Recording Notes Receivable: Issuance, Payment, and Default

Marydale Products permits its customers to defer payment by giving personal notes instead of cash. All the notes bear interest and require the customer to pay the entire note in a single payment 6 months after issuance. Consider the following transactions, which describe Marydale's experience with two such notes:

1. On October 31, 2019, Marydale accepts a 6-month, 9% note from Customer A in lieu of a $3,600 cash payment for services provided that day.
2. On February 28, 2020, Marydale accepts a 6-month, $2,400, 7% note from Customer B in lieu of a $2,400 cash payment for services provided on that day.
3. On April 30, 2020, Customer A pays the entire note plus interest in cash.
4. On August 31, 2020, Customer B pays the entire note plus interest in cash.

Required:

Prepare the necessary journal and adjusting entries required to record Transactions a through d in Marydale's records. For a compound transaction, if an amount box does not require an entry, leave it blank.

June Rentals Inc. owns a large commercial storage unit that it had purchased on January 1, 2018 for $6 million cash and is accounted for in a separate account, classified as "Storage Property." The company decided to use the revaluation model to account for its storage properties and revalues them when they recognize that a substantial difference exists between net book value and fair value. June uses the straight-line depreciation method over the asset's 40-yr useful life (no residual value).

The asset's fair values were as follows on the following dates:

Dec 31, 2018: $5.85 million; Dec 31, 2019: $6.004 million (substantial difference from NBV); Dec 31, 2020: $5.846 million

On January 3, 2021, June sold building for $5.846 million. June uses IFRS.

Required:

1. Assuming June uses the asset adjustment (elimination) method for revaluation, prepare all required journal entries for 2018, 2019, 2020, and 2021. (Don't forget the depreciation entries.) Also, be sure to record the entry for the sale of the equipment.
2. Assuming June uses the proportional method for revaluation, prepare the required journal entries for 2019 to recognize the revaluation.

The following data were taken from the records of Clarkson Company for the fiscal year ended June 30, 2020.

1. Prepare a cost of goods manufactured schedule. (Assume all raw materials used were direct materials.)

2. Prepare an income statement through gross profit.

3. Prepare the current assets section of the balance sheet at June 30, 2020. (List Current Assets in order of liquidity.)

The following data were taken from the records of Clarkson Company for the fiscal year ended June 30, 2020.

a) Prepare a cost of goods manufactured schedule. (Assume all raw materials used were direct materials.)

b) Prepare an income statement through gross profit.

c) Prepare the current assets section of the balance sheet at June 30, 2020. (List Current Assets in order of liquidity.)

After two quarters of increasing levels of production, the CEO of Canadian Fabrication & Design was upset to learn that, during this time of expansion, productivity of the newly hired sheet metal workers declined with each new worker hired. Believing that the new workers were either lazy or ineffectively supervised (or possibly both), the CEO instructed the shop foreman to “crack down” on the new workers to bring their productivity levels up.

1. Explain carefully in terms of production theory why it might be that no amount of “cracking down” can increase worker productivity at CF&D.

2. Provide an alternative to cracking down as a means of increasing the productivity of the sheet metal workers.

After two quarters of increasing levels of production, the CEO of Canadian Fabrication & Design was upset to learn that, during this time of expansion, productivity of the newly hired sheet metal workers declined with each new worker hired. Believing that the new workers were either lazy or ineffectively supervised (or possibly both), the CEO instructed the shop foreman to “crack down” on the new workers to bring their productivity levels up.

a. Explain carefully in terms of production theory why it might be that no amount of “cracking down” can increase worker productivity at CF&D.
b. Provide an alternative to cracking down as a means of increasing the productivity of the sheet metal workers.

An engine manufacturer has observed failures with their product. In the last 6 years, they have experienced 2 engine failures one year, 3 engine failures in two consecutive years, 4 engine failures one year, and 5 engine failures in each of the preceding two years (two in the last month, alone).

The CEO of the engine manufacturer wants to reassure customers. He promises that in the next month, there will not be multiple engine failures (no more than 1 failure).

Assume the probability of failure is exponential.

The CEO asks you to calculate the probability that they are correct: What is the probability there will be no more than a single engine failure in the next month?

You have been recently hired by a multinational firm that manufactures airplanes parts. They are interested in investing in a new factory. However, the CEO is unsure of where they should invest. The CEO would like to either invest in a developed or a developing country and your input is valuable to his decision. Your focus will be on providing specific information on both a developed and developing country, providing that both countries have data for the last 20 years. You will need to provide support, through your analysis, for which country you think will be best for this factory to invest in. Do not pick a country that does not have data that is easily accessible.

A United Kingdom firm is planning to hedge an import payment of USD 10 million dollars due in 9 months (i.e. the firm will expect to pay the US $10 million in 9 months-time). The spot rate is 1 UK = 1.25 USD. Note: UK = UK pounds. USD = US Dollars. The 9-month forward rate is 1 UK = 1.2575 USD. The nine-month interest rate for borrowing (and lending) in the United Kingdom (UK) is 1.00% p.a. and in the United States (US) is 2.60% p.a. respectively. All interest rates are continuously compounded rates. Required: What is the best way for the company to hedge its future USD payment or cash outflow? Of the two possible alternative options to hedge the USD payment how much better off in UK pounds are you under the best option at time t = 9 months hence? Assume the firm can borrow or lend UK pounds and / or US dollars at the interest rates quoted above and also transact at the quoted spot and forward rates. If necessary state any other assumptions you make.

a. option one .. option two .. b. How much better off in UK pounds are you under the best option at time t = 9 months hence?