Ron's Don't Wait Inc (RDW) purchased a delivery van on July 1, 2019. The Van cost $65,000 and has an estimated life of 5 years or 200,000 kms and a residual value of $5,000. RDW uses exact months for it's depreciation. RDW estimates the Van will be driven 22,000 kms in 2019, 55,000 in 2020, 48,000 in 2021, 65,000 in 2022, and 25,000 in 2023.

Required

Prepare the following depreciation schedule for all 5 years for each of the following methods:

      a) Straight Line

b) Double-Declining Balance

c) Units of Output

Which method should RDW Inc adopt if it wants to maximize it's earnings in 2020?

Novak Co. has the following defined benefit pension plan balances on January 1, 2020.

Projected benefit obligation 4555000

Fair value of plan assets 4555000

The interest (settlement) rate applicable to the plan is 10%. On January 1, 2021, the company amends its pension agreement so that prior service costs of $599,000 are created. Other data related to the pension plan are:

Prepare a pension worksheet for the pension plan in 2020. (Enter all amounts as positive.)

[The following information applies to the questions displayed below.]
  
In 2018, the Westgate Construction Company entered into a contract to construct a road for Santa Clara County for $10,000,000. The road was completed in 2020. Information related to the contract is as follows:

Westgate recognizes revenue over time according to percentage of completion.

Calculate the amount of revenue and gross profit (loss) to be recognized in each of the three years. (Do not round intermediate calculations. Loss amounts should be indicated with a minus sign.)

On January 1, 2020, Uniform Co. sold its 2-year old equipment to XYZ Inc. for a cash down-payment of P100,000 and a non-interest bearing note with a face amount of P900,000 due December 31, 2021. There is no established price for the equipment but its carrying amount on the company’s books was at P600,000. The prevailing market rate of interest for similar note of this type on the transaction date was at 10%. On December 31, 2020 XYZ developed a financial difficulty and it was apparent that it will no longer be able to settle the amount due on December 31, 2021. To maximize the recovery of the note, Uniform agreed to extend the maturity of the note to up to December 31, 2022.  Furthermore, Uniform also agreed to reduce the principal amount by 25%.

How much is the impairment loss to be recognized on the note in 2020?

342,149

204,545

260,331

286,364

Question 2

A.   List two (2) policies a company may adopt to lessen the risk of uncollectible accounts and improve its cash flows.

B. Joseph Corporation a mobile phone wholesaler sells mobile phones to PhoneTech Ltd, a mobile phone retailer on August 1, 2020 for $500 each, the value of the sale is $50,000, with credit terms of 3/10, n/30. Assume the company uses the net method to record accounts receivables.

Required:

a. Prepare the journal entry to record the sale.

b. On August 8, 2020, collection on $15,000 of the sales was received from PhoneTech. Record the necessary journal entry for the cash received.

c. The remaining $35,000 of the sales was collected on August 28, 2020 from Phone Tech. Record the necessary journal entry for the transaction on this date.

At December 31, 2020, the available-for-sale debt portfolio for Crane, Inc. is as follows.

On January 20, 2021, Crane, Inc. sold security A for $16,100. The sale proceeds are net of brokerage fees.

Crane, Inc. reports net income in 2020 of $124,000 and in 2021 of $147,000. Total holding gains (including any realized holding gain or loss) equal $43,000 in 2021.

Prepare a statement of comprehensive income for 2020, starting with net income.
Prepare a statement of comprehensive income for 2021, starting with net income.

Windsor Inc. issued $3,840,000 of 10%, 10-year convertible bonds on June 1, 2020, at 99 plus accrued interest. The bonds were dated April 1, 2020, with interest payable April 1 and October 1. Bond discount is amortized semiannually on a straight-line basis.

On April 1, 2021, $1,440,000 of these bonds were converted into 35,000 shares of $21 par value common stock. Accrued interest was paid in cash at the time of conversion.

At the end of 2019, Jeffco Inc. had the following equity accounts and balances:

During 2020, Jeffco engaged in the following transactions involving its equity accounts:

Sold 8,000 shares of common stock for $35 per share.

Sold 1,000 shares of 9%, $120 par preferred stock at $125 per share.

Declared and paid cash dividends of $14,000.

Repurchased 600 shares of treasury stock (common) for $45 per share.

Sold 100 of the treasury shares for $51 per share.

Required:

1. Prepare the journal entries for Transactions a through e.

2. Assume that 2020 net income was $93,000. Prepare a statement of stockholders' equity at December 31, 2020.

Flint Company has the following two temporary differences between its income tax expense and income taxes payable.

The income tax rate for all years is 20%

Assuming there were no temporary differences prior to 2020, prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2020, 2021, and 2022. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)