Question 2
[25] Jenny is the owner of The Bride Boutique. The boutique sells well-known brands of wedding dresses and related products. Jenny recently attended a short course on financial management for SMEs. One of the topics covered in the programme was cash budgets. Jenny wants to implement cash budgeting for the boutique and she prepared a cash budget for the period April – June 2020. However, she is still concerned that she may not have prepared the cash budget correctly and requested your assistance to help her prepare the cash budget. At a meeting between Jenny and yourself, she provided you with the following information: Actual and forecasted sales and purchases for the period February – June 2020   February
(Actual) March (Actual) April (Forecast) May (Forecast) June (Forecast) Total sales R950 000 R1 050 000 R1 200 000 R1 350 000    R1 100 000 Total purchases R760 000 R892 500 R1 020 000 R945 000 R770 000
The boutique’s monthly cash sales are 60% of its total monthly sales, the balance being credit sales.  The boutique’s credit terms to customers require that the customers settle their credit purchases by paying 70% of their outstanding balances one month after the month of purchase and the remaining balances two months after the month of purchase.  The boutique pays 30% of its monthly purchases in cash and the rest of the monthly purchases are made on credit. Jenny has to pay her suppliers 40% of the credit purchases one month after the month of purchase and the outstanding balance two months after the month of purchase.  Jenny plans to replace some of the display cabinets in July 2020. A friend of hers who owns a jewellery shop will buy the cabinets from her for R15 000 in June 2020 and will pay her in cash.    The monthly wages and salaries are R12 000 and Jenny intends to grant an 8% increase in wages and salaries from May 2020.    The monthly rent for the boutique premises is R25 000 while the business insurance is R2 500 per month. The insurer advised that an insurance premium increase of 10% will take effect as from 1 June 2020.  Consumables average R1 500 per month and Jenny intends to spend R1 400, R2 500 and R1 500 on advertising in April, May, and June, respectively.  Jenny’s tax advisor informed her that the boutique will have to pay tax of R46 000 to SARS in April 2020. Required: Prepare a cash budget for The Bride Boutique for the period April – June 2020 using the format for a detailed cash budget as presented in the prescribed textbook.

MAJOR CASE STUDY

You have commenced work at Alfred’s Accountants, and Alfred has given you a series of tasks to perform.

The first task is as follows:

Alfred hands you a pre-adjustment trial balance of an organisation known as Radcliffe Rifles and a series of notes about Radcliffe Rifles. He then asks you to undertake a series of tasks:

RADCLIFFE RIFLES

Pre-Adjustment Trial Balance as at 30 June 2020

The following transactions have not yet been entered in the accounts.

• Depreciation of equipment is to be charged at the rate of 1% per annum on cost.
• Prepaid Rent expired during the period $5600.
• A customer paid a deposit of $5000, inventory will be delivered on 5 July 2020.
• Wages owing at 30 June 2020 were $850.
• Accounts payable paid $12500.
• Prepaid annual insurance $1200, policy commencing from 1 July 2020.
• Accounts receivable collected 7500.
• On 30 June 2020 office supplies on hand $400.
• Radcliffe Rifles rented out the basement of the premises for $2000 per month. The tenant has not yet paid the June rent.
• Bad debt written off $500.

Task 1.

Required:

Mr Alfred instructs you to prepare the journal entries necessary to record above transactions in the General Journal as at 30 June 2020. Narrations are not required.   

Task 2

Required:

Mr Alfred instructs you to prepare an Income Statement for the 6 months ending 30 June 2020.

Task 3

Required:

Mr Alfred instructs you to prepare a fully classified Balance Sheet (using a narrative or T form) as at 30 June 2020. (Note: must use a standard Balance Sheet format with appropriate headings)

Acquisition Cost, Equity Method, Eliminating Entries, Second Year

Peak Entertainment acquires all of the stock of Saddlestone Inc. on January 1, 2020. In preparing to consolidate the trial balances of Peak and Saddlestone at December 31, 2021 (two years after the acquisition), you assemble the following information:

Date-of-acquisition information:

• Value of stock given up to acquire Saddlestone: $20,000,000.

• Direct merger costs: $250,000.

• Saddlestone’s shareholders’ equity: $7,200,000, consisting of capital stock, $2,000,000; retained earnings, $5,000,000; accumulated other comprehensive income, $200,000.

• Fair value of earnings contingency agreement to be paid in cash: $300,000.

• Fair value of previously unrecorded identifiable intangibles (5-year life): $2,000,000. There are no revaluations of Saddlestone’s reported net assets.

Information for 2020 and 2021:

• Saddlestone’s reported net income for 2020: $3,000,000; for 2021: $3,500,000.

• Saddlestone’s reported other comprehensive income for 2020: $100,000 net income; for 2021: $25,000 net loss.

• Saddlestone declared and paid dividends of $1,000,000 each year.

• Goodwill and identifiable intangibles are not impaired in 2020; goodwill is impaired by $200,000 in 2021.

Required

a. Prepare the 2020 and 2021 journal entries made by Peak to record its investment, using the complete equity method.

Enter numerical answers using all zeros (do not abbreviate in thousands or in millions).

b. Prepare the consolidation eliminating entries made at December 31, 2021.

Enter numerical answers using all zeros (do not abbreviate in thousands or in millions).

On January 1, 2020, Aumont Company sold 12% bonds having a maturity value of $500,000 for $537,907, which provides the bondholders with a 10% yield. The bonds are dated January 1, 2020, and mature January 1, 2025, with interest payable December 31 of each year. Aumont Company allocates interest and unamortized discount or premium on the effective-interest basis. Prepare the journal entry at the date of the bond issuance. (Round answer to 0 decimal places, e.g. 38,548. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

a.Prepare the journal entry at the date of the bond issuance

b.Prepare a schedule of interest expense and bond amortization for 2020–2022.

c.Prepare the journal entry to record the interest payment and the amortization for 2020.

d.Prepare the journal entry to record the interest payment and the amortization for 2022.

Prepare the journal entry at the date of the bond issuance. (Round answer to 0 decimal places, e.g. 38,548. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Prepare a schedule of interest expense and bond amortization for 2020–2022. (Round answer to 0 decimal places, e.g. 38,548.)

Prepare the journal entry to record the interest payment and the amortization for 2020. (Round answer to 0 decimal places, e.g. 38,548. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Prepare the journal entry to record the interest payment and the amortization for 2022. (Round answer to 0 decimal places, e.g. 38,548. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Question 1: Partial year’s depreciation; alternative methods; exchange/disposal of PPE

Videotron Ltee completed the following transactions involving printing equipment.

Machine 6690 was purchased for cash on May 1, 2020, at an installed cost of $72,900. Its useful life was estimated to be four years with an $8,100 trade-in value. Straight-line depreciation was recorded for the machine at the ends of 2020 and 2021.

On August 5, 2020, it was traded for Machine 6691, which had an installed cash price of $54,000. A trade-in allowance of $40,500 was received and the balance was paid in cash. The new machine’s life was estimated at five years with a $9,450 trade-in value. The fair values of Machines 6690 and 6691 were not reliably determined at the time of the exchange. Double-declining-balance depreciation was recorded on each December 31 of Machine 6691’s life. On February 1, 2025, it was sold for $13,500.

Machine 6711 was purchased on February 1, 2025, at an installed cash price of $79,650. It was estimated that the new machine would produce 75,000 units during its useful life, after which it would have an $8,100 trade-in value. Units-of-production depreciation was recorded on the machine for 2025, a period in which it produced 7,500 units of product. Between January 1 and October 3, 2026, the machine produced 11,250 more units. On October 3, 2026, it was sold for $54,000

Required

Prepare journal entries to record:

1. The depreciation expense recorded to the nearest whole month on the first December 31 of each machine’s life. (for units-of-production, round the rate per unit to three decimal places).
2. The purchase/exchange/disposal of each machine.

Question 2: Intangible assets

On February 3, 2020, Secure Software Group purchased the patent for a new software for cash of $220,800. The company expects the software to be sold over the next five years and uses the straight-line method to amortize intangibles.

Required

1. Prepare entries to record the:

1. Purchase of the software patent.
2. Straight-line amortization for the year ended December 31, 2020, calculated to the nearest whole month. Round to the nearest dollar.

2. On December 31, 2020, the company’s adjusted trial balance showed the additional asset accounts shown below. Prepare the asset section of the balance sheet at December 31, 2020, including the patent purchased on February 3, 2020.

Accounts receivable………………………………$285,600

Accumulated depreciation, equipment……………$259,200

Accumulated depreciation, building………………$189,000

Allowance for doubtful accounts……………………$8,400

Cash………………………………………………. $103,200

Equipment…………………………………………$477,600

Building………………………………………… $595,200

Land………………………………………………. $ 110,400

Merchandise inventory…………………………… $ 135,600

Blue Department Store converted from the conventional retail method to the LIFO retail method on January 1, 2020, and is now considering converting to the dollar-value LIFO inventory method. During your examination of the financial statements for the year ended December 31, 2021, management requested that you furnish a summary showing certain computations of inventory cost for the past 3 years.

Here is the available information.

Compute the cost of inventory on hand at December 31, 2019, based on the conventional retail method. (Round ratios for computational purposes to 0 decimal places, e.g. 78% and final answer to 0 decimal places, e.g. 28,987)

Compute the inventory to be reported on December 31, 2019, in accordance with procedures necessary to convert from the conventional retail method to the LIFO retail method beginning January 1, 2020. Assume that the retail value of the December 31, 2019, inventory was $60,900. (Round ratios for computational purposes to 2 decimal places, e.g. 78.72% and final answer to 0 decimal places, e.g. 28,987.)

Without prejudice to your solution to part (b), assume that you computed the December 31, 2019, inventory (retail value $60,900) under the LIFO retail method at a cost of $36,845. Compute the cost of the store’s 2020 and 2021 year-end inventories under the dollar-value LIFO method. (Round ratios for computational purposes to 2 decimal places, e.g. 78.72% and final answer to 0 decimal places, e.g. 28,987.)

Q1) (Foreign Pension)

Elizabeth Windsor is 59 years old. She is a resident taxpayer with private health insurance. She also received a government pension from the United Kingdom that is taxable in Australia but not in the United Kingdom. Elizabeth is subject to tax as an Australian resident taxpayer but exempt from tax in the United Kingdom.

During the 2017/18 tax year, Elizabeth derived interest and unfranked dividends of $39,000 and also received $25,000 of pension.

Required:

Calculate Elizabeth’s taxable income for the 2017/18 tax year.

Calculate Elizabeth’s tax payable or refundable for the 2017/18 tax year

Q2) Stan Eckhardt, aged 57, received a superannuation lump sum of $310,000 from his superannuation fund upon retirement on 15 April 2018. PAYG tax of $28,170 was withheld from the lump sum. The lump sum comprised entirely of an element taxed in the fund. Stan also received gross wages of $85,000 up to the date of his retirement. PAYG tax of $22,110 was withheld from Stan’s wages. Stan has adequate private health insurance.

Payback Period and NPV:
Taxes and Straight-Line Depreciation
Assume that United Technologies is evaluating a proposal to change the company's manual design system to a computer-aided design (CAD) system. The proposed system is expected to save 10,000 design hours per year; an operating cost savings of $40 per hour. The annual cash expenditures of operating the CAD system are estimated to be $200,000. The CAD system requires an initial investment of $500,000. The estimated life of this system is five years with no salvage value. The tax rate is 35 percent, and United Technologies uses straight-line depreciation for tax purposes. United Technologies has a cost of capital of 20 percent.

(a) Compute the annual after-tax cash flows related to the CAD project.
$ Answer

(b) Compute each of the following for the project:

1. Payback period. (Round your answer to two decimal places.)
Answer years

2. Net present value. (Round answer to the nearest whole number. Use a negative sign with your answer if appropriate.)
$ Answer

need right answers please