1. Mercy Sports Shop started operations on 1^st January, 2020. The firm sells sports shoes in shopping malls. The company expects a 20 per cent increase in sales per month for November and December 2020. Mercy has budgeted sales as indicated in the following table:

Required:-

1. Using excel complete the sales budget by filling in the missing amounts.   
2. Determine the amount of sales revenue that will appear on the pro-forma income statement for the company’s fourth quarter 2020.

On January 1, 2016, a company pays $5,222,591 for a 5-year corporate bond with a face value of $5 million. The bond pays interest at 5 percent on December 31 of each

year, and the principal is due on December 31, 2020. The investment yields a 4 percent compound annual

return to maturity. The company classies the bond as a held-to-maturity investment.

Required

Prepare the journal entries to record the investment on January 1, 2016, receipt of the interest payments

on December 31 of each year 2016 through 2020, and receipt of the bond principal on December 31,

2020, using the effective interest method.

Eastman Corporation manufactures one product. On December 31, 2018, Eastman adopted the dollar-value LIFO inventory method. The inventory on that date using the dollar-value LIFO inventory method was $850,000. Inventory data are as follows:

                Year                       Inventory @ Year-End Prices                       Price Index (base year 2018

                2019                       $1,180,000                                                                           1.05

                2020                       $1,940,000                                                                           1.15

                2021                       $1,800,000                                                                           1.25

1. Compute the inventory at December 31, 2019, 2020 and 2021, using the dollar-value LIFO method for each year, including the LIFO Reserve.

Please show computations.

2. Prepare the journal entries for the LIFO reserve for 2019 and 2020.

During 2020, Blue Spruce Corporation started a construction job with a contract price of $6.16 million. Blue Spruce ran into severe technical difficulties during construction but managed to complete the job in 2022. The contract is non-cancellable. Under the terms of the contract, Blue Spruce sends billings as revenues are earned. Billings are non-refundable. The following information is available:

Calculate the amount of gross profit that should be recognized each year under the percentage-of-completion method.

2020

2021

2022

The following account balances are taken from Sherwood Ltd.’s adjusted trial balance at June 30, 2020:

Prepare a single-step statement of income for the year ended June 30, 2020.

.

.

.

Prepare a multi-step statement of income for the year ended June 30, 2020.

On the 1st March 2019, Concept Limited purchased printing equipment costing $186,000 by issuing a 5 year, 4% unsecured note payable. The note requires $42,000 annual principal repayments plus interest each 1st March. Journalise the transactions to account for the acquisition of equipment. (Remember to allocate the current and non-current portions of the liability) Accrue interest on the note payable at the 31st December, 2019. Record the payment of the first instalment (including interest) of the note payable on 1st March, 2020 and then accrue interest as at 31st December, 2020. Prepare an excerpt from the Balance Sheet as at 31st December, 2020 showing liabilities.

Habiby, Inc., began operations in 2018 and has the following income and expenses for 2018 through 2021.

a. What is the amount of tax that Habiby should pay each year? If an amount is zero, enter "0".

b. How much would Habiby have paid in tax if the old NOL rules were in place but the corporate tax rate was 21 percent?. If an amount is zero, enter "0".

During 2020, Sweet Company started a construction job with a contract price of $1,620,000. The job was completed in 2022. The following information is available.

(a)

Compute the amount of gross profit to be recognized each year, assuming the percentage-of-completion method is used.

On December 31, 2020, Jen & Mink Clothing (J&M) performed the inventory count and determined the year-end ending inventory value to be $75,500. It is now January 8, 2021, and you have been asked to double-check the year-end inventory listing. J&M uses a perpetual inventory system. Note: Only relevant items are shown on the inventory listing.

The following situations have been brought to your attention:

1. On January 3, 2021, J&M received a shipment of 100 blue jackets, for $2,000 (Item #7649). The inventory was purchased December 23, 2020, FOB destination from Global Threads. This inventory was included in J&M’s inventory count and inventory listing.
2. On December 29, 2020, J&M sold scarves (Item #5566) to a customer with a sale price of $700 and cost of $500, FOB shipping. The order was shipped on December 30, 2020. J&M has not included this inventory.
3. Red Blazers (Item #6193) were purchased and shipped from International Co. on December 30, 2020, for $3,300, FOB shipping. The shipment arrived January 5, 2021, and the appropriate party paid for the shipping charges of $320. Additional costs were $220 for import duties and $60 for insurance during shipment. J&M has not included this inventory.
4. At year-end, J&M is holding $5,000 of black pants (Item #10824) on consignment for designer Duke Co. This inventory was included in J&M’s inventory count and inventory listing.
5. On December 31, 2020, J&M shipped white shirts (Item #4291), FOB destination costing $1,000 to a customer. The customer was charged $1,400 and the customer received the goods on January 3, 2021. J&M has not included this inventory.

Required:
1. In situations (a) to (e) determine whether inventory should be included or excluded in inventory at December 31, 2020. If the inventory should be included, determine the correct inventory cost. (Do not leave any empty spaces; input a 0 wherever it is required.)

2. Determine the correct ending inventory value at December 31, 2020. Starting with the unadjusted inventory value of $75,500, add or subtract any errors based on your analysis in Part 1. Assume all items that are not shown in the inventory listing are recorded correctly.

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