On October 15, 2016, Koala, Inc. issued a 10 year bond (with a typical $1000 face value) that had an annual coupon value of $60. [We are assuming that the 2020 coupon has just been redeemed.]

• Initially, the bond was sold for the premium price of $1,025.

• On October 15, 2020, this bond was selling for only $975.

• The market rate of interest for a riskless corporate bond, of this maturity, was 4.5% on October 15, 2016, which reflects market expectations about future rates of inflation.

• The market rate of interest for a riskless corporate bond, of this maturity, was 4.0% on October 15, 2020, which reflects market expectations about future rates of inflation.

Question: It is now October 15, 2020 and suddenly the Federal Reserve announces a massive program to reduce inflation. Instantly, the market rate of interest for a riskless corporate bond that would apply to this bond, falls from 4.0% to 2.5%. If there is no change in the risk premium expected for this Koala, Inc. bond, what will be this bond’s yield to maturity?  [To 3 decimal places.]

On 5/17/2020, a random sample of 1007 U.S. households finds that Trump has a 49% approval rating.

a) Use the 2SD method to find a 95% confidence interval estimate of the proportion of all U.S. households that approve of Trump on 5/17/2020. Show all work/steps to get the 2SD estimate. Round the margin of error to three decimal places. Work and Answer:

b) Use your answer from part (a) to fill in the red spaces below in order to write the results of the poll in these two notations:

According to the poll, on 5/17/2020, Trump has an approval rating of 49% ± _________%

According to the poll, on 5/17/2020, Trump’s approval rating was between ______% and ______%

c) If we were to use this same sample information to find a 90% confidence interval estimate instead of a 95% confidence interval estimate, then would our new 90% confidence interval be wider, or would it be narrower than the 95% estimate? Work and Answer:

The adjusted balances at December 31, 2020, for Derlak Enterprises are shown in alphabetical order below:

*The owner, Lee Derlak, made no additional investments during the year.

Required:
Prepare a comparative classified balance sheet at December 31, 2020. (Record the accounts in the given order. Enter all amounts as positive values.)

Analysis Component:
Are Derlak's assets financed mainly by debt or equity in 2019? in 2020? Is the change in how assets were financed from 2019 to 2020 favourable or unfavourable?

The adjusted balances at December 31, 2020, for Derlak Enterprises are shown in alphabetical order below:

*The owner, Lee Derlak, made no additional investments during the year.

Required:
Prepare a comparative classified balance sheet at December 31, 2020. (Record the accounts in the given order. Enter all amounts as positive values.)

Analysis Component:
Are Derlak's assets financed mainly by debt or equity in 2019? in 2020? Is the change in how assets were financed from 2019 to 2020 favourable or unfavourable?

On January 1, 2018, Surreal Manufacturing issued 600 bonds, each with a face value of $1,000, a stated interest rate of 3 percent paid annually on December 31, and a maturity date of December 31, 2020. On the issue date, the market interest rate was 4 percent, so the total proceeds from the bond issue were $583,352. Surreal uses the simplified effective-interest bond amortization method and adjusts for any rounding errors when recording interest in the final year.

Required:

1. 1. Prepare a bond amortization schedule

2. 2-5. Prepare the journal entries to record the bond issue, the interest payments on December 31, 2018 and 2019, the interest and face value payment on December 31, 2020 and the bond retirement. Assume the bonds are retired on January 1, 2020, at a price of 101.

   1. Record the issuance of 600 bonds at face value of $1,000 each for $583,352.
   2. Record the interest payment on December 31, 2018.
   3. Record the interest payment on December 31, 2019.
   4. Record the interest and face value payment on December 31, 2020.
   5. Record the retirement of the bonds at a quoted price of 101, assuming the bonds are retired on January 1, 2020.

Mr. Chai sells various types of toys throughout Malaysia. Three of the accounts in the ledger of Mr. Chai indicated the following;

Balances at 1 January 2020:

(i)           Insurance paid in advance RM562

(ii)      Wages outstanding RM306

(iii)     Rent receivable, received in advance RM36

During 2020, Mr. Chai:

(i)           Paid for insurance RM1,019, by bank standing order

(ii)      Paid RM15,000 wages, in cash

(iii)     Received RM2,600 rent, by cheque, from the tenant

At 31 December 2020:

(i)           Insurance prepaid was RM345

(ii)      Wages accrued amounted to RM419

(iii)     Rent receivable in arrears was RM105

Required;

(a)      Prepare the prepaid insurance, accrued wages and rent receivable accounts for the year ended 31 December 2020.

(b)      Prepare the income statement extract showing clearly the amounts of insurance expense, wages expense and rent revenue for the year ended 31 December 2020.

(c)                 Explain the effects on the financial statements of accounting for:

               (i)           the expenses accrued at year end

               (ii)             the income received in advance at year end

(d)               Explain the purposes of accounting for:

              (i)           the expenses accrued at year end

              (ii)              the income received in advance at year end

Question 1. Merino Plc 2019 and 2020 Balance Sheets included the following items:

Merino Plc Income Statement was as follows:

Required:

Prepare the STATEMENT OF CASH FLOWS for the year ended December 31, 2020. Additional information includes the following:

1. Equipment was purchased for $64,848 cash
2. Issued 3,360 common shares for cash at $28 per share
3. Declared and paid cash dividends during the year.

On 1 January 2019 Liam Ltd acquired 90% of the issued shares of Ian Ltd. During the year ended 31 December 2019 the following intra group transactions occurred:

• Sales of inventory:

Ian Ltd sold inventory to Liam Ltd $360,000. This inventory costed Ian Ltd $300,000. At 31 December 2019 Liam Ltd held 50% of the inventory acquired from Ian Ltd.

• Intragroup sale of equipment:

An item of equipment originally acquired by Liam Ltd on 1 January 2017 at a cost of $400,000 was sold to Ian Ltd on 1 January 2019 for $340,000. Liam Ltd had depreciated this asset at 10% per annum on a straight-line basis with no scrap value. There is no change in the asset expected life subsequent to the sale.

• During the year ended 31 December 2019 the following dividends were paid:

• Liam Ltd     $100,000
• Ian Ltd        $40,000

• On 30 June 2019 Liam Ltd lent Ian Ltd $100,000. Interest on this loan at 8% was paid up to 31 December 2019.

Required:

Prepare the consolidation journal entries required to eliminate the above intragroup transactions for the year ended 31 December 2019. Assume a tax rate of 30%.

PART A

Shania Twain Ltd pays its annual insurance premium in cash on 1 September each year.  The latest payment of $9,000 was on 1 September 2020 which was $600 more than the previous year.  All transactions are recorded in the general journal. Shania Twain Ltd has a December 31st year end.

Required:

Assuming Shania Twain Ltd uses the Asset approach to record the payment, prepare general journal entries (narrations are NOT required) required at:

1. 1 September 2020
2. 31 December 2020 (adjusting entry only; i.e. closing entry not required)

PART B

Why do we prepare closing entries at year end?

PART C

Shania Twain Ltd had Accounts Receivable of $215,000 and an Allowance for Doubtful Debts of $520 (Credit) at 31 December 2020.  A review of outstanding accounts indicated the need to immediately write off $700 of bad debts and to make a provision for Doubtful Debts for next year based on 3% of Adjusted Accounts Receivable.

Prepare the necessary general journal entries for the above information (narrations are NOT required).

PART D

Shania Twain Ltd had purchased equipment on 1 January 2020 at a cost of $200,000. The equipment had a useful life of 6 years and an estimated residual of $35,000.  The company decided to use the reducing balance method of depreciation at 30% per annum.

Calculate the depreciation and prepare the necessary journal entry for the year ended 31 December 2021.

On March 10, 2020, Pharoah Company sold to Barr Hardware 160 tool sets at a price of $50 each (cost $30 per set) with terms of n/60, f.o.b. shipping point. Pharoah allows Barr to return any unused tool sets within 60 days of purchase. Pharoah estimates that (1) 10 sets will be returned, (2) the cost of recovering the products will be immaterial, and (3) the returned tools sets can be resold at a profit. On March 25, 2020, Barr returned 7 tool sets and received a credit to its account. Assume that instead of selling the tool sets on credit, that Pharoah sold them for cash.

(a)

Partially correct answer iconYour answer is partially correct.

Prepare journal entries for Pharoah to record (1) the sale on March 10, 2020, (2) the return on March 25, 2020, and (3) any adjusting entries required on March 31, 2020 (when Pharoah prepares financial statements). Pharoah believes the original estimate of returns is correct. (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.)