Aubrae and Tylor Williamson began operations of their furniture repair shop (Furniture Refinishers, Inc.) on January 1, 2019. The annual reporting period ends December 31. The trial balance on January 1, 2020, was as follows:

Transactions during 2020 follow:

1. Borrowed $40,000 cash on July 1, 2020, signing a one-year, 10 percent note payable.
2. Purchased equipment for $19,000 cash on July 1, 2020.
3. Sold 10,000 additional shares of capital stock for cash at $.50 market value per share at the beginning of the year.
4. Earned $148,000 in revenues for 2020, including $62,000 on credit and the rest in cash.
5. Incurred $40,000 in wages expense and $12,000 in miscellaneous expenses for 2020, with $10,000 on credit and the rest paid with cash. Note: Wages are paid in cash.
6. Purchased additional small tools, $5,000 cash.
7. Collected accounts receivable, $12,000.
8. Paid accounts payable, $15,000.
9. Purchased $24,000 of supplies on account.
10. Received a $3,000 deposit on work to start January 15, 2021.
11. Declared a cash dividend on December 1, $15,000; paid on December 31.

Data for adjusting entries:

12. Supplies of $8,000 and small tools of $7,000 were counted on December 31, 2020 (debit Miscellaneous Expenses).
13. Depreciation for 2020, $3,000.
14. Interest accrued on notes payable (to be computed).
15. Wages earned since the December 24 payroll but not yet paid, $6,000.
16. Income tax expense was $6,000, payable in 2021. Post the journal entries for transactions 1 through 11 and adjusting entries for transactions 12 through 16 to the respective T-Accounts.

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Headquartered in Toronto, Indigo Books & Music Inc. (TSX: IDG) is Canada’s largest book retailer and the third largest in North America. The following information was taken from the management discussion and analysis section of the company’s March 31, 2020, annual report (in thousands):

Additional information from the company’s annual report:

1. Inventories are valued at the lower of cost, determined using a moving average cost formula, and market, being net realizable value. Under this method, inventory is recorded at the level of the individual article (stock-keeping unit or SKU).

2. Costs include all direct and reasonable expenditures that are incurred in bringing inventories to their present location and condition. Vendor rebates are recorded as a reduction in the price of the products and corresponding inventory is recorded net of vendor rebates.

3. The average cost of an article is continually updated based on the cost of each purchase recorded in inventory. When the company permanently reduces the retail price of an item, there is a corresponding reduction in inventory recognized in the period if the markdown incurred brings the retail price below the cost of the item.

4. The amount of inventory write-downs as a result of net realizable value lower than cost was $10.3 million in 2020 ($7.3 million in fiscal 2019), and there were no reversals of inventory write-downs that were recognized in 2020 or in prior

periods. The amount of inventory at March 31, 2020 with net realizable value equal to cost was $1.7 million ($2.3 million at March 31, 2019).

(a) Calculate the company’s inventory turnover and days sales in inventory ratios for 2020 and 2019. Comment on whether Indigo’s management of its inventory improved or weakened in fiscal 2020.  

(b) Does Indigo follow the lower of cost or net realizable value rule? Did the application of this rule have any effect on 2020 results? Explain

(c) Indigo uses the average cost formula to account for its inventories. A major competitor, Amazon Inc., uses the FIFO cost formula to account for its inventories. What difficulties would this create in comparing Indigo’s financial results with those of Amazon? Explain.  

Analyzing Accounts and Notes Receivable; Computing Interest, Estimating Value, and Recording Bad Debts

Analyze each of the four separate scenarios and answer the requirements.

Note: Round each of your answers to the nearest whole dollar.

1. On December 31, 2020, Helena Company, a California real estate firm, received two $28,000 notes from customers in exchange for services rendered. The 8% note from El Dorado Company is due in nine months, and the 3% note from Newcastle Company is due in five years. The market interest rate for similar notes on December 31, 2020, was 8%. At what amounts should the two notes be reported in Helena’s December 31, 2020, balance sheet?

2. EPPA, an environmental management firm, issued to Dara, a $14,000, 8%, five-year installment note that required five equal annual year-end payments. This note was discounted to yield a 9% rate to Dara. What is the total amount of interest revenue to be recognized by Dara on this note?

3. On July 1, 2020, Lezix Company, a maker of denim clothing, sold goods in exchange for a $140,000, one-year, noninterest-bearing note. At the time of the sale, the market rate of interest was 12% on similar notes. At what amount should Lezix record the note receivable on July 1, 2020?

4. The records of Quest Company included the following accounts (with normal balances).

The company estimates bad debts as 2% of receivables at year-end to be uncollectible.

Prepare the adjusting entry at December 31, 2020, to adjust the allowance for doubtful accounts.

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Which is a primary limitation of the audit risk model?

Which of the following statements is most correct concerning the reason(s) that U.S. corporations desire and are willing to pay for independent audits of their financial statements?

CPA firms must register with the PCAOB if they wish to perform independent audits of

Which of the following organizations grants a license to practice as a CPA?

Management of a publicly held organization subject to the SEC has the responsibility for all of the following except:

The primary assertion that is satisfied by physically observing the client's count of inventory is

The control environment includes all of the following except

WBG manufactures and sells electronic transducers that are used in military and commercial products. WBG has three divisions: Transducer Division. Military Division, and Commercial Division. The Transducer Division designs and produces transducers that are sold externally as well as internally to the Military Division and the Commercial Division. Both the Military Division and the Commercial Division incorporate transducers in their final products that are sold to non- WBG end users. Because of the unique proprietary design of the WBG transducers. Military and Commercial Divisions only use WBG transducers in their products. All of WBG's sales are in the United States.

The three divisions are profit centers and about 50 percent of the Transducer Division output is sold externally, while the remainder is sold internally to the Military Division and the Commercial Division. WBG currently uses a full-cost transfer pricing policy for the transducers. The senior managers of the three divisions receive about 40 percent of their compensation tied to the performance of their division and the balance is received as base salary.

Because of the incessant bickering among WBG's three divisions' management teams over its current transfer pricing policy, the CEO of WBG attended a seminar on transfer pricing. After attending the seminar, the CEO proposed the following new policy for transducers: “Each month the transfer price of transducers will be the same as the external market price the Transducer Division receives for transducers sold to external customers, if. and only if. the Transducer Division is at capacity for the month. Otherwise, the transfer price is the Transducer Division's variable cost for the month.”

Required:

You work for the CEO. Write a memo to the CEO that (a) explains the benefits of the proposed policy, (b) explains the likely changes in behavior among the three divisions that the new policy is likely to produce, and (c) states what additional data the CEO and you should collect and how you would analyze the data before making a decision regarding whether or not the new transfer pricing policy should be adopted.

69. The phrase “time is of the essence” in a contract means: a. parties must adhere to the time requirements b. time to complete the contract is important to the parties c. a Court will not make the parties adhere to the time requirements d. a Court will make the parties adhere to the time requirements e. a and b only f. a-b- and d only 70. A contract can be discharged because of “Impossibility” when: a. one person who is contracting decides to cancel b. one of the contracting parties dies c. the property which is the subject of the contract is destroyed d. all of the above e. a and b only f. b and c only TRUE/FALSE 71. A contract where a person promises to pay for the debt or default of another is called a “personal satisfaction contract”. 72. There is a duty to exercise reasonable diligence to minimize damages - this is referred to as “liquidated damages”. 73. When a person completes 85 % of the duties in a contract, that person could successfully use the argument that they “substantially performed”. 74. A standard form contract between two parties of unequal bargaining power is often referred to as an “output contract”. 75. If the parties agree on the amount of monies owed in a contract the debt is said to be liquidated. 76. A unilateral contract is one that is missing the one essential element of price. 77. All states in the United States have adopted statutory law that deals with the sale of goods and commercial transactions which is called the “Uniform Business Act”. 78. A serious communication with definite terms that creates the power of acceptance in an offeree is called a “quasi contract”. 79. A third party, not mentioned in a contract, could successfully recover damages from the contract if that third party was considered an “involved beneficiary”. 80. When one party makes a promise to enter into an agreement without receiving an expressed agreement by the other party, this is referred to as “bilateral” contract or agreement.

PLEASE ANSWER EACH OF THE FOLLOWING #69 through #80

1. Which ONE of the following defendants is the only one in which a state court would absolutely be able to exercise in personam jurisdiction (without having to have additional information to make a determination)?

a. An individual who is traveling through a state and allegedly causes damage while there.

b.A business that is incorporated in somewhere in the United States.

c. A business with manufacturing and distribution facilities located in multiple states throughout the country.

d. An individual who is employed by a business that has retail locations throughout the state.

2. Plaintiff’s counsel is cross-examining a defense witness during a jury trial and asks a question relating to the contents of a letter that the witness received from the defendant. The question will only be allowed if

a. The letter was referenced and entered into evidence during the witness’ direct examination.

b. The letter has not yet been discussed in front of the jury.

c. The letter was referenced during the defendant’s opening argument.

d. the letter establishes the defendant’s guilt beyond any reasonable doubt.

7. Which of the following is most likely to be ruled inadmissible hearsay?

a. A witness testifies during direct examination that he believes the defendant is guilty because he read a detailed article in the Wall Street Journal discussing the case and titled "The Defendant Did It."

b. A witness testifies during direct examination that immediately after she was in a car accident she felt extemely frightened and she believed that she had injured her arm.

c. A witness testifies during direct examination that the she doesn't believe she will get a fair trial because the local newspaper has been publishing artcles with headlines like "The Defendant Did It."

d. A witness testifies during direct examination that immediately after she was fired from her job, she called her lawyer and said "I think I just got fired because of my plans to take maternity leave!"

According to the U.S. Department of Labor, nonfarm labor productivity rose at an annualized rate of 0.9 percent in the second quarter of 2017 as hours worked and output per worker both rose at their fastest pace in 18 months. Compared to the same quarter in 2016, productivity increased at a rate of 1.2 percent, its best performance in two years., while unit labor costs fell at a rate of 0.2 percent. From 2007 to 2016, labor productivity increased at an average annual rate of 1.2 percent, well below its long-term growth rate of 2.1 percent from 1947 to 2016. This is an indication of a decline in the potential growth rate, blamed in part on a shortage of workers and low capital expenditure.
Source: Lucia Mutikani, "U.S. productivity rises in second quarter, keeps labor costs in check," reuters.com, August 9, 2017.

Refer to the Article Summary. In the second quarter of 2017, labor productivity in the United States rose at its fastest pace in 18 months. Labor productivity is important for an economy because an increase in labor productivity

Group of answer choices

will increase the labor force participation rate.

allows the average consumer to increase consumption.

will create short-run, but not long-run, economic growth.

will increase output and decrease wages in the long run.