Mr. Chai sells various types of toys throughout Malaysia, three of the accounts in the ledger of Mr. Chai indicted the following:

Balance at 1 January 2020:

1. Insurance paid in advance RM562
2. Wages outstanding RM306
3. Rent rreceivable, received in advance RM36

During 2020, Mr. Chai:

1. Paid for insurance RM1019 by bank standing order
2. Paid RM15000 wages in cash
3. Received RM2600 rent by cheque from the Ferdy

At 31 December 2020:

1. Insurance prepaid was RM345
2. Wages accrued amounted to RM419
3. Rent receivable was RM106

Required:

1. Prepare the prepaid insurance, accrued wages and rent receivable accounts for the year ended 31 December 2020
2. Prepare the income statement extract showing clearly the amounts of insurance expense, wages expense and rent revenue for the year ended 31 December 2020
3. Explain the effects on the financial statements of accounting for:

1. The expenses accrued at year end
2. The income received in advance at year end

4. Explain the purpose of accounting for:

1. The expenses accrued at year end
2. The income received in advance at year end

Assume Target acquires a tract of land on January 1, 2020, for $106,000 cash. On December 31, 2020, the current market value of the land is $143,000. On December 31, 2021, the current market value of the land is $120,000. The firm sells the land on December 31, 2022, for $177,000 cash. Ignoring income taxes, complete the following items.

(a) Assuming valuation of the land at acquisition cost until sale of the land (Approach 1), indicate the dollar effect of the information on net income for: 1. 2020 2. 2021, and 3. 2022.

(b) Assuming valuation of the land at current market value and including market value changes each year in net income (Approach 2), indicate the dollar effect of the information on net income for: 1. 2020 2. 2021, and 3. 2022.

(c) Assuming valuation of the land at current market value but including unrealized gains and losses in accumulated other comprehensive income until sale of the land (Approach 3), indicate the dollar effect of the information on net income for: 1. 2020 2. 2021, and 3. 2022.

On June 30, 2020, Ivanhoe Company issued $3,810,000 face value of 16%, 20-year bonds at $4,956,520, a yield of 12%. Ivanhoe uses the effective-interest method to amortize bond premium or discount. The bonds pay semiannual interest on June 30 and December 31.

(a)

Partially correct answer iconYour answer is partially correct.

Prepare the journal entries to record the following transactions. (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.)

1. On January 1, 2020, Hawkeye Air leased a new airplane for a term of 8 years. The expected life of the airplane is 20 years. There are no rights to purchase the asset at the end of the term, no bargain purchase option, and no residual value guarantee. The lease stipulates that Hawkeye Air makes annual payments of $550,000 beginning at the end of the first year (December 31, 2020). Hawkeye Air has an incremental borrowing rate of 6% and the fair market value of the airplane on January 1, 2020, is $6,250,000 (for simplicity, assume the lessor’s implicit rate is greater than 6%).

a. What journal entries related to the lease arrangement should be recorded during 2020 (assume Hawkeye Air’s fiscal year-end is December 31).

b. Identify any effects the lease arrangement and the associated reporting would have on the balance sheet, income statement, and statement of cash flows for 2020.

c. What is the annual lease payment that results in a present value of minimum lease payments equal to 90% of the fair market value of the airplane ($6,250,000)?

AZA Company purchased a machine on July 1, 2019. The machine cost $400,000 and has an estimated residual value of $40,000. The expected useful life is 8 years. The machine is to be used for 100,000 machine hours. AZA’s year end is December 31. Required:

a. Calculate the depreciation expense for 2019 and 2020 using the straight-line method. Also list the Accumulated Depreciation Balances at December 31, 2019 and December 31, 2020.

b. Calculate the depreciation expense for 2019 and 2020 using the units-of-production method. The machine was used for 8,000 machine hours in 2019 and 23,000 machine hours in 2020.

c. Calculate the depreciation expense for 2019 and 2020 using the double-declining-balance method.

d. Determine the book value of the machine at December 31, 2019 under the (a) straight-line method and (b) units-of-production, and (c) double-declining-balance method.

e. Write the journal entry for recording depreciation expense for year ended December 31, 2019 using the double declining balance depreciation method.

On January 1, 2020, Firm ABC (lessor) leased a building to Firm XYZ (lessee). The relevant information related to the lease is as follows.

1) The lease arrangement is for 3 years.

2) The building’s cost and fair value at commencement of the lease is $60,000. The building is depreciated on a straight-line basis. Its estimated economic life is 5 years with salvage value of $12,000 at the end of the lease. The residual value after 5 years is assumed to be zero.

3) The lease contains no renewal options. The building reverts to Firm ABC at the termination of the lease.

4) The implicit rate of Firm ABC (the lessor) is 6% and is known by Firm XYZ.

5) Both the lessor and the lessee are on a calendar-year basis.

(a) Prepare the journal entries that Firm XYZ should make in 2020

Dates 1/1/2020, 1/1/2020, 1/1/2021, 1/1/2022

Please include Lease Payment, Interest, Reduction of Lease Liability, Lease Liability

(b) Prepare the journal entries that Firm ABC should make in 2020

Question 5

Alto Imports ending inventory was assigned a cost of $14,600 as a result of a physical stock-take on 30 June 2020.

A review of the company’s records revealed the following information:

• Alto Imports had recorded a $2,900 invoice (excluding GST) from a supplier for goods shipped ExW on 26 June 2020. The goods were not included in the physical inventory count because they had not yet arrived at the warehouse of Alto Imports by 30 June.
• Alto Imports had recorded a $1,900 invoice (excluding GST) from a supplier for goods shipped DPP on 28 June 2020. The goods were not included in the physical inventory count because they had not yet arrived at the warehouse of Alto Imports by 30 June.
• Alto Imports had goods valued at $3,600 (excluding GST) out on consignment on 30 June 2020 that were included in the physical inventory count.

Required:

1. For each of the above, determine the effects on Alto Imports 30 June inventory account balances.

2. What is correct value of inventory on hand at 30 June 2020?

The following account balances were taken from ABC Company’s unadjusted trial
balance at December 31, 2020:

Accounts Payable ............  $56,000
Accounts Receivable .........  $42,000
Cash ........................  $11,000
Common Stock ................  $63,000
Cost of Goods Sold ..........  $52,000
Income Tax Expense ..........  $12,000
Insurance Expense ...........  $21,000
Inventory ...................  $70,000
Land ........................  $68,000
Mortgage Payable ............  $49,000
Patent ......................  $31,000
Prepaid Insurance ...........  $17,000
Rental Revenue ..............  $46,000
Retained Earnings ...........  $72,000 (at January 1, 2020)
Sales Revenue ...............  $95,000
Supplies ....................  $19,000
Wage Expense ................  $38,000

ABC Company has not yet recorded adjusting entries related to the following
two items:

(1)  $11,000 of supplies were used up during 2020.

(2)  ABC Company has provided services to a customer totaling $14,000 as of
     December 31, 2020. However, the customer has not yet paid ABC Company.

Calculate the total assets reported in ABC Company's December 31, 2020 balance
sheet after the appropriate adjusting entries have been recorded and posted.