Culver Inc., a greeting card company that follows ASPE, had the following statements prepared as at December 31, 2020:

CULVER INC.
Comparative Statement of Financial Position
December 31
2020      2019
Cash     $47,775         $25,090     
Accounts receivable   57,930         51,030     
Inventory      39,990         60,070     
Prepaid rent      5,210         4,100     
Equipment      161,990         130,120     
Accumulated depreciation–equipment      (35,210   )      (25,100   )
Goodwill      28,000         68,000     
    Total assets      $305,685         $313,310     
                        
Accounts payable      $46,190         $40,120     
Income tax payable      3,990         6,070     
Salaries and wages payable      8,090         4,090     
Short–term loans payable      7,930         10,030     
Long–term loans payable      68,000         87,000     
Common shares      130,000         130,000     
Retained earnings      41,485         36,000     
    Total liabilities and shareholders’ equity      $305,685         313,310     

CULVER INC.
Income Statement
Year Ending December 31, 2020
Sales revenue               $348,490
Cost of goods sold               165,000
Gross margin               183,490
Operating expenses               120,000
Operating income               63,490
Interest expense      $12,100           
Impairment loss–goodwill      40,000           
Gain on disposal of equipment      (2,400   )      49,700
Income before income tax               13,790
Income tax expense               4,105
Net income               $9,685

Additional information:

1.      Dividends on common shares in the amount of $4,200 were declared and paid during 2020.
2.      Depreciation expense is included in operating expenses, as is salaries and wages expense of $70,000.
3.      Equipment with a cost of $36,000 that was 70% depreciated was sold during 2020.

Prepare a statement of cash flows using the direct method. (Show amounts that decrease cash flow with either a - sign e.g. -10,000 or in parenthesis e.g. (10,000).)

         Problem Set 8 Addendum:

1.      There is one more topic in population genetics that I wanted to touch on, but did not get a chance to cover in lecture. We did discuss why genetic drift is of concern in zoo populations due to small population size. Related phenomena are when a natural population goes through a population bottleneck (a reduction of population size due to a severe natural event (flood, fire, severe storm) or due to human activity (habitat destruction, hunting to near extinction) or a founder effect (i.e. a small founder population derived from a larger mainland population is established on an island). See Campbell p. 493. In such events the chance survivors or chance founders (not based on better traits, just chance) represent very small numbers of individuals and in such cases the effects of drift can be very strong.

            Elephant seals are a good example of the effect of a population bottleneck on the level of genetic variation in the population. In the 1890s hunting reduced the northern elephant seal population from thousands of individuals to 20 individuals. Under a hunting ban the population increased and now numbers about 30,000. In a sample of 24 protein coding genes in the present-day population , only three loci were polymorphic. The level of polymorphism was much higher in the southern elephant seal population, that was not reduced to very low population size. In the northern population, the population size has increased, but the level of genetic variation has not. The northern and southern elephant seals are different species and separated geographically, so migration between the northern and southern populations cannot replenish genetic variation in the northern elephant seals. What is the only force that can replenish genetic variation in the Northern elephant seal population? Why hasn’t this force been able to replenish genetic variation in >100 years? Answer: the only force of evolution that can replenish genetic variation in the population is mutation. Mutations rates are so low that it will take thousands of generations for mutation to replenish genetic variation in the northern elephant seal population. A similar example is discussed in Campbell (pp.493-494).

            Problem Set 9           

            Use your lecture notes, lecture slides, and Campbell text to answer the questions below.

1.      Use class notes and Campbell’s section on Hierarchical Classification (pp. 552-553) to answer the following. Explain the Linnaean system of classification used to organize biological diversity. This system of classification is a hierarchical system. What does that mean? Define a Genus. What is a Family, and why would members of several genera be placed in the same family? You could answer the same for higher level groups up the taxonomic hierarchy. How do biosystematists (biologists who classify organisms, also sometimes called “taxonomists”) decide where to place a newly described species within the hierarchy? Answer: a systematist who is an expert in a particular group (a Family of beetles for example) analyzes the phenotypic and genetic similarity of the new species to existing known species in the Family to decide in which Genus to place the new species).

   2.      Explain how species are defined under the Biological Species Concept (BSC) (see class notes and Campbell pp. 505-508).   Reproductive isolation is an important part of the BSC. What is meant by reproductive isolation of two species? Note that the test of the BCS is that two species must be reproductively isolated in Nature. Horses and donkeys can mate and produce a hybrid mule offspring that is sterile. Why are horses and donkeys considered different species under the BSC? How do the different diploid numbers in the two species help explain hybrid sterility? (Note that to produce a mule horses and donkeys are forced to mate by humans and this only occurs under domestication, not in nature).

3.       Explain in general terms geological theory of uniformitarianism originally proposed by Hutton and later supported by Lyell.   Why did this theory suggest that the age of the earth was many millions of years? Lyell was a contemporary and friend of Darwin.

            S18: We did not discuss the theory of uniformitarianism this year, but geologists before and during Darwin’s time had proposed that the earth was far older than the 6,000 year age accepted by biblical creationists of the time (and accepted by most of the scientific “establishment”). Briefly, the geological theory of Uniformitarianism proposed that the monumental geological formations that we observe on earth today (the Grand Canyon for example) were produced over extremely long periods of time by the same slow gradual geological processes (erosion, deposition of sediments, volcanism) that we see operating around us today. Based on his observations and calculations Lyell (a geologist and friend of Darwin) estimated that the earth was more that 300 million years old. Today geologists using modern methods estimate the age of the earth at approximately 4.6 billion years. Darwin was strongly influenced by Lyell’s writings on uniformitarianism and used the idea of slow gradual change over long periods of geologic time in his explanation of how complex adaptations form from originally simple forms. The idea of uniformitarianism was also important because it provided the time scale necessary for process of evolution to produce the diversity of life that we observe around us and in the fossil record.

The labor supply and demand equations in Mexico and the US are Ndmex =140–2Wmex andNsmex =80 NdUS =600–4WUS andNsUS =260 (Notice: To make the exercise simple, we are assuming that the labor supply curves are perfectly vertical at 80 in México and at 260 in the US). where Ndmex and NdUS are the number of workers demanded in Mexico and the US (in millions of workers). Wmex and WUS are the yearly wage rates in Mexico and the US (in of your textbook. thousands of dollars). Nsmex and NsUS are the number of workers supplied in Mexico and the US (in millions of workers).

a. What are the equilibrium wages in Mexico and the US.

b. Due to the higher US wages (see your answer to part a), millions of Mexican workers want to emigrate to the US. However, the US inmigration authorities issue work permits for only 10 million Mexican workers. How will this limited flow of Mexican workers affect wages both in Mexico and the US (hint: if these flows take place, how many workers will there be left in México, how many workers will there be in the US, i.e., how do the labor supply curves shift?).

c. If an unlimited flow of Mexican workers is allowed (free movement of labor across borders), at the end, wages will be equal in both countries (basically, in practice, there will be just one unified labor market). What would be this wage? How many Mexican workers will emigrate to the US? How many Mexican workers will be demanded in the US? At the end, how many workers will there be in México and the US? (Hint: Find the total labor supply and demand equations).

The Queen of the Snows started a business, Winter Carnival Co., a company that specializes in merchandise for ice-fishing, snow-sliding, treasure-hunting and other winter activities. In 2017, the company had the following beginning balances (in dollar). Accounts receivable $60,000 Accounts payable $30,000 Allowance for doubtful accounts $6,000 Accumulated depreciation – machine $50,000 Cash $25,000 Common stock $100,000 Inventory $300,000 Machine $150,000 Prepaid advertisement $27,000 Notes payable $200,000 Salary payable $5,000 Retained earnings $171,000 During 2017, the following transactions occurred. 1.Winter Carnival acquired additional merchandise, totaled $90,000, of which $60,000 was on account. 2.Winter Carnival delivered merchandise and earned sales revenue, totaled $550,000, of which $150,000 was on credit. Cost, to Winter Carnival Co., of the merchandise sold, totaled $300,000. 3.Winter Carnival collected a total of $120,000 on its accounts receivable from its various customers. 4.Winter Carnival borrowed $50,000 on May 1, 2017 from a local bank, on a 6% note for 5 years. Winter Carnival would pay interest semi-annually on each May 1 and November 1. 5.In addition, Winter Carnival signed a sales contract with a customer, Mini-Soda Company to deliver a total of $100,000 merchandise January 2018. Winter Carnival collected $10,000 cash in advance from this customer on November 17, 2017. 6.Winter Carnival paid $70,000 on its accounts payable to its suppliers. 7.Winter Carnival incurred insurance expenses of $12,000, all paid in cash in 2017. 8.Winter Carnival paid its employees $95,000 cash for their salary. At the end of year 2017, the company still owed $3,000 salary payable to its employees. The following information was also available during 2017 for Winter Carnival Co. 9.Its existing “notes payable” at the beginning of the year 2017 had a due date in 2020 and an interest rate of 3%. The interest would be paid in cash at the end of each calendar year. 10.The ending balance of “allowance for doubtful accounts” was estimated to be 10% of the ending balance of its “accounts receivable” at the end of 2017. 2 11.Its ‘prepaid advertisement’ had 18 months remaining at the beginning of the year 2017. 12.The existing machine had an estimated life of 15 years with no residual value and had been depreciated using the straight-line method. And lastly, 13.The income tax rate was 20% for Winter Carnival and the company would pay its income tax in the first quarter of 2018. Required: 1.Based on above transactions, prepare journal entries and adjusting entries in 2017 for Winter Carnival. 2.Set up T-accounts and post your journal entries and adjusting entries to T-accounts. (A kind reminder: Don’t forget the beginning balances.) 3.Prepare a pre-closing trial balance, as of December 31, 2017. 4.Prepare an income statement, in a good format, for the year ended December 31, 2017 for Winter Carnival. 5.Prepare a statement of retained earnings, in a good format, for the same period for Winter Carnival. 6.Prepare a balance sheet, in a good format, as of December 31, 2017 for Winter Carnival. 7.Prepare closing entries and a post-closing trial balance, as of December 31, 2017.

The Queen of the Snows started a business, Winter Carnival Co., a company that specializes in merchandise for ice-fishing, snow-sliding, treasure-hunting and other winter activities. In 2017, the company had the following beginning balances (in dollar).

Accounts receivable $60,000 Accounts payable $30,000 Allowance for doubtful accounts $6,000 Accumulated depreciation – machine $50,000 Cash $25,000 Common stock $100,000 Inventory $300,000 Machine $150,000 Prepaid advertisement $27,000 Notes payable $200,000 Salary payable $5,000 Retained earnings $171,000  

During 2017, the following transactions occurred.  
1. Winter Carnival acquired additional merchandise, totaled $90,000, of which $60,000 was on account.
2. Winter Carnival delivered merchandise and earned sales revenue, totaled $550,000, of which $150,000 was on credit. Cost, to Winter Carnival Co., of the merchandise sold, totaled $300,000.
3. Winter Carnival collected a total of $120,000 on its accounts receivable from its various customers.
4. Winter Carnival borrowed $50,000 on May 1, 2017 from a local bank, on a 6% note for 5 years. Winter Carnival would pay interest semi-annually on each May 1 and November 1.
5. In addition, Winter Carnival signed a sales contract with a customer, Mini-Soda Company to deliver a total of $100,000 merchandise January 2018. Winter Carnival collected $10,000 cash in advance from this customer on November 17, 2017.
6. Winter Carnival paid $70,000 on its accounts payable to its suppliers.
7. Winter Carnival incurred insurance expenses of $12,000, all paid in cash in 2017.
8. Winter Carnival paid its employees $95,000 cash for their salary. At the end of year 2017, the company still owed $3,000 salary payable to its employees.
The following information was also available during 2017 for Winter Carnival Co.
9. Its existing “notes payable” at the beginning of the year 2017 had a due date in 2020 and an interest rate of 3%. The interest would be paid in cash at the end of each calendar year.  
10. The ending balance of “allowance for doubtful accounts” was estimated to be 10% of the ending balance of its “accounts receivable” at the end of 2017.

2

11. Its ‘prepaid advertisement’ had 18 months remaining at the beginning of the year 2017.
12. The existing machine had an estimated life of 15 years with no residual value and had been depreciated using the straight-line method. And lastly,
13. The income tax rate was 20% for Winter Carnival and the company would pay its income tax in the first quarter of 2018.  

Required:
1. Based on above transactions, prepare journal entries and adjusting entries in 2017 for Winter Carnival.
2. Set up T-accounts and post your journal entries and adjusting entries to T-accounts. (A kind reminder: Don’t forget the beginning balances.)
3. Prepare a pre-closing trial balance, as of December 31, 2017.
4. Prepare an income statement, in a good format, for the year ended December 31, 2017 for Winter Carnival.
5. Prepare a statement of retained earnings, in a good format, for the same period for Winter Carnival.
6. Prepare a balance sheet, in a good format, as of December 31, 2017 for Winter Carnival.
7. Prepare closing entries and a post-closing trial balance, as of December 31, 2017.

In the green cells calculate total Gross Profit (i.e., Sales - COGS) using the condition(s) as specified and without creating a helper column, using Filters, or Pivot Tables.

B Inc. began operations in January 2018 and reported the following results for each of its 3 years of operations.

At December 31, 2020, B Inc. capital accounts were as follows.

B Inc. has never paid a cash or stock dividend. There has been no change in the capital accounts since B began operations. The state law permits dividends only from retained earnings.

(a) Compute the book value of the common stock at December 31, 2020. (Round answers to 2 decimal places, e.g. $38.50.)

(b) Compute the book value of the common stock at December 31, 2020, assuming that the preferred stock has a liquidating value of $104 per share. (Round answers to 2 decimal places, e.g. $38.50.)

On January 1, 2020, Crane Corp., which uses IFRS, signs a 10-year, non-cancellable lease agreement to lease a specialty lathe from Liu Inc. The following information concerns the lease agreement.

calculate the amount of the right-of-use asset and lease liability and prepare the initial entry to reflect the signing of the lease agreement

Prepare the journal entries on Crane Corp.’s books to record the payments and expenses related to this lease for the years 2020 and 2021 as well as any adjusting journal entries at its fiscal year ends of December 31, 2020 and 2021. Crane does not use reversing entries. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. Round answers to 2 decimal places, e.g. 5,275.25.)

Ayayai Inc. began operations in January 2018 and reported the following results for each of its 3 years of operations. 2018 $246,000 net loss 2019 $38,000 net loss 2020 $835,000 net income At December 31, 2020, Ayayai Inc. capital accounts were as follows. 8% cumulative preferred stock, par value $100; authorized, issued, and outstanding 5,400 shares $540,000 Common stock, par value $1.00; authorized 1,000,000 shares; issued and outstanding 693,000 shares $693,000 Ayayai Inc. has never paid a cash or stock dividend. There has been no change in the capital accounts since Ayayai began operations. The state law permits dividends only from retained earnings.
(a) Compute the book value of the common stock at December 31, 2020. (Round answers to 2 decimal places, e.g. $38.50.) Book value per share $enter a dollar amount of the book value of the common stock at December 31, 2020 rounded to 2 decimal places.
(b) Compute the book value of the common stock at December 31, 2020, assuming that the preferred stock has a liquidating value of $105 per share. (Round answers to 2 decimal places, e.g. $38.50.) Book value per share $enter the book value per share in dollars rounded to 2 decimal places