I found some sample questions that I am still not clearly after I review. So I want to get answers to these five questions. Please present them through excel. Thank you.Page 1 of 5
Question 1 (16 marks)
On the morning of November 21, management of Strang Company learned that there had been a breakin at their warehouse, and that SOME of their merchandise inventory (but not ALL the inventory) had
been stolen after the close of business on November 20.
Strang immediately took an inventory count on Nov 21 to figure out the amount of the loss before
opening for business. This inventory count indicated that $90,000 of goods were on-hand and present
in the warehouse.
The following additional data is available from the accounting records of Strang:
Purchases received, Nov 1 – 20
Inventory on hand, Nov 1
Sales revenue, Nov 1-20 (goods delivered to customers) $270,000
Records from the recent past indicate that sales prices for the goods that were stolen are set, on average,
at 45% above cost.
Required (show all calculations):
Estimate the inventory of goods on hand at the close of business on November 20th AND determine the
amount of the theft loss.
Page 2 of 5
Question 1 continued
Henry Corporation’s inventory at December 31, 2020, included 1000 units of product XX. The
bookkeeper incorrectly valued the XX inventory at $210 per unit.
Relevant per-unit data for product XX follow:
Estimated selling price
Estimated direct selling expenses
All 1,000 units are expected to be sold in 2021.
Required (show all calculations):
(a) What was the correct TOTAL inventory value that should be used for product XX at December 31,
(b) Was net income for 2020 overstated or understated due to the bookkeeper’s mistake? By how
much (ignore income tax aspects)?
Question 2 (12 marks)
A) Hinshaw Oil Co. constructed an oil pipeline that was completed at the end of 2020. It estimates
(at the end of 2020) that in 20 years when the pipeline will be decommissioned, it will need to
pay $20 million in dismantling costs. Hinshaw uses a 6% discount rate. Prepare the relevant
journal entries for 2020 and 2021 under IFRS for Hinshaw relating to the dismantling costs.
B) In 2020, an employee informs TAM Co. that he will be taking 6 months paternity leave. This will
cost TAM $1,000 a month. At the end of 2020, the employee has completed 4 months leave and
has been paid $4,000. Prepare the relevant journal entries for 2020 for TAM.
Page 3 of 5
Question 3 (22 marks)
Morrison Co. follows IFRS and has a Dec 31 year end. The following transactions occurred during 2020:
1) On January 1, 2020, Morrison purchased a piece of land by issuing a note for $500,000 plus 5%
interest. Interest payments are due annually on January 1 and the note matures on January 1,
2023. (5% is the market rate of interest on this type of loan.)
2) Morrison issued a $900,000, three-year, zero-interest-bearing note to Williams Corp. on July 1,
2020, and received $790,000 cash.
a) Prepare all of the 2020 journal entries related to the above scenarios. Show all calculations.
(For #2, you will need to calculate the effective interest rate. Use Excel RATE formula. Type
out the factors that you used in your formula (ie. PV, FV, n). Round your percentage to two
decimal places (ie. X.XX%.))
b) Prepare the Liability section of the CLASSIFIED statement of financial position of Morrison
Co. in good form at December 31, 2020 reflecting the above scenarios. Show the two notes
Page 4 of 5
Question 4 (26 marks)
On August 1, 2020, Fitzgerald Inc. sold 1000 bonds, having a maturity value of $1,000 each and 5%
interest. The bonds were sold at 97. Bond issue costs of $45,300 were incurred. The effective interest
rate was 7.2% including the issue costs. The bonds are dated August 1, 2020 and mature on August 1,
2024, with interest payable on August 1 and February 1 of each year. Fitzgerald uses the amortized cost
method using the effective interest method to amortize the bond premium or discount. Fitzgerald
prepares financial statements annually at December 31.
Required – Show ALL calculations:
(a) Prepare the journal entry at the date of issue of the bonds.
(b) Prepare a bond amortization schedule for the bond through to its maturity date of August 1,
(c) Prepare all other required journal entries relating to the bond for all of 2020 and Feb 1, 2021.
(d) On Feb 2, 2021, all bonds were repurchased from the Bondholders by Fitzgerald at the callable
provision of 101 and retired. Prepare the journal entry to record the repurchase and retirement
of these bonds.
(e) Assume instead that Fitzgerald follows ASPE and chooses to amortize the premium or discount
using the straight-line method.
i. Prepare the Dec 31, 2020 year end adjusting entry.
ii. Is the interest expense for 2020 higher or lower using the straight-line method?
Page 5 of 5
Question 5 (24 marks)
Russell Inc. follows IFRS. Its December 31, 2019 trial balance includes the following balances:
Preferred shares, $1, cumulative (11,000 shares issued) $300,000
Common shares (20,000 shares issued)
Contributed surplus – common share repurchase
Accumulated other comprehensive loss
The preferred dividends have been declared and paid up to and including 2017.
a) Prepare journal entries for Russell Inc. resulting from the following transactions (show all
i) January 1, 2020: Repurchased 3000 common shares for $31 per share and cancelled them.
ii) December 29, 2020: Declared and paid all preferred dividends that are outstanding.
iii) December 30, 2020: Declared a 15% common stock dividend to be issued in January. The
common shares were trading at $30 per share.
b) Prepare a statement of changes in shareholders’ equity in good form for Russell Inc. at December
31, 2020 including the number of shares outstanding.
– Russell Inc. had net income of $198,000 and other comprehensive income of $24,000
(unrealized gains on investments) during 2020.
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