept after his termination.

Internal Control:

Description of new control:

c. One hospital refused to pay the false invoices because receipt of the invoiced items could not be verified.

What voucher system document controls were in place at this hospital?

d. Another hospital paid the false invoices, giving the checks directly to Mark when he met them at his usual time, rather than mailing the checks to the supplier.

Internal Control:

Description of new control:

e. Mark endorsed the hospital checks with the name of his former company's cashier and used a "For deposit only" stamp purchased at a local office supply store to stamp each check. He deposited the checks into his personal bank account.

Internal Control:

Description of new control: