The following trial balance was extracted from the books of Al Mawaleh Traders, sole trader as at 31 May 2018.

Trial balance as at 31 May 2018

Additional information:

(i) Closing Inventory is valued at $12,600 on 31 May 2018

(ii) Outstanding Salaries were $1,200

(iii) Prepaid Insurance was $690

(iv) The provision for doubtful debts is to be adjusted to 5% of Receivables outstanding on 31 May 2018

(v) Depreciation is to be provided as follows:

Equipment 10% per annum using the straight line method.

Furniture 20% per annum using the straight line method.

You are required to:

Prepare the Statement of Profit or Loss (Income Statement) for the year ended 31 May 2018.

Prepare the Statement of Financial Position (Balance Sheet) based on the Trial Balance in Section A

Tanner-UNF Corporation acquired as a long-term investment $260 million of 6% bonds, dated July 1, on July 1, 2018. The market interest rate (yield) was 8% for bonds of similar risk and maturity. Tanner-UNF paid $220 million for the bonds. The company will receive interest semiannually on June 30 and December 31. Company management is holding the bonds in its trading portfolio. As a result of changing market conditions, the fair value of the bonds at December 31, 2018, was $230 million.

Required:
1. & 2. Prepare the journal entry to record Tanner-UNF’s investment in the bonds on July 1, 2018 and interest on December 31, 2018, at the effective (market) rate.
3. Prepare any additional journal entry necessary for Tanner-UNF to report its investment in the December 31, 2018, balance sheet.
4. Suppose Moody’s bond rating agency downgraded the risk rating of the bonds motivating Tanner-UNF to sell the investment on January 2, 2019, for $200 million. Prepare the journal entries to record the sale.

On January 1, 2018, the Blackstone Corporation purchased a tract of land (site number 11) with a building for $690,000. Additionally, Blackstone paid a real estate broker's commission of $45,000, legal fees of $5,500, and title insurance of $22,500. The closing statement indicated that the land value was $545,000 and the building value was $145,000. Shortly after acquisition, the building was razed at a cost of $84,000.

Blackstone entered into a $3,900,000 fixed-price contract with Barnett Builders, Inc., on March 1, 2018, for the construction of an office building on land site 11. The building was completed and occupied on September 30, 2019. Additional construction costs were incurred as follows:

To finance the construction cost, Blackstone borrowed $3,900,000 on March 1, 2018. The loan is payable in 10 annual installments of $390,000 plus interest at the rate of 12%. Blackstone's average amounts of accumulated building construction expenditures were as follows:

Required:
1. Prepare a schedule that discloses the individual costs making up the balance in the land account in respect of land site 11 as of September 30, 2019.
2. Prepare a schedule that discloses the individual costs that should be capitalized in the office building account as of September 30, 2019.

Tanner-UNF Corporation acquired as a long-term investment $260 million of 7% bonds, dated July 1, on July 1, 2018. The market interest rate (yield) was 9% for bonds of similar risk and maturity. Tanner-UNF paid $220 million for the bonds. The company will receive interest semiannually on June 30 and December 31. Company management has classified the bonds as available-for-sale investments. As a result of changing market conditions, the fair value of the bonds at December 31, 2018, was $230 million.

Required:
1. & 2. Prepare the journal entry to record Tanner-UNF’s investment in the bonds on July 1, 2018 and interest on December 31, 2018, at the effective (market) rate.
3. Prepare any additional journal entry necessary for Tanner-UNF to report its investment in the December 31, 2018, balance sheet.
4. Suppose Moody’s bond rating agency downgraded the risk rating of the bonds motivating Tanner-UNF to sell the investment on January 2, 2019, for $200 million. Prepare the journal entries necessary to record the sale, including updating the fair-value adjustment, recording any reclassification adjustment, and recording the sale.

If no journal entry is required select "No journal entry required." Enter answers rounded to millions to one decimal place i.e. 5,500,000= 5.5

On June 30, 2018, Georgia-Atlantic, Inc., leased a warehouse facility from IC Leasing Corporation. The lease agreement calls for Georgia-Atlantic to make semiannual lease payments of $468,683 over a five-year lease term, payable each June 30 and December 31, with the first payment at June 30, 2018. Georgia-Atlantic’s incremental borrowing rate is 10%, the same rate IC uses to calculate lease payment amounts. Depreciation is recorded on a straight-line basis at the end of each fiscal year. The fair value of the warehouse is $3.8. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.)

Required:
1. Determine the present value of the lease payments at June 30, 2018 that Georgia-Atlantic uses to record the right-of-use asset and lease liability.
2. What pretax amounts related to the lease would Georgia-Atlantic report in its balance sheet at December 31, 2018?
3. What pretax amounts related to the lease would Georgia-Atlantic report in its income statement for the year ended December 31, 2018?

7-2

Sweet Sixteen has two classes of stock authorized: $100 par value preferred and $1 par value common. Sweet Sixteen has the following beginning balances in its stockholders' equity accounts on January 1, 2018: preferred stock, $100,000, common stock, $20,000; paid-in capital, $380,000; and retained earnings, $450,000. Net income for the year ended December 31, 2018, is $65,000. The following transactions affect stockholders' equity during 2018:

March 1 Issue 3,000 additional shares of common stock for $22 per share.
April 1 Issue 5,000 additional shares of preferred stock for $110 per share.
June 1 Declare a cash dividend on common stock of $1 per share and a cash dividend on preferred stock of $5 per share to all stockholders of record on June 15.
June 30 Pay the cash dividends declared on June 1.
August 1 Purchase 2,000 shares of common treasury stock for $18 per share.
October 1 Reissue 1,000 shares of treasury stock purchased on August 1 for $20 per share.

Taking into consideration the beginning balances and all the transactions during 2018, respond to the following for Sweet Sixteen:

Required:

2. Prepare the stockholders’ equity section of the balance sheet as of December 31, 2018. (Amounts to be deducted should be indicated by a minus sign.)

On January 2, 2018, Baltimore Company purchased 9,000 shares of the stock of Towson Company at $13 per share. Baltimore did NOT obtain significant influence as the purchase represents a 15% ownership stake in Towson Company. On August 1, 2018, Towson Company paid cash dividends of $19,000. Baltimore Company intended this investment to a long-term investment. On December 31, 2018, Towson Company reported $60,000 of net income for FY 2018. Additionally, the current market price for Towson Company's stock increased to $18 per share at the end of the year. Use this information to determine, how much Baltimore Company should report for its investment in Towson Company on December 31, 2018. (Round to the nearest dollar.) Your Answer:

Frederick Company has two service departments (Cafeteria Services & Maintenance). Frederick has two production departments (Assembly Department & Packaging Department.) Frederick uses a step allocation method where Cafeteria Services is allocated to all departments and Maintenance Services is allocated to the production departments. All allocations are based on total employees. Cafeteria Services has costs of $165,000 and Maintenance has costs of $170,000 before any allocations. What amount of Maintenance total cost is allocated to the Packaging Department? (round to closest whole dollar) Employees are:

            Cafeteria Services 3

            Maintenance    6

Assembly Department 9

Packaging Department 10

Your Answer:

Edwards Co. includes one coupon in each bag of dog food it sells. In return for 4 coupons, customers receive a dog toy that the company purchases for £1.20 each. Edwards's experience indicates that 60 percent of the coupons will be redeemed. During 2018, 100,000 bags of dog food were sold, 12,000 toys were purchased, and 50,000 coupons were redeemed. During 2019, 120,000 bags of dog food were sold, 16,000 toys were purchased, and 60,000 coupons were redeemed.

1. If cash with an amount of less than £1.2 is received from customer for each dog toy given, explain how this would affect the premium expense in 2018? (No need to show any calculation)

2. If cash with an amount of less than £1.2 is received from customer for each dog toy given, explain how this would affect the premium liability at the end of 2018? (No need to show any calculation)

3. The clerical staff argued that if the sales volume of dog food in 2018 is recorded wrongly, it would not have any effect on the accurateness of the premium liability at the end of 2019, because premium liability at the end of 2019 is related to sales volume of dog food in 2019, but not related to the sales volume of dog food in 2018. Do you agree with him? Explain the reasons. (No need to show any calculation)

On 1 July 2017, Koala Ltd acquired a depreciable asset at a cost of $500 000. The asset is to be depreciated for accounting purposes over a useful life of four years using the straight-line method and a zero residual value. For tax purposes, depreciation is deductible at the rate of 40% per annum on the reducing balance. For the year ended 30 June 2018, taxable income of Koala Ltd was $250 000.

On 1 July 2018, Koala Ltd revalued the asset to a carrying amount of $420 000. For accounting purposes, depreciation will now be calculated on a three-year remaining useful life and a zero residual value. For the year ended 30 June 2019, taxable income of Koala Ltd was $320 000.

On 1 July 2019, Koala Ltd disposed of the asset for $125 000 cash.

The tax rate is 30% throughout this period.

Required

Determine the carrying amount, tax base and any related deferred tax in relation to this asset as at 30 June 2018 and 30 June 2019. Show all workings.

Show the general journal entries to record current and deferred income tax for the reporting periods ended 30 June 2018 and 30 June 2019.

Show the general journal entries (including any deferred tax consequences) to revalue the asset on 1 July 2018 and dispose of it on 1 July 2019.

Bob Fuji began business on January 1, 2018 with a Balance Sheet that listed $ 300,000 of Cash and $ 300,000 of Shareholders' Equity.  During 2018, the following inventory related transactions took place:

Produced 15,000 units of inventory @ a cost of $ 20 per unit

Delivered 12,000 units of inventory to customers with a selling price of $ 28 per unit

Collected $ 280,000 of cash related to 10,000 units of inventory

The above transactions were the only transactions for the firm, and the "year-end" selling price of inventory is $ 28.

D. (3)    If Bob Fuji recognizes revenue at the Completion of Production, Total Assets on

          Bob Fuji's December 31, 2018 Balance Sheet will be equal to $ _____________

E. (4)    If Bob Fuji recognizes revenue at the Time of Cash Collection, Total Assets on

          Bob Fuji's December 31, 2018 Balance Sheet will be equal to $ _____________

F. (3)   _____    Assume that (other than collecting the amount of money that he was

                        owed at the end of 2018) in 2019, the only activity of Bob Fuji is that he

                        "liquidates" any remaining inventory, receiving cash in the amount of

                       $ 25 per unit.  

G. If Bob recognizes revenue at "Time of Cash Collection", which of the following items will be GREATER than $ 0 on Bob Fuji's 2019 Income Statement?

                        A. Revenue

                        B. Net Income

                        C. Both A and B

                        D. None of the above