1). Which of the following is not included in a security agreement?

Select one:

a. Reference to the finance statement.

b. Reference to the loan.

c. Creation of the security interest.

d. Description of the collateral.

2)

A secured creditor's interest in after-acquired property might include

Select one:

a. new inventory to replace sold inventory.

b. equipment purchased after the initial loan is disbursed, but paid for with money from that loan.

c. Both constitute after-acquired property.

d. Neither, a creditor may not have an interest in after-acquired property. A

3)

Between two unperfected secured creditors,

Select one:

a. Both unperfected creditors become unsecured creditors.

b. the first to perfect has priority over the collateral.

c. the first to attach has priority over the collateral.

5).

Perfection

Select one:

a. gives notice to third parties (usually other creditors) that this creditor has a security interest in the collateral.

b. gives the creditor a priority interest in the collateral securing her loan.

c. accomplished both of these tasks.

6)

In which of the following situations can a security interest be perfected without filing a Finance Statement?

Select one:

a. Possession of the collateral.

b. Perfection by automatic attachment of consumer goods that are purchased on credit from the seller.

c. Both of these are ways to perfect without filing.

d. Neither of these are ways to perfect without filing. A creditor must always file a Finance Statement.

Seashell Corp. was organized to consolidate Sea Company and Shell Company in a business combination. Seashell issued 25,000 shares of its newly authorized $10 par value common stock in exchange for all of the outstanding common stock of Sea and Shell. At the time of the consolidation, the fair value of Sea's and Shell's assets and liabilities are equal to their book values. The shareholders' equity accounts of Sea and Shell on the date of the consolidation were:

Which one of the following is the amount of goodwill Seashell would recognize upon issuing its common stock to effect the consolidation?

You Answered Correctly! (Answer is A, $0)

Explanation:

Since Seashell's stock is newly issued to effect the consolidation, it has no prior market value. In the absence of a market value, the fair value of Seashell's stock is determined by the fair value of the net assets acquired in the consolidation. Therefore, the consideration given (common stock issued) is equal to the fair value of net assets acquired, and no goodwill is recognized

For this problem what would be "the fair value of the net assets acquired in the consolidation" as stated in the answer explanation above? Also, please explain as simple as possible why goodwill is not recognized because I still can't seem to understand why it isn't with the explanation above?

1)Presents Inc. acquired all of the outstanding common stock of Santa Co. on January 1, 2017, for $257,000. Annual amortization of $19,000 resulted from this acquisition. Presents reported net income of $70,000 in 2017 and $50,000 in 2018 and paid $22,000 in dividends each year.

Santa reported net income of $40,000 in 2017 and $47,000 in 2018 and paid $10,000 in dividends each year. On the consolidated financial statements for 2017,

a)what amount should have been shown for Equity in Subsidiary Earnings?

A. $0.
B. $30,000.
C. $60,000.
D. $70,000.

b)what amount should have been shown for consolidated dividends?
A. $0.
C. $22,000.
D. $32,000.
E. $64,000.

2)Presents Inc. acquired all of the outstanding common stock of Santa Co. on January 1, 2017. On that date, Santa had a building with a book value of $200,000 and a fair value of $410,000. Santa had equipment with a book value of $350,000 and a fair value of $340,000. The building had a 10-year remaining useful life and the equipment had a 5-year remaining useful life. How much total expense will be in the consolidated financial statements for the year ended December 31, 2017 related to Santa’s building acquired by Presents?

A. $19,000.
C. $20,000.
D. $41,000.
E. 0.

. Answer the following questions:

a-A tax payer acquires an asset through manufacturing it and he incurred the following costs: direct material SR 100,000, direct labor SR 50,000 and manufacturing overhead SR 50,000. After 3 years the taxpayer disposed of that assets for SR250,000 cash

Required: Compute the taxable gain or loss.

b-A tax payer acquired a non-depreciable asset for SR 200,000 and he incurred subsequent expenses for SR 30,000 to alter and improve that asset, after 2 years the tax payer disposed of that asset for SR 215,000 cash.

Required: Compute the taxable gain or loss.

c-A tax payer acquired an asset for SR 100,000 and subsequently he disposed of that assets as a gift.

Required: how much is taxable gain if the market value of that assets at date of disposing for SR120,000.

d- A tax payer acquired an asset for SR 150,000 through borrowing and he subsequently disposed of that assets when the market value of the asset was SR 140,000 and value of the debt was SR 150, 000.

Required: Compute the taxable gain or loss.

e- A tax payer incurred expenses of SR 75,000 to purchase equipment used for research and development and incurred Research and development expenses connected with the earning of taxable of SR 50,000.

Required: which of the two expenses are deductible under Saudi Tax law?

) Matthews Co. acquired all of the common stock of Jackson Co. on January 1, 2017. As of that date, Jackson had the following trial balance: Debit Credit Accounts payable $ 60,000 Accounts receivable $ 50,000 Additional paid-in capital 60,000 Buildings (net) (20-year life) 140,000 Cash and short-term investments 70,000 Common stock 300,000 Equipment (net) (8-year life) 240,000 Intangible assets (indefinite life) 110,000 Land 90,000 Long-term liabilities (mature 12/31/19) 180,000 Retained earnings, 1/1/17 120,000 Supplies 20,000 Totals $ 720,000 $ 720,000 - During 2017, Jackson reported net income of $96,000 while paying dividends of $12,000. During 2018, Jackson reported net income of $132,000 while paying dividends of $36,000. Assume that Matthews Co. acquired the common stock of Jackson Co. for $588,000 in cash. As of January 1, 2017, Jackson's land had a fair value of $102,000, its buildings were valued at $188,000, and its equipment was appraised at $216,000. Any excess of consideration transferred over fair value of assets and liabilities acquired is due to an unamortized patent to be amortized over 10 years. Matthews decided to use the equity method for this investment. Required: (A.) Prepare consolidation worksheet entries for December 31, 2017. (B.) Prepare consolidation worksheet entries for December 31, 2018.

Natalie has prepared the balance sheet and income statement of Cookie & Coffee Creations Inc. and would like you to prepare the cash flow statement. The comparative balance sheet of Cookie & Coffee Creations Inc. at October 31, 2020 for the years 2020 and 2019 and the income statement for the year ended October 31, 2020, are presented below. Additional information: 1. Equipment (cost $4,500 and book value $3,000) was disposed of at the beginning of the year for $500 cash and replaced with new equipment purchased for $4,000 cash. 2. Additional equipment was bought for $14,000 on November 1, 2019. A $12,000 note payable was signed. The terms provide for equal semi-annual installment payments of $2,000 on May 1 and November 1 of each year, plus interest of 5% on the outstanding principal balance. 3. Other equipment was bought for $13,000 cash. 4. Dividends were declared on the preferred and common stock on October 15, 2020, to be paid on November 15, 2018. 5. Accounts payable relate only to merchandise creditors. 6. Prepaid expenses relate only to other operating expenses. Instructions:

(a) Prepare a statement of cash flows for Cookie & Coffee Creations Inc. for the year ended October 31, 2020, using the indirect method

b) Prepare a statement of cash flows for Cookie & Coffee Creations Inc. for the year ended October 31, 2020, using the direct method.

COOKIE & COFFEE CREATIONS INC. Balance Sheet October 31, Assets 2020 2019 Cash $ 22,324 $5,550 Accounts receivable 3,250 2,710 Inventory 7,897 7,450 Prepaid expenses 5,800 6,050 Equipment 102,000 75,500 Accumulated depreciation— equipment (25,200) (9,100) Total assets $116,071 $88,160 COOKIE & COFFEE CREATIONS INC. Balance Sheet October 31, Liabilities and Stockholders’ Equity 2020 2019 Accounts payable $ 1,150 $ 2,450 Income taxes payable 9,251 7,200 Dividends payable 27,000 27,000 Salaries and wages payable 7,250 1,280 Interest payable 188 0 Note payable 10,000 0 Preferred stock, no par, $6 cumulative, 3,000 and 2,800 shares issued, respectively 15,000 14,000 Common stock, $1 par—25,180 shares issued and outstanding 25,180 25,180 Additional paid-in capital—treasury stock 250 250 Retained earnings 20,802 10,800 Total liabilities and stockholders’ equity $116,071 $88,160 COOKIE & COFFEE CREATIONS INC. Income Statement Year Ended October 31, 2020 Sales $485,625 Cost of goods sold 222,694 Gross profit 262,931 Operating expenses Salaries and wages expense $147,979 Depreciation expense 17,600 Other operating expenses 48,186 213,765 Income from operations 49,166 Other expenses Interest expense $ 413 Loss on disposal of plant assets 2,500 2,913 Income before income tax 46,253 Income tax expense 9,251 Net income $ 37,002 Assignment Rubric

LePage Manufacturing Ltd. agrees to lease equipment to Labonté Ltée. on July 15, 2020. LePage follows ASPE and Labonté is a public company following IFRS 16. The following information relates to the lease agreement.

1. The lease term is seven years, with no renewal option, and the equipment has an estimated economic life of nine years.

2. The equipment’s cost is $420,000 and the asset’s fair value on July 15, 2020, is $560,000.

3. At the end of the lease term, a payment to LePage, the lessor, in the amount of $80,000 is expected to be payable by Labonté, the lessee, under a residual value guarantee. Labonté depreciates all of its equipment on a straight-line basis.

4. The lease agreement requires equal annual rental payments beginning on July 15, 2020.

5. LePage usually sells its equipment to customers who buy the product outright, but Labonté was unable to get acceptable financing for a cash purchase. LePage’s credit investigation on Labonté revealed that the company’s financial situation was deteriorating. Because Labonté had been a good customer many years ago, LePage agreed to enter into this lease agreement, but used a higher-than-usual 15% interest rate in setting the lease payments. Labonté is aware of this rate.

6. LePage is uncertain about what additional costs it might have to incur in connection with this lease during the lease term, although Labonté has agreed to pay all executory costs directly to third parties.

7. LePage incurred legal costs of $2,500 in early July 2020 in finalizing the lease agreement.

Instructions:

a. Discuss the nature of this lease for both the lessee and the lessor.

b. Using (1) time value of money tables, (2) a financial calculator, or (3) Excel functions, calculate the amount of the annual rental payment that is required to obtain a return of 15% for LePage.

c. Prepare the journal entries that Labonté would make in 2020 and 2021 related to the lease arrangement, assuming that the company has a December 31 fiscal year end and that it does not use reversing entries. Round amounts to the nearest dollar.

d. From the information you have calculated and recorded, identify all balances related to this lease that would be reported on Labonté’s December 31, 2020 statement of financial position and statement of income, and where each amount would be reported.

e. Prepare the journal entries that LePage would make in 2020 and 2021 related to the lease arrangement, assuming that the company has a December 31 fiscal year end and does not use reversing entries. Round amounts to the nearest dollar.

f. From the information you have calculated and recorded, identify all balances related to this lease that would be reported on LePage’s December 31, 2020 statement of financial position and statement of income, and where each amount would be reported.

g. Comment briefly on the December 31, 2020 reported results in parts (d) and (f) above.

The following transactions are from Sharper Vision Corporation.

1. Purchased inventory on December 10, 2020, with a list price of $6,000, a trade discount of 20%, and with terms 2/10, n/30.
2. Returned $800 of inventory to the supplier on December 15, 2020.
3. Paid $3,200 cash on account on December 19, 2020.
4. Paid the remaining balance on January 5, 2021.

• Perpetual inventory systems
• Periodic inventory systems

a. Prepare journal entries for the transactions 1 through 4, assuming that the company uses the perpetual inventory system and the net method to record purchases. Include any adjusting entry required on December 31, 2020.
Note: Round answers to the nearest dollar.

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At December 31, 2020, Bouvier Corp. has assets of $10 million, liabilities of $6 million, common shares of $2 million (representing 2 million common shares of $1.00 par), and retained earnings of $2 million. Net sales for the year 2020 were $18 million, and net income was $800,000. As one of the auditors of this company, you are making a review of subsequent events on February 13, 2021, and you find the following.

1)

On February 3, 2021, one of Bouvier's customers declared bankruptcy. At December 31, 2020, this company owed Bouvier $300,000, of which $40,000 was paid in January 2021.

2

On January 18, 2021, one of the client's three major plants burned. Bouvier has fire insurance coverage.

3

On January 23, 2021, a strike was called at one of Bouvier's largest plants and it halted 30% of production. As of today (February 13), the strike has not been settled.

4)

A major electronics enterprise has introduced a line of products that would compete directly with Bouvier's primary line, now being produced in a specially designed new plant. Because of manufacturing innovations, the competitor has been able to achieve quality similar to that of Bouvier's products, but at a price 30% lower. Bouvier officials say they will meet the lower prices, which are barely high enough to cover variable and fixed manufacturing and selling costs.

5)

Merchandise traded in the open market is recorded in the company's records at $1.40 per unit on December 31, 2020. This price held for two weeks after the release of an official market report that predicted vastly excessive supplies; however, no purchases were made at $1.40. The price throughout the preceding year had been about $2.00, which was the level experienced over several years. On January 18, 2021, the price returned to $2.00 after public disclosure of an error in the official calculations of the prior December—the correction erased the expectations of excessive supplies. Inventory at December 31, 2020, was on a lower of cost and net realizable value basis.

6)

On February 1, 2021, the board of directors adopted a resolution to accept the offer of an investment banker to guarantee the marketing of $1.2 million of preferred shares. The company owns equity investments classified as current assets accounted for using the fair value through net income model. The investments have been adjusted to fair value as at December 31, 2020.

7

On January 21, 2021, the annual report of one of the investment companies has been issued for its year ended November 30, 2020. The investee company did not meet its earnings forecasts and the market price of the investment dropped from $49 per share at December 31, 2020, to $27 per share on January 21, 2021

Instructions

For each event, state how it will affect the 2020 financial statements, if at all. The company follows IFRS

Sunny Ltd., a hand sanitizer manufacturer, has prepared its financial statements for the year ended at December 31, 2019. On February 28, 2020, the board of directors authorized to issue the financial statements to shareholders. The following events have occurred:

1. On December 1, 2019, the board of directors decided to issue $50,000,000, 9% convertible bonds for the purpose of expanding business in other countries. The conversion rate is fixed at 50 shares for bond with face value of $1,000. The convertible bonds are offered to the public on January 15, 2020. The market interest rate for a similar bond without conversion option is at 12%.

2. On October 23, 2019, Sunny signed a contract to sell 10,000 hand sanitizer to a local store at a price of $200 each. However, due to the increase in the cost of materials, the estimated cost of making one hand sanitizer has been increased to $250. Sunny has to deliver the hand sanitizer to its customer on January 30, 2020.

3. Under the terms of the sales contract, Sunny undertakes to recall its new formulated sanitizer, for its manufacturing defects within six months from the date of sale. The accountants estimated that 5% of the sanitizer will be returned for refund. In January 2020, Sunny discovered a serious problem in the manufacturing process of the new formulated sanitizer. Because of this, Sunny expected that 20% of the sanitizer sold in 2019 will be returned for refund.

4. On December 15, 2019, a group of customers reported that the hand sanitizer that they bought in 2019 caused them have serious skin infection problems. They filed a lawsuit against Sunny on December 20, 2019. The company’s attorney said that it was probable that Sunny would be liable for the case. However, the amount of damage could not be estimated.

5. On February 12, 2020, the above lawsuit case was settled for the amount of $2,500,000.

6. Sunny has retail stores in China doing poorly. On February 15, 2020, Sunny estimated that those stores might report a loss of $1,500,000 in 2020.

7. In May 2019, Sunny had legal disputes with Coco Limited. Unable to reach out-of-court settlement with Coco, Sunny sued Coco for compensation for damages in August 2018. In November 2019, Sunny heard good news about the lawsuit in which the company sued Coco. Sunny’s lawyer is confident that the company will win the case and will receive about $120,000 in compensation for damages from Coco in early 2020. Sunny recognized the gain and receivable from litigation of $120,000 in year 2019.

8. On March 1, 2020, a customer owing $600,000 to Sunny filed for bankruptcy. The financial statements include an allowance for doubtful debts pertaining to this customer only of $30,000.

Required: For each of the above event, state the correct accounting treatments in accordance with Hong Kong Accounting Standards for the year ended at December 31, 2019. If it is an event after the reporting period, identify whether it is an adjusting or non-adjusting event. Give reasons for your answer.