The 2016 Form 10-K of NetFlix includes the following footnoted information. Use this information to answer the required.

The computation of net income per share is as follows:

Employee stock options with exercise prices greater than the average market price of the common stock were excluded from the diluted calculation as their inclusion would have been anti-dilutive.

The following table summarizes the potential common shares excluded from the diluted calculation (in thousands):

Required:

Penny's Pool Service & Supply, Inc. (PPSS) is completing the accounting process for the year just ended, December 31, 2015. The transactions during 2015 have been journalized and posted. The following data with respect to adjusting entries are available:

1. PPSS owed $7,500 wages to the office receptionist and three assistants for working the last 10 days in December. The employees will be paid in January 2016.

2.On October 1, 2015, PPSS received $24,000 from customers who prepaid pool cleaning service for one year beginning on November 1, 2015.

3.The company received a $520 utility bill for December utility usage. It will be paid in January 2016.

4.PPSS borrowed $30,000 from a local bank on May 1, 2015, signing a note with a 10 percent interest rate. The note and interest are due on May 1, 2016.

5.On December 31, 2015, PPSS cleaned and winterized a customer's pool for $800, but the service was not yet recorded on December 31.

6.On August 1, 2015, PPSS purchased a two-year insurance policy for $4,200, with coverage beginning on that date. The amount was recorded as Prepaid Insurance when paid.

7.On December 31, 2015, PPSS had $3,100 of pool cleaning supplies on hand. During 2015, PPSS purchased supplies costing $23,000 from Pool Corporation, Inc., and had $2,400 of supplies on hand on December 31, 2014.

8.PPSS estimated that depreciation on its buildings and equipment was $8,300 for the year.

9.At December 31, 2015, $110 of interest on investments was earned that will be received in 2016.

Required:   Prepare adjusting entries for Penny's Pool Service & Supply, Inc., on December 31, 2015.

The condensed financial statements of Ness Company for the years 2016 and 2017 are presented below. NESS COMPANY Balance Sheets December 31 (in thousands) 2017 2016 Current assets Cash and cash equivalents $330 $360 Accounts receivable (net) 470 400 Inventory 460 390 Prepaid expenses 130 160 Total current assets 1,390 1,310 Property, plant, and equipment (net) 410 380 Investments 10 10 Intangibles and other assets 530 510 Total assets $2,340 $2,210 Current liabilities $820 $790 Long-term liabilities 480 380 Stockholders’ equity—common 1,040 1,040 Total liabilities and stockholders’ equity $2,340 $2,210 NESS COMPANY Income Statements For the Year Ended December 31 (in thousands) 2017 2016 Sales revenue $3,800 $3,460 Costs and expenses Cost of goods sold 970 890 Selling & administrative expenses 2,400 2,330 Interest expense 10 20 Total costs and expenses 3,380 3,240 Income before income taxes 420 220 Income tax expense 168 88 Net income $ 252 $ 132 Compute the following ratios for 2017 and 2016. (Round current ratio and inventory turnover to 2 decimal places, e.g 1.83 and all other answers to 1 decimal place, e.g. 1.8 or 12.6%.) (a) Current ratio. (b) Inventory turnover. (Inventory on December 31, 2015, was $340.) (c) Profit margin. (d) Return on assets. (Assets on December 31, 2015, were $1,900.) (e) Return on common stockholders’ equity. (Equity on December 31, 2015, was $900.) (f) Debt to assets ratio. (g) Times interest earned.

Your client is Hobartcorp Ltd, a diversified business operating throughout Australia. Year-end was 30 June 2016, the auditor’s report was signed on 31 July 2016 and the financial statements were mailed to shareholders on 14 August 2016.

During your subsequent events review, you noted the following independent and material items:

1. Hobartcorp has been involved in a legal dispute with a competitor for a number of years. The dispute relates to alleged breaches of copyright by Hobartcorp. On 27 July, you discovered that Hobartcorp had settled the legal action out of court on terms more favourable than expected.

2. As for (1) above, except that the legal action was settled on 5 August.

3. On 10 July, one of Hobartcorp’s major product lines developed a fault that rendered the product unusable. Hobartcorp became aware of the fault on 30 July. Although the fault posed no safety risks to consumers, Hobartcorp decided to launch a full product recall on the following day.

4. On 30 July 2016, the Bureau of Meteorology issued a cyclone warning for parts of Far North Queensland. Hobartcorp has a large sugar cane plantation in this area. On 2 August, the cyclone hit, wiping out about 90% of the crop.

5. In early June, one of Hobartcorp’s largest debtors informed Hobartcorp that it was experiencing serious financial difficulties. On 5 July, Hobartcorp was informed that the debtor had gone into receivership. Preliminary reports suggest Hobartcorp will recover only 10 cents in the dollar of the outstanding debt

REQUIRED: (a) Outline the key additional procedures you should have performed in relation to each of the above events.

(b) What actions should you have recommended to management in relation to each of the above events?

Prepare journal entries for each of the transactions and adjustments

Chapati Company started business on January 1, 2016. Some of the events that occurred in its first year of operations follow:

1.An insurance policy was purchased on February 28 for $1,800.

2.During the year, inventory costing $140,000 was purchased, all on account.

3.Sales to customers totalled $200,000. Of these, $40,000 were cash sales.

4.Payments to suppliers for inventory that had been purchased earlier totalled $110,000.

5.Collections from customers on account during the year totalled $140,000.

6.Customers paid $25,000 in advance payments for goods that will be delivered later.

7.Equipment that cost $140,000 was purchased on October 1 for $40,000 cash plus a two-year, 10% note with a principal amount of $100,000.

8.Wages totalling $44,000 were paid to employees during the year.

9.The board of directors declared dividends of $12,000 in December 2016, to be paid in January 2017.

10.A year-end review revealed that the insurance policy (in item 1) was for one year of coverage that began on March 1, 2016.

11.The equipment that was purchased (in item 7) on October 1, 2016, is to be depreciated using the straight-line method, with an estimated useful life of 10 years and an estimated residual value of $20,000.

12.No interest was paid on the note during the year.

13.A physical count at year end revealed $20,000 of unsold inventory still on hand.

14.It was determined that 80% of the goods that were paid for in advance (in item 6) had been delivered to the customers by the end of the year.

15.In addition to the wages that were paid during the year, wages of $4,000 remained unpaid at the end of the year.

In 2015, Slim Drug Company began to notice problems with its obesity drug. The company stopped selling the drug near the end of 2015. In the last six months of 2016, the company was sued by 1,000 people who had an allergic reaction to the company's obesity drug. At the end of 2016, the company's attorneys believe there is a 60% chance the company will need to make payments in the range of $1,000 to $5,000 to settle each claim. At the end of 2017, while none of the cases have been resolved, the company's attorneys now believe there is an 80% chance the company will need to make payments in the range of $2,000 to $7,000 to settle each claim. In 2018, 400 claims were settled at a total cost of $1.2 million. Based on this experience, the company believes 30% of the remaining cases will be settled for $3,000 each, 50% will be settled for $5,000 and 20% will be settled for $10,000 each.

Using IFRS what journal entries would be required in 2016?

a. There would be no entry since no claims had be made

b. There would be a debit to prepaid legal provision expense and a credit to legal provision for claims of $3,000,000.

c. There would be a debit to litigation expense and a credit to legal provision for claims of $3,000,000

d. There would be recorded as a long-term liability as the claim is possible.

Using U.S. GAAP what journal entries would be required in 2016?

a. There would be a debit to accrued legal provision expenseand a credit to legal provision for claims of $3,000,000.

b. There would be no entry since no claims had be made

c. There would be a debit to litigation expense and a credit to legal provision for claims of $2,000,000

d. There would be recorded as a long-term liability as the claim is possible.

Estimating Share Value Using the DCF Model
Following are forecasts of Target Corporation's sales, net operating profit after tax (NOPAT), and net operating assets (NOA) as of January 30, 2016

Answer the following requirements assuming a terminal period growth rate of 1%, a discount rate (WACC) of 6%, common shares outstanding of 602 million, and net nonoperating obligations (NNO) of $8,488 million.

a. Estimate the value of a share of Target common stock using the discounted cash flow (DCF) model as of January    30, 2016.

Instructions:

• Round all answers to the nearest whole number, except for discount factors and stock price per share.

• Round discount factors to 5 decimal places.
• Round stock price per share to two decimal places.
• Do not use negative signs with any of your answers.

Problem 11-4A Warranty expense and liability estimation LO P4

[The following information applies to the questions displayed below.]

On October 29, 2016, Lobo Co. began operations by purchasing razors for resale. Lobo uses the perpetual inventory method. The razors have a 90-day warranty that requires the company to replace any nonworking razor. When a razor is returned, the company discards it and mails a new one from Merchandise Inventory to the customer. The company's cost per new razor is $15 and its retail selling price is $60 in both 2016 and 2017. The manufacturer has advised the company to expect warranty costs to equal 5% of dollar sales. The following transactions and events occurred.

2016

2017

3. How much warranty expense is reported for January 2017?
  

4. What is the balance of the Estimated Warranty Liability account as of December 31, 2016?

5. What is the balance of the Estimated Warranty Liability account as of January 31, 2017?

Problem 1:

Kingdom Leasing Inc. agrees to lease jousting equipment to Knight Inc. on Jan 1, 2016. They agree on the following terms: 1) The normal selling price of the jousting equipment is $410000 and the cost of the asset to Kingdom Leasing Inc. was $250000. 2) Knight will pay all maintenance, insurance, and tax costs directly and annual payments of $60000 on Jan 1 each year. 3) The lease begins on Jan 1, 2016 and payments will be in equal annual installments. 4) The lease is noncancelable with no renewal option. The lease term is 10 years (the same as the estimated economic life). 5) At the end of the lease, the jousting ring will revert to Kingdom Leasing Inc. and have an unguaranteed residual value of $30000. Their implicit interest rate is 10%. 6) Kingdom Leasing, Inc. incurred costs of $6500 in negotiating and closing the lease. There are no uncertainties regarding additional costs yet to be incurred and the collectability of the lease payments is reasonably predictable. Required: a) Determine what type of lease this would be for Kingdom Leasing Inc. and calculate the following: (Show all work.) Lease Receivable Sales Price Cost of Sales b) Prepare Kingdom's amortization schedule for the lease terms. c) Prepare all the journal entries for Kingdom for 2016. Assume a calendar year fiscal year.

  Problem 2:

Use the data given in Problem #1 and answer the required questions to record the lease in the Knight Inc.’s books. Required: a) Determine what type of lease this would be for the lessee and calculate the initial obligation. b) Prepare Knight Inc.'s amortization schedule for the lease terms. c) Prepare all the journal entries for Knight Inc. for 2016. Assume a calendar year fiscal year.