St. Margaret Beer Co. is considering a three-year project that will require an initial investment of $44,000. If market demand is strong, St. Margaret Beer Co. thinks that the project will generate cash flows of $29,500 per year. However, if market demand is weak, the company believes that the project will generate cash flows of only $2,000 per year. The company thinks that there is a 50% chance that demand will be strong and a 50% chance that demand will be weak.

If the company uses a project cost of capital of 11%, what will be the expected net present value (NPV) of this project? (Note: Do not round intermediate calculations and round your answer to the nearest whole dollar.)

-$5,235

-$6,613

-$4,960

-$5,511

St. Margaret Beer Co. has the option to delay starting this project for one year so that analysts can gather more information about whether demand will be strong or weak. If the company chooses to delay the project, it will have to give up a year of cash flows, because the project will then be only a two-year project. However, the company will know for certain if the market demand will be strong or weak before deciding to invest in it.

What will be the expected NPV if St. Margaret Beer Co. delays starting the project? (Note: Do not round intermediate calculations and round your answer to the nearest whole dollar.)

$2,937

$8,448

$8,433

$2,643

What is the value of St. Margaret Beer Co.’s option to delay the start of the project? (Note: Do not round intermediate calculations and round your answer to the nearest whole dollar.)

$8,448

$8,433

$2,643

$2,937

Bank Reconciliation and Entries

The cash account for Pala Medical Co. at June 30, 20Y1, indicated a balance of $13,360. The bank statement indicated a balance of $15,350 on June 30, 20Y1. Comparing the bank statement and the accompanying canceled checks and memos with the records revealed the following reconciling items:

1. Checks outstanding totaled $5,530.
2. A deposit of $5,760, representing receipts of June 30, had been made too late to appear on the bank statement.
3. The bank collected $2,990 on a $2,840 note, including interest of $150.
4. A check for $880 returned with the statement had been incorrectly recorded by Pala Medical Co. as $800. The check was for the payment of an obligation to Skyline Supply Co. for a purchase on account.
5. A check drawn for $70 had been erroneously charged by the bank as $700.
6. Bank service charges for June amounted to $60.

Required:

1. Prepare a bank reconciliation.

2. Journalize the necessary entries (a.) that increase cash and (b.) that decrease cash. The accounts have not been closed. For a compound transaction, if an amount box does not require an entry, leave it blank.

3. If a balance sheet were prepared for Pala Medical Co. on June 30, 20Y1, what amount should be reported as cash?

You have been tasked to evaluate the financial health and working capital policy of Yoyo Co.
The extracts of the balance sheet as at 31 December 2019 and income statement for the year ended are as follows:
Balance sheet
$'000
Income Statement
$'000
Current assets
Sales
20,000
Inventory
2,500
Cost of Sales
15,000
Accounts receivables
4,250
Cash
4,000
Current liabilities
Accounts payables
2,750
Short-term bank loan
2,500
Companies which are similar to Yoyo Co have the following average metrics for 2019:
Inventory days
57 days
Accounts receivable days
55 days
Accounts payables days
60 days
Current ratio
2.4x
Quick ratio
1.7x
Management is currently reviewing their credit policies in order to attract more customers and improve its operating cycle. The sales manager proposes that for customers who order goods exceeding $100,000, Yoyo Co can extend credit terms of 2/10, net 60.
Assume 360 days in a year.
(a) Compute the working capital cycle (i.e. cash cycle) of Yoyo Co as at 31 December 2019.

(b) Interpret Yoyo Co’s cash cycle based on your computations.

(c) Analyse the performance metrics of Yoyo Co as compared to its competitors based on the cash cycle and liquidity ratios.

(d) Discuss the circumstances when the cash cycle of a company is positive and when the cash cycle is negative.

(e) Calculate the implied interest rate when Yoyo Co’s customers do not take up the discount offered to them.

Bank Reconciliation and Entries

The cash account for Pala Medical Co. at June 30, 20Y1, indicated a balance of $14,380. The bank statement indicated a balance of $16,970 on June 30, 20Y1. Comparing the bank statement and the accompanying canceled checks and memos with the records revealed the following reconciling items:

Checks outstanding totaled $6,110.

A deposit of $6,360, representing receipts of June 30, had been made too late to appear on the bank statement.

The bank collected $3,310 on a $3,140 note, including interest of $170.

A check for $770 returned with the statement had been incorrectly recorded by Pala Medical Co. as $700. The check was for the payment of an obligation to Skyline Supply Co. for a purchase on account.

A check drawn for $40 had been erroneously charged by the bank as $400.

Bank service charges for June amounted to $40.

Required:

1. Prepare a bank reconciliation.

2. Journalize the necessary entries (a.) that increase cash and (b.) that decrease cash. The accounts have not been closed. For a compound transaction, if an amount box does not require an entry, leave it blank.

3. If a balance sheet were prepared for Pala Medical Co. on June 30, 20Y1, what amount should be reported as cash?
$

The cash account for Pala Medical Co. at June 30, 20Y1, indicated a balance of $9,335. The bank statement indicated a balance of $10,710 on June 30, 20Y1. Comparing the bank statement and the accompanying canceled checks and memos with the records revealed the following reconciling items: Checks outstanding totaled $3,860. A deposit of $4,020, representing receipts of June 30, had been made too late to appear on the bank statement. The bank collected $2,090 on a $1,980 note, including interest of $110. A check for $550 returned with the statement had been incorrectly recorded by Pala Medical Co. as $500. The check was for the payment of an obligation to Skyline Supply Co. for a purchase on account. A check drawn for $50 had been erroneously charged by the bank as $500. Bank service charges for June amounted to $55. Required: 1. Prepare a bank reconciliation. Pala Medical Co. Bank Reconciliation June 30, 20Y1 Cash balance according to bank statement $ Adjustments: $ Total adjustments Adjusted balance $ Cash balance according to company's records $ Adjustments: $ Total adjustments Adjusted balance $ 2.

Journalize the necessary entries (a.) that increase cash and (b.) that decrease cash. The accounts have not been closed. For a compound transaction, if an amount box does not require an entry, leave it blank. a. 20Y1 June 30 b. June 30 3. If a balance sheet were prepared for Pala Medical Co. on June 30, 20Y1, what amount should be reported as cash? $ PreviousNext

Part I

Choose the correct statement(s) regarding changes in accounting estimates:

Changes in accounting estimates generally result from the availability of new information.

Disclosure of current period effects is generally required for changes in estimate.

A change in accounting principle that is inseparable from a change in estimate is accounted for prospectively, but with footnote disclosure of retrospective effects.

Multiple Choice

A. II and III only.

B. I only.

C. III only.

D. I and II only.

Part II

During 2018, Creek Co. determined that an insurance premium paid and entirely expensed in 2017 was for the period January 1, 2017 through January 1, 2019. How should Creek classify and treat the above transaction on its financial statements?

Multiple Choice

A. Creek Co. should classify the transaction as a correction of an accounting error and restate its financial statements retroactively.

B. Creek Co. should classify the transaction as a change in accounting principle and restate its financial statements retroactively.

C. Creek Co. should classify the transaction as a correction of an accounting error and make no retroactive adjustments.

D. Creek Co. should classify the transactions as a change in accounting principle and make no retroactive adjustments.

Part III

The correction of a mathematical error in the calculation of prior years’ depreciation should be:

Multiple Choice

A. Recorded as a prior-period adjustment.

B. Corrected with an adjustment to the current period’s depreciation expense.

C. Recorded as a change in accounting estimate.

D. Recorded as a change in accounting principle.

Outdoor Equipment (OE) sells camping equipment. On December 1, the accounts receivable account had a balance of $51,000, the bad debt expense account had a balance of $0, and the allowance for doubtful account had a credit balance of $5,100. Journalize the remaining journal entries for the 2017 year.

Dec. 2 Sold tents for $5,200 on account with a cost of $2,600.
      20 Determined that the total accounts of Rocky Co. with an accounts receivable balance of $1,300 and Grouse Co. with an accounts receivable balance of $2,600 were uncollectible and needed to be written off.
      23 Unexpectedly received payment from Grouse Co. for $2,600.
      31 Estimated that 10% of accounts receivable recorded to date would be uncollectible.

Required:
1. Prepare journal entries to record the transactions. Note: Write-off of uncollectible accounts for Rocky Co. and Grouse Co. should be posted separately.

Journal entry worksheet

Record the estimate for uncollectible accounts.

Note: Enter debits before credits.

2. Post the T-account for accounts receivable, bad debt expense, and allowance for doubtful accounts. Determine the ending balance for each account.

Bank Reconciliation and Entries

The cash account for Pala Medical Co. at June 30, 20Y1, indicated a balance of $13,015. The bank statement indicated a balance of $15,420 on June 30, 20Y1. Comparing the bank statement and the accompanying canceled checks and memos with the records revealed the following reconciling items:

1. Checks outstanding totaled $5,550.
2. A deposit of $5,780, representing receipts of June 30, had been made too late to appear on the bank statement.
3. The bank collected $3,010 on a $2,850 note, including interest of $160.
4. A check for $660 returned with the statement had been incorrectly recorded by Pala Medical Co. as $600. The check was for the payment of an obligation to Skyline Supply Co. for a purchase on account.
5. A check drawn for $30 had been erroneously charged by the bank as $300.
6. Bank service charges for June amounted to $45.

Required:

1. Prepare a bank reconciliation.

2. Journalize the necessary entries (a.) that increase cash and (b.) that decrease cash. The accounts have not been closed. For a compound transaction, if an amount box does not require an entry, leave it blank.

3. If a balance sheet were prepared for Pala Medical Co. on June 30, 20Y1, what amount should be reported as cash?
$

Bank Reconciliation and Entries The cash account for Pala Medical Co. at June 30, 20Y1, indicated a balance of $9,335. The bank statement indicated a balance of $10,710 on June 30, 20Y1. Comparing the bank statement and the accompanying canceled checks and memos with the records revealed the following reconciling items: Checks outstanding totaled $3,860. A deposit of $4,020, representing receipts of June 30, had been made too late to appear on the bank statement. The bank collected $2,090 on a $1,980 note, including interest of $110. A check for $550 returned with the statement had been incorrectly recorded by Pala Medical Co. as $500. The check was for the payment of an obligation to Skyline Supply Co. for a purchase on account. A check drawn for $50 had been erroneously charged by the bank as $500. Bank service charges for June amounted to $55. Required: 1. Prepare a bank reconciliation. Pala Medical Co. Bank Reconciliation June 30, 20Y1 Cash balance according to bank statement $ Adjustments: $ Total adjustments Adjusted balance $ Cash balance according to company's records $ Adjustments: $ Total adjustments Adjusted balance $ 2. Journalize the necessary entries

(a.) that increase cash and (b.) that decrease cash. The accounts have not been closed. For a compound transaction, if an amount box does not require an entry, leave it blank. a. 20Y1 June 30 b. June 30 3. If a balance sheet were prepared for Pala Medical Co. on June 30, 20Y1, what amount should be reported as cash? $ PreviousNext

The Magnus Corporation, a publicly accountable entity, had the following investments as at

December 31, 20x2:

Company

Type

Classification

Original

Cost

Carrying

Value

Fair

Value

Will Corp. Shares FVPL $65,000 $61,000 $58,000

Simon Co. Shares FVPL 205,000 212,000 225,000

Craig Inc. Shares FVOCI 82,000 88,000 106,000

Frey Inc. Shares FVOCI 94,000 80,000 88,000

Blandin Co. Bonds FVOCI 210,106 210,106 210,106

The Blandin Co. bonds were purchased on December 31, 20x2. The bonds have a face value of

$200,000, pay interest of 4% semiannually (Jun 30 & Dec 31) and mature on December 31,

20x19. Bond issue costs were capitalized to the FVOCI investment account.

The following transactions took place in 20x3:

Feb 4 Sold the Simon shares for $250,000 less $10,000 in brokerage fees

Mar 31 Purchased shares of Winny Inc. for $105,000 plus $6,500 in brokerage fees. The

shares are classified as FVPL.

April 20 Sold the Frey Inc. shares for $98,000 less $1,800 in brokerage fees.

Aug 12 Purchased shares of Bane Co. for $45,000 plus $1,000 in brokerage fees. The

shares are classified FVOCI.

Dec 31 The fair values of the investments on hand are as follows:

Will Corp. $ 51,000

Craig Inc. 125,000

Blandin Co. 206,000

Winny Inc. 114,000

Bane Co. 29,500

Required –

a) Prepare the journal entries to record all 20x3 transactions for the investments above.

When preparing the December 31, 20x3 fair value adjustment entry, write two journal

entries only: one for the total fair value adjustment on FVPL investments and one for the

total fair value adjustment on FVOCI investments. Do not write a separate journal entry

for each individual investment.

b) Assume that Magnus’s net income for the year ended December 31, 20x3 is $1,000,000.

Prepare the bottom portion of the Statement of Comprehensive Income starting with the

net income line.

c) Prepare a t-account showing the transaction in the A•OCI account from the beginning to

the end of the year. Prove the ending balance.

d) At the end of 20x4 the Blandin Co. bonds were trading at 104. Write all journal entries

for the bonds for the year ended December 31, 20x4.