On January 1, 2000 Apple Company acquired all of the stock of Pear Company at book value. Apple accounts for its investment in Pear using the initial value method and Pear doesn't pay any dividends.

On January 1st 2015 Pear Company issued $1,000,000 face value bonds for $930,000 These 7% bonds pay interest each July 1 and January 1. Pear uses straight line amortization on these 20 year bonds.

On January 1, 2020, Apple Company acquired all of the Pear bonds for $955,000.

1. Make the necessary worksheet entries for 2020

2. In 2020, Apple reported unconsolidated income of $900,000 and Pear reported income of $100,000 what is consolidated income

3. make the necessary worksheet entries for 2021

4. in 2021, Apple reported unconsolidated inocme of $800,000 and Pear reported income $125,000 what is consolidated income

Investment in Equity Securities with No Significant Influence

Investment in Equity Securities with No Significant Influence Zyggy Corporation invests in the stock of other companies for trading purposes. Zyggy has the following investment activity during 2018, 2019, and 2020:

• Purchased stock of Allen Corporation on February 3, 2018, for $160,000. The investment was sold on June 18, 2018, for $168,000.
• Purchased stock of Becker Corporation on October 29, 2018, for $320,000. The investment had a fair value of $304,000 on December 31, 2018, and was sold for $324,000 on March 1, 2019.
• Purchased stock of Corey Corporation on November 1, 2018, for $480,000. Its fair value on December 31, 2018 and 2019 was $512,000 and $408,000, respectively. The investment was sold for $400,000 on February 15, 2020.

b. What gains and losses are reported on Zyggy’s income statements for 2018, 2019, and 2020?

Use a negative sign with answers to indicate a net loss, if applicable.

A coffee producer holds (owns) a current inventory of coffee worth $6 million (or 1,500,000 pounds) at current spot prices of $4.00 per pound. He plans to sell this inventory in 12 months, or on December 23, 2020. He fears that the price of coffee could fall in 12 months. He is considering a minimum variance (risk) hedge of his inventory using the coffee futures contract. The current price of Dec 2020 coffee futures is $4.10 per pound and the size of one coffee futures contract is 37,500 pounds. The standard deviation of the coffee spot and futures prices are 0.85 and 0.93, respectively. The correlation between futures and spot prices is 0.92. Assume that the coffee spot and futures prices on Dec. 23, 2020 (contract maturity date) are both at $3.80 per pound.  What are the  gains or losses on futures contracts using reverse trade for an optimal hedge?

Blue Corporation purchased a new machine for its assembly process on August 1, 2020. The cost of this machine was $169,800. The company estimated that the machine would have a salvage value of $16,800 at the end of its service life. Its life is estimated at 5 years, and its working hours are estimated at 20,000 hours. Year-end is December 31. Compute the depreciation expense under the following methods. Each of the following should be considered unrelated. (Round depreciation rate per hour to 2 decimal places, e.g. 5.35 for computational purposes. Round your answers to 0 decimal places, e.g. 45,892.) (a) Straight-line depreciation for 2020 $enter a dollar amount (b) Activity method for 2020, assuming that machine usage was 800 hours $enter a dollar amount (c) Sum-of-the-years'-digits for 2021 $enter a dollar amount (d) Double-declining-balance for 2021

Marigold Corporation purchased a new machine for its assembly process on August 1, 2020. The cost of this machine was $127,500. The company estimated that the machine would have a salvage value of $10,500 at the end of its service life. Its life is estimated at 5 years, and its working hours are estimated at 20,000 hours. Year-end is December 31.

Compute the depreciation expense under the following methods. Each of the following should be considered unrelated. (Round depreciation rate per hour to 2 decimal places, e.g. 5.35 for computational purposes. Round your answers to 0 decimal places, e.g. 45,892.)

(a)      
Straight-line depreciation for 2020
$enter a dollar amount
(b)      
Activity method for 2020, assuming that machine usage was 880 hours
$enter a dollar amount
(c)      
Sum-of-the-years'-digits for 2021
$enter a dollar amount
(d)      
Double-declining-balance for 2021

The comparative statement of financial position of Blue Spruce Corporation as at December 31, 2020, follows: BLUE SPRUCE CORPORATION Statement of Financial Position December 31 December 31 Assets 2020 2019 Cash $ 53,500 $ 11,900 Accounts receivable 89,600 87,200 Equipment 26,200 21,700 Less: Accumulated depreciation (9,800 ) (10,800 ) Total $ 159,500 $ 110,000 Liabilities and Shareholders’ Equity Accounts payable $ 20,300 $ 15,500 Common shares 100,000 79,600 Retained earnings 39,200 14,900 Total $ 159,500 $ 110,000 Net income of $37,600 was reported and dividends of $13,300 were declared and paid in 2020. New equipment was purchased, and equipment with a carrying value of $4,500 (cost of $11,500 and accumulated depreciation of $7,000) was sold for $7,600. Prepare a statement of cash flows using the indirect method for cash flows from operating activities. Assume that Blue Spruce prepares financial statements in accordance with ASPE.

Question 2: A company wants to get its working capital calculated by you. You are given the following estimates for the year 2020 In addition to that add 5 percent to your figures for contingencies. Calculate the average amount of working capital required for the year 2020.

Solution:

Required                                                                                           

(a) Calculate the depreciation expense using the straight-line method for 2019 and 2020.
(b) Calculate the depreciation expense using the diminishing-balance method and a depreciation rate of 25% for 2019 and 2020.
(c) Calculate the depreciation expense using the units-of-production method for 2019, assuming the machine usage was 1.820 hours.
(d) On 31 December 2020 the company discarded a delivery truck that was purchased on 1 January 2016 for $23,650 cash including
GST of 10% and was depreciated on a straight line basis with a useful life of 6 years and a residual value of $2150 (excluding GST).
What was the profit or loss on the scrapping of the truck?

ACCOUNTING FOR LEASES
  This equipment is NOT considered a specialized one.
  Start Date: January 1, 2020
  Contract term: 3 years (The contract ends on December 31, 2022.) The property title will be transferred to the tenant free of cost when the third year ends.
  Annual payments: $ 37,174 payable on January 1 of each year. The first payment was made on 1/1/20.
  Estimated useful life for the asset: 4 years.
  Estimated residual value: zero.
  Landlord's interest rate: 12%, the tenant does NOT know it.
  Lessee's incremental borrowing rate: 10%.
  The fair value of the asset is $ 100,000.
  The original acquisition cost the lessor paid for the equipment was $ 90,000.

  REQUIRED (Read carefully and only answer what is asked, otherwise you may lose points)
  1. Prepare the journal entries to be recorded by the LESSEE on January 1, 2020.
  2. Indicate the expense accounts and the amount that the lessee will report in the 2020 statement of income and expenses (account and amount).