Laura Leasing Company signs an agreement on January 1, 2020, to lease equipment to Larkspur Company. The following information relates to this agreement.

Prepare an amortization schedule that would be suitable for the lessee for the lease term. (Round answers to 0 decimal places, e.g. 5,265.)

Prepare all of the journal entries for the lessee for 2020 and 2021 to record the lease agreement, the lease payments, and all expenses related to this lease. Assume the lessee’s annual accounting period ends on December 31. (Credit account titles are automatically indented when amount is entered. Do not indent manually. Round answers to 0 decimal places, e.g. 5,265. Record journal entries in the order presented in the problem.)

ABC Corporation had the following shareholders’ equity balances at January 1, 2020:

Common shares, unlimited authorized, 400,000 issued                                       $800,000

Retained earnings                                                                                             120,000                     

Accumulated other comprehensive income                                                                30,000

The following events occurred in 2020:

• Issued 50,000 common shares for $150,000 cash.
• Declared and paid cash dividends of $25,000.
• Reported net income of $40,000.
• Reported other comprehensive income of $10,000.
• At the end of the year, the fair market value of common shares was $5/share.
• Completed a 2:1 stock-split.

Required:

1. Prepare a statement of changes in equity using the following tabular format (i.e., input numbers into the table below):

2. Would your answer to part a) above change if the company paid a stock dividend rather than a cash dividend? Explain.

3. Briefly explain why the shareholders’ equity section is important to users of financial statements.
4. Provide your views on the following quote from the President of Medical Ltd, a struggling pharmaceutical company that focuses on developing new and innovative medications:

“Investors are important. We need to please them. We need to maintain a high dividend payout ratio…whatever it takes…I want to show an increasing dividend payout ratio….”

Alta Products Ltd. has just created a new division to manufacture and sell DVD players. The facility is highly automated and thus has high monthly fixed costs, as shown in the following schedule of budgeted monthly costs. This schedule was prepared based on an expected monthly production volume of 2,000 units. Manufacturing costs Variable costs per unit Direct materials $  30 Direct labour 40 Variable overhead 10 Total fixed overhead 70,000 Selling and administrative costs Variable 6% of sales Fixed $50,000 During August 2020, the following activity was recorded: Units produced 2,000 Units sold 1,700 Selling price per unit $  175 Instructions

a. Prepare an income statement for the month ended August 31, 2020, under absorption costing. Net income $34,150

b. Prepare an income statement for the month ended August 31, 2020, under variable costing. Net income $23,650

c. Reconcile the absorption-costing and variable-costing income figures for the month.

d. Prepare an income statement for the month ended August 31, 2020, under throughput costing.

e. Reconcile the variable-costing income and throughput-costing income figures for the month.

f. What are some of the arguments in favour of using variable costing? What are some of the arguments in favour of using absorption costing?

Sunland Sports began operations on January 2, 2020. The following stock record card for footballs was taken from the records at the end of the year.

A physical inventory on December 31, 2020, reveals that 120 footballs were in stock. The bookkeeper informs you that all the discounts were taken. Assume that Sunland Football Shop uses the invoice price less discount for recording purchases.

Compute the December 31, 2020, inventory using the FIFO method. (Round per unit and final answer to 2 decimal paces, e.g. 35.57.)

Compute the 2020 cost of goods sold using the LIFO method. (Round per unit and final answer to 2 decimal paces, e.g. 35.57.)

35) The following aging information pertains to Jacobsen Co.'s accounts receivable at December 31, 2021:

During 2021, Jacobsen wrote off $18,000 in receivables and recovered $6,000 that had been written off in prior years. Jacobsen's December 31, 2020, allowance for uncollectible accounts was $40,000. Using the balance sheet approach, what amount of allowance for uncollectible accounts should Jacobsen report at December 31, 2021?

A) $55,400.

B) $28,000.

C) $49,400.

D) $31,400.

Problem 1

Beavis Construction Company was the low bidder on a construction project to build an earthen dam for $1,800,000. The project was begun in 2020 and completed in 2021. Cost and other data are presented below:

                                                                          2020                           2021

Costs incurred during the year                    $ 450,000                  $1,100,000

Estimated costs to complete                       1,050,000                                  0

Billings during the year                                400,000                    1,400,000

Cash collections during the year                   300,000                    1,500,000

Assume that Beavis recognizes revenue on this contract over time according to percentage of completion.

Required:

1. Prepare all journal entries to record costs, billings, collections, and profit recognition for

    2020

2. Prepare all journal entries to record costs, billings, collections, profit recognition and     

     completion of the project for 2021

The following list of accounts is taken from the December 31, 2020, unadjusted trial balance of Perdu Sales, a business that is owned by Eldon Perdu.

Additional information:
Accrued sales salaries amount to $3,200. Prepaid selling expenses of $5,200 have expired. Depreciation for the period is $2,500.

Required:
Assuming a perpetual inventory system, complete the following:

a. Journalize the adjusting journal entries.

b. Prepare a classified multiple-step income statement for the year ended December 31, 2020.

Analysis Component:
Assume that for the year ended December 31, 2019, net sales were $600,000; operating expenses were $344,000; and there was a loss of $14,000. Calculate the company’s gross profit ratios for 2019 and 2020. (Do not round intermediate calculations. Round your final answers to 2 decimal places.)

2019= gross profit %

2020= gross profit%

On January 1, 2018, Pomegranate Company acquired 90% of the voting stock of Starfruit Company for $91,700,000 in cash. The fair value of the noncontrolling interest in Starfruit at the date of acquisition was $6,300,000. Starfruit’s book value was $13,000,000 at the date of acquisition. Starfruit’s assets and liabilities were reported on its books at values approximating fair value, except its plant and equipment (10-year life, straight-line) was overvalued by $25,000,000. Starfruit Company had previously unreported intangible assets, with a market value of $40,000,000 and 5-year life, straight-line, which were capitalized following GAAP.

Additional information: Pomegranate uses the complete equity method to account for its investment in Starfruit on its own books. Goodwill recognized in this acquisition was impaired by a total of $2,000,000 in 2018 and 2019, and by $500,000 in 2020. It is now December 31, 2020, the accounting year-end.

Here is Starfruit Company’s trial balance at December 31, 2020:

Dr (Cr)

Current assets $28,200,000

Plant & equipment, net 188,000,000

Intangibles 2,000,000

Liabilities (180,000,000)

Capital stock (1,000,000)

Retained earnings, January 1 (29,500,000)

Acumulated other comprehensive income, January 1 (500,000)

Dividends 400,000

Sales revenue (24,000,000)

Cost of goods sold 10,000,000

Operating expenses 6,500,000

Other comprehensive income (100,000)

Question:

On the 2020 consolidated income statement, the noncontrolling interest in net income of Starfruit is

$150,000

$175,000

$200,000

$750,000

On January 1, 2018, Pomegranate Company acquired 90% of the voting stock of Starfruit Company for $91,700,000 in cash. The fair value of the noncontrolling interest in Starfruit at the date of acquisition was $6,300,000. Starfruit’s book value was $13,000,000 at the date of acquisition. Starfruit’s assets and liabilities were reported on its books at values approximating fair value, except its plant and equipment (10-year life, straight-line) was overvalued by $25,000,000. Starfruit Company had previously unreported intangible assets, with a market value of $40,000,000 and 5-year life, straight-line, which were capitalized following GAAP.

Additional information:

Pomegranate uses the complete equity method to account for its investment in Starfruit on its own books. Goodwill recognized in this acquisition was impaired by a total of $2,000,000 in 2018 and 2019, and by $500,000 in 2020. It is now December 31, 2020, the accounting year-end. Here is Starfruit Company’s trial balance at December 31, 2020:

On the 2020 consolidation working paper, eliminating entry (R) reduces the Investment in Starfruit by

$ 3,600,000

$64,800,000

$68,200,000

$81,000,000

Larsen’s Creamery has a costing system with two direct cost categories: direct materials and direct manufacturing labor. Manufacturing overhead (both variable and fixed) is allocated to products on the basis of standard direct manufacturing labor-hours (DLH). At the beginning of 2020 Larsen adopted the following manufacturing cost standards. Input Cost per Output Unit Direct materials 3 lb. at $5 per lb. $15.00 Direct manufacturing labor 5 hours at $15 per hour $75.00 Manufacturing overhead Variable $6 per DLH $30.00 Fixed $8 per DLH $40.00 Standard manufacturing cost per output unit $160.00 The denominator level for total manufacturing overhead per month in 2020 is 40,000 direct manufacturing labor-hours. Larsen’s flexible budget for March 2020 was based on this denominator level. The records for March 2020 indicated the following: Direct materials purchased 25,000 lb. at $5.20 per lb. Direct materials used 23,100 lb. Direct manufacturing labor 40,100 hours at $14.60 per hour Actual fixed manufacturing overhead $350,000 Actual variable manufacturing overhead $250,000 Actual production 7,800 output units

Write a memo to managers about the issues you see and what actions you would recommend. Comment on how sustainability issues would influence your recommendation.