Carla Tool Company’s December 31 year-end financial statements contained the following errors.

An insurance premium of $64,800 was prepaid in 2020 covering the years 2020, 2021, and 2022. The entire amount was charged to expense in 2020. In addition, on December 31, 2021, fully depreciated machinery was sold for $16,300 cash, but the entry was not recorded until 2022. There were no other errors during 2020 or 2021, and no corrections have been made for any of the errors. (Ignore income tax considerations.)

(a) Compute the total effect of the errors on 2021 net income.

(b) Compute the total effect of the errors on the amount of Carla’s working capital at December 31, 2021.

(c) Compute the total effect of the errors on the balance of Carla’s retained earnings at December 31, 2021.

Indigo Tool Company’s December 31 year-end financial statements contained the following errors.

An insurance premium of $63,300 was prepaid in 2020 covering the years 2020, 2021, and 2022. The entire amount was charged to expense in 2020. In addition, on December 31, 2021, fully depreciated machinery was sold for $14,800 cash, but the entry was not recorded until 2022. There were no other errors during 2020 or 2021, and no corrections have been made for any of the errors. (Ignore income tax considerations.)

(a) Compute the total effect of the errors on 2021 net income.

(b) Compute the total effect of the errors on the amount of Indigo’s working capital at December 31, 2021.

(c) Compute the total effect of the errors on the balance of Indigo’s retained earnings at December 31, 2021.

On January 1, 2018, Surreal Manufacturing issued 600 bonds, each with a face value of $1,000, a stated interest rate of 3 percent paid annually on December 31, and a maturity date of December 31, 2020. On the issue date, the market interest rate was 4 percent, so the total proceeds from the bond issue were $583,352. Surreal uses the simplified effective-interest bond amortization method and adjusts for any rounding errors when recording interest in the final year.

Required:

1. 1. Prepare a bond amortization schedule

2. 2-5. Prepare the journal entries to record the bond issue, the interest payments on December 31, 2018 and 2019, the interest and face value payment on December 31, 2020 and the bond retirement. Assume the bonds are retired on January 1, 2020, at a price of 101.

   1. Record the issuance of 600 bonds at face value of $1,000 each for $583,352.
   2. Record the interest payment on December 31, 2018.
   3. Record the interest payment on December 31, 2019.
   4. Record the interest and face value payment on December 31, 2020.
   5. Record the retirement of the bonds at a quoted price of 101, assuming the bonds are retired on January 1, 2020.

Mr. Chai sells various types of toys throughout Malaysia. Three of the accounts in the ledger of Mr. Chai indicated the following;

Balances at 1 January 2020:

(i)           Insurance paid in advance RM562

(ii)      Wages outstanding RM306

(iii)     Rent receivable, received in advance RM36

During 2020, Mr. Chai:

(i)           Paid for insurance RM1,019, by bank standing order

(ii)      Paid RM15,000 wages, in cash

(iii)     Received RM2,600 rent, by cheque, from the tenant

At 31 December 2020:

(i)           Insurance prepaid was RM345

(ii)      Wages accrued amounted to RM419

(iii)     Rent receivable in arrears was RM105

Required;

(a)      Prepare the prepaid insurance, accrued wages and rent receivable accounts for the year ended 31 December 2020.

(b)      Prepare the income statement extract showing clearly the amounts of insurance expense, wages expense and rent revenue for the year ended 31 December 2020.

(c)                 Explain the effects on the financial statements of accounting for:

               (i)           the expenses accrued at year end

               (ii)             the income received in advance at year end

(d)               Explain the purposes of accounting for:

              (i)           the expenses accrued at year end

              (ii)              the income received in advance at year end

On May 1, 2020, Spencer Industries purchased the machine for use in its production process. The cash price of this machine was $35,000, sales tax $2,200, insurance during shipping $80, shipping costs $150, installation and testing costs $70, and $100 of oil and lubricants to be used with the machinery during its first year of operations.

Instructions:

1. Prepare the journal entry to record its purchase on May 1, 2020.

2. Compute depreciation on December 31, 2020 under the methods bellow:

A. The straight-line method of depreciation, estimates the useful life of the machine is 4 years with a $5,000 residual value remaining at the end of that time period.

B. The declining-balance method, estimates the useful life of the machine is 4 years with a $5,000 residual value remaining at the end of that time period. The rate used is twice the straight-line rate.

C. The units-of-activity method, estimates that the useful life of the machine is 125,000 units. Actual usage is as follows: 2020, 28,000 units; 2021, 37,000 units; 2022, 42,000 units; and 2023, 18,000 units.

3. The adjusting entry to record annual depreciation using straight-line method on December 31, 2020.

Grape Inc. had the following balance sheet at December 31, 2019:

Grape INC. BALANCE SHEET DECEMBER 31, 2019

Cash $ 31,000

Accounts payable $ 61,000

Accounts receivable 56,800

Notes payable (long-term) 76,000

Investments 86,000

Common stock 200,000

Plant assets (net) 138,500

Retained earnings 41,300

Land 66,000

Total assets and Total Liabilities and Stockholders' Equity $378,300 $378,300

During 2020, the following occurred:

1. Grape liquidated its available-for-sale investment portfolio at a gain of $15,000.

2. A tract of land was purchased for $61,000 cash.

3. An additional $15,200 in common stock was issued at par.

4. Dividends totaling $41,000 were declared and paid to stockholders.

5. Net income for 2020 was $46,000, including $8,000 in depreciation expense.

6. Land was purchased through the issuance of $195,000 in additional notes payable.

7. At December 31, 2020, Cash was $68,000, Accounts Receivable was $84,000, and Accounts Payable was $72,000.

Instructions:

(a) Prepare the balance sheet as it would appear at December 31, 2020

(b) Prepare a statement of cash flows for the year 2020 for Grape. Prepare all in good form.

Write a function that takes the current date and corrects the number of days, if it's wrong. The function must return true if the date passed to it is a valid date and false, if not. The main function uses the returned value to either print "Date validated", if a valid date was entered or "Invalid date entered. Changed to ", followed by the modified date.

For example: if given 11/31/2020, it will produce 12/1/2020. If given 2/29/2021, it will make it 3/1/2021. But, if 11/29/2020 is entered, it will not change it.

To check the date, the function uses the fact that months 4, 6, 9, 11 have 30 days, month 2 has 28 days in non-leap years and 29 in leap years and the remaining months have 31 days.

A year is a leap year if it's divisible by 400 or if not, it's divisible by 4, but not 100.

Example interaction between the user and the program:

Enter a date: 2/31/2021

Invalid date entered. Changed to 3/3/2021

Another example:

Enter a date: 12/32/2020

Invalid date entered. Changed to  1/1/2021

Another example:

Enter a date: 10/28/2020

Date validated.

Press any key to continue.

In its first year of business, Sweet Acacia purchased land, a building, and equipment on March 5, 2020, for $648,000 in total. The land was valued at $280,235, the building at $334,915, and the equipment at $68,350. Additional information on the depreciable assets follows:

Allocate the purchase cost of the land, building, and equipment to each of the assets.

Sweet Acacia has a December 31 fiscal year end and is trying to decide how to calculate depreciation for assets purchased during the year.

Calculate depreciation expense for the building and equipment for 2020 and 2021 assuming depreciation is calculated to the nearest month. (Round answers to 0 decimal places, e.g. 5,275.)

Sweet Acacia has a December 31 fiscal year end and is trying to decide how to calculate depreciation for assets purchased during the year.

Calculate depreciation expense for the building and equipment for 2020 and 2021 assuming a half-year's depreciation is recorded in the year of acquisition. (Round answers to 0 decimal places, e.g. 5,275.)

Question 1. Merino Plc 2019 and 2020 Balance Sheets included the following items:

Merino Plc Income Statement was as follows:

Required:

Prepare the STATEMENT OF CASH FLOWS for the year ended December 31, 2020. Additional information includes the following:

1. Equipment was purchased for $64,848 cash
2. Issued 3,360 common shares for cash at $28 per share
3. Declared and paid cash dividends during the year.

On 1 January 2019 Liam Ltd acquired 90% of the issued shares of Ian Ltd. During the year ended 31 December 2019 the following intra group transactions occurred:

• Sales of inventory:

Ian Ltd sold inventory to Liam Ltd $360,000. This inventory costed Ian Ltd $300,000. At 31 December 2019 Liam Ltd held 50% of the inventory acquired from Ian Ltd.

• Intragroup sale of equipment:

An item of equipment originally acquired by Liam Ltd on 1 January 2017 at a cost of $400,000 was sold to Ian Ltd on 1 January 2019 for $340,000. Liam Ltd had depreciated this asset at 10% per annum on a straight-line basis with no scrap value. There is no change in the asset expected life subsequent to the sale.

• During the year ended 31 December 2019 the following dividends were paid:

• Liam Ltd     $100,000
• Ian Ltd        $40,000

• On 30 June 2019 Liam Ltd lent Ian Ltd $100,000. Interest on this loan at 8% was paid up to 31 December 2019.

Required:

Prepare the consolidation journal entries required to eliminate the above intragroup transactions for the year ended 31 December 2019. Assume a tax rate of 30%.