The adjusted trial balance of Monona Inc. as of December 31, 2020, follows.

a. Prepare the income statement for the year ended December 31, 2020.
b. Prepare the statement of stockholders’ equity for the year ended December 31, 2020. Assume that the common stock was issued prior to 2020.
c. Prepare the balance sheet on December 31, 2020

P18.8 (LO 2, 3) (Time Value, Gift Cards, Discounts) Presented below are two independent revenue arrangements for Colbert Company.

Instructions
Respond to the requirements related to each revenue arrangement.

a.    Colbert sells 3D printer systems. Recently, Colbert provided a special promotion of zero-interest financing for 2 years on any new 3D printer system. Assume that Colbert sells Lyle Cartright a 3D system, receiving a $5,000 zero-interest-bearing note on January 1, 2020. The cost of the 3D printer system is $4,000. Colbert imputes a 6% interest rate on this zero-interest note transaction. Prepare the journal entry to record the sale on January 1, 2020, and compute the total amount of revenue to be recognized in 2020.

b.    Colbert sells 20 nonrefundable $100 gift cards for 3D printer paper on March 1, 2020. The paper has a standalone selling price of $100 (cost $80). The gift cards expiration date is June 30, 2020. Colbert estimates that customers will not redeem 10% of these gift cards. The pattern of redemption is as follows.

Redemption Total
March 31
50%
April 30
80%
June 30
85%
Prepare the 2020 journal entries related to the gift cards at March 1, March 31, April 30, and June 30.

Question 11

In early February 2020, Indigo Corp. began construction of an addition to its head office building that is expected to take 18 months to complete. The following 2020 expenditures relate to the addition:

On February 1, Indigo issued a $105,000, three-year note payable at a rate of 10% to finance most of the initial payment to the contractor. No other asset-specific debt was entered into. Details of other interest-bearing debt during the period are provided in the table below:

What amount of interest should be capitalized for the fiscal year ending December 31, 2020, according to IAS 23? (Do not round intermediate calculations. Round capitalization rate to 2 decimal places, e.g. 52.75% and final answer to 0 decimal places, e.g. 5,275.)

Exercise 19-04 Wildhorse Company reports pretax financial income of $76,100 for 2020. The following items cause taxable income to be different than pretax financial income.

1. Depreciation on the tax return is greater than depreciation on the income statement by $16,700.

2. Rent collected on the tax return is greater than rent recognized on the income statement by $22,700.

3. Fines for pollution appear as an expense of $11,100 on the income statement. Wildhorse’s tax rate is 30% for all years, and the company expects to report taxable income in all future years. There are no deferred taxes at the beginning of 2020.

1. Compute taxable income and income taxes payable for 2020.

2. Prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 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.)

3. Prepare the income tax expense section of the income statement for 2020, beginning with the line “Income before income taxes.” (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

4. Compute the effective income tax rate for 2020. (Round answer to 1 decimal places, e.g. 25.5%.)

3. (LESSOR ENTRIES FOR FINANCING LEASE WITH A GUARANTEED RESIDUAL)

The following facts pertain to a non-cancelable lease agreement between Ace Leasing Company and King Company, a lessee.

Commencement of Lease Date January 1, 2020

Annual lease payment due at the beginning of the year beginning with January 1, 2020 $137,171

Residual value of equipment at end of lease term, guaranteed by lessee $54,000

Book Value of Lease Equipment on LESSOR books $500,000

Lease term 6 years

Economic life of leased equipment 7 years

Fair Value of asset at January 1, 2020 $659,000

Lessor’s Implicit Rate 12% Lessee’s incremental borrowing rate 12%

The asset will revert to the lessor at the end of the lease term. You examined this lease from the Lessee prospective in problem #1. Based on the tests you found it was a financing lease. In this problem you will complete the LESSOR entries. You do not need to redo the tests – it is still a financing lease with a guaranteed residual

A. Prepare the entry on the Lessor’s book to record this Lease on 1/1/2020. You will need to compute the Lease Receivable debit, the CGS debit, the Equipment credit and the Sale Revenue credit to complete the entry.

B. Complete the entry to receive the first rental payment on 1/1/2020.

C. Prepare the interest revenue amortization schedule for the first two years and prepare the interest revenue entry for 12/31/2020.

Flint Inc. uses a calendar year for financial reporting. The company is authorized to issue 9,000,000 shares of $12 par common stock. At no time has Flint issued any potentially dilutive securities. Listed below is a summary of Flint’s common stock activities. 1. Number of common shares issued and outstanding at December 31, 2018 2,160,000 2. Shares issued as a result of a 12% stock dividend on September 30, 2019 259,200 3. Shares issued for cash on March 31, 2020 2,190,000 Number of common shares issued and outstanding at December 31, 2020 4,609,200 4. A 2-for-1 stock split of Flint’s common stock took place on March 31, 2021.

Compute the weighted-average number of common shares used in computing earnings per common share for 2019 on the 2020 comparative income statement.

Compute the weighted-average number of common shares used in computing earnings per common share for 2020 on the 2020 comparative income statement.

Compute the weighted-average number of common shares to be used in computing earnings per common share for 2020 on the 2021 comparative income statement.

Compute the weighted-average number of common shares to be used in computing earnings per common share for 2021 on the 2021 comparative income statement.

Lester Company processes a raw material called Wizon until the splitoff point were it becomes products X, Y, and Z. Product X is sold at the splitoff point with no further processing. Products Y and Z require further processing to finish them before they can be sold. The following is a summary of costs and other related data for the year ending December 31, 2020.

Joint costs before the splitoff point $240,000

Separable Joint costs after splitoff to complete “Y” $132,000

Separable costs after splitoff to complete “Z” $228,000

product X Y Z

Litres processed 60,000 60,000 120,000

Selling price per litre $1.50 $3.20 $3.15

There were no inventories on hand January 1, 2020, and there was no Wizon on hand on December 31, 2020. All units of X, Y, and Z on hand at year end were complete as to processing.

REQUIRED:

1. Allocate the total joint costs to products X, Y, and Z using the net realizable value method.

2. Calculate the full cost of producing one unit of each of X, Y, and Z

.3. For each product (X, Y, and Z) calculate the dollar value of the cost of goods sold for 2020 and the ending inventory dollar value at December 31, 2020. Assume that 40,000 units of X, 60,000 units of Y, and 90,000 units of Z were sold during 2020.

Exercise 16-15

Nash Inc. uses a calendar year for financial reporting. The company is authorized to issue 8,880,000 shares of $12 par common stock. At no time has Nash issued any potentially dilutive securities. Listed below is a summary of Nash’s common stock activities.

a.) Compute the weighted-average number of common shares used in computing earnings per common share for 2019 on the 2020 comparative income statement.

b.) Compute the weighted-average number of common shares used in computing earnings per common share for 2020 on the 2020 comparative income statement.

c.) Compute the weighted-average number of common shares to be used in computing earnings per common share for 2020 on the 2021 comparative income statement.

d.) Compute the weighted-average number of common shares to be used in computing earnings per common share for 2021 on the 2021 comparative income statement.

The audit team completed the field work on 22 July 2020. The audit report was signed on 5 August by Charles Kirby. The financial statements were signed by the BoD on the same day, which was subsequently released to shareholders on 12 August 2020. During the review of subsequent events, you noted the following material events:

1) Cook’s Furniture Ltd has purchased a property in Adelaide Australia on 20 July 2020 for AUD 3,200,000 and intended to use it as a showroom. The company borrowed AUD 2,000,000 to finance the purchase. The company plans to take the opportunity of the current low interest rate to expand its property acquisitions

. 2) The company applied for Wages Subsidy scheme on 4 April and was granted 70,000. On 7 August, the BoD received a letter from the government requesting the company to pay back the Wages Subsidy with interests citing the reason that the company did not qualify.

3) The company was experiencing delays in its supply chain from overseas suppliers from March to May 2020, which resulted longer lead times in filling customer orders. On 31 July, a customer filed a lawsuit against the company suing for damages of $300, 000. Because of the delay, this customer could not open business on time and suffered income loss. REQUIRED:

For each of the above subsequent event:

a) Explain the potential impact on the 2020 financial statements.

b) Discuss audit procedures that may verify the potential impact on the 2020 financial statements.

1. On 5 September 2018, Norris Corporation purchased a computer equipment for $100,000, paid $20,000 cash and signed a 6% two-year notes payable for the remaining balance. The equipment was expected to be used for 4 years with a residual value of $10,000. Straight-line depreciation method is used. Depreciation for fractional years is recorded to the nearest full month. The financial year-end date is 31 December.

On 25 February 2020, the company spent $25,000 to completely overhaul the equipment. The management believes the estimated useful life of the equipment will be extended for 3 years more with residual value of $6,000, with effect on 25 February 2020.

Required:

Calculate the depreciation expense of the computer equipment for the year of 2020. Show your workings. (Round ALL answers to 2 decimal places.)

2. Marvel Company purchased motor vehicle costing $1,200,000 on 15 September 2017. The motor vehicle has an estimated useful life of 5 years and residual value of $200,000. Straight-line depreciation method is used. Half-year convention is adopted. On 5 March 2020, the company sold the motor vehicle for $400,000 cash. The company adjusts its accounts annually with the year-end at 31 December.

Required:

1. (a) Prepare the journal entries to update the depreciation before disposal in 2020;

2. (b) Prepare the journal entries on 5 March 2020 regarding to the disposal.