Managerial Accounting for Ace Retailing Ltd.
Problem2.
Below are adjusted accounts and balances for Ace Retailing Ltd. for the year ended December 31, 2020:
Cost of goods sold 750,000
Dividends declared (common shares) 245,000
Dividends declared (preferred shares) 82,000
Gain on disposal of discontinued J division 115,000
Gain on sale of FVNI investments 45,000
Interest income 15,000
Loss on impairment of goodwill 12,000
Loss due to warehouse fire 175,000
Loss from operation of discontinued J division 285,000
Loss on disposal of unused equipment from F division 82,000
Retained earnings, January 1, 2020 458,000
Sales revenue 1,500,000
Selling and administrative expenses 245,000
Unrealized gain on FVOCI investments (OCI) 18,600
Additional information:
1.Ace decided to discontinue the J division operations. A formal plan to dispose of J division has been completed. There are no plans to dispose of F division at this time.
2.During 2020, 400,000 common shares were outstanding with no shares activity for 2020.
3.Ace's tax rate is 27%.
4.Ace follows IFRS and accounts for its investments in accordance with IFRS 9 meaning that any unrealized gains/losses for FVNI are reported through net income and FVOCI are reported in OCI.
Required:
a.Prepare a multiple-step statement of income for the year ended December 31, 2020, in good form reporting expenses by function.
b.Prepare a combined statement of income and comprehensive income in good form reporting expenses by function.
c.How would the answer in part (b) differ if a statement of comprehensive income were to be prepared without combining it with the statement of income?
d.Prepare a single-step statement of income in good form reporting expenses by function.
e.Explain what types of items are to be reported in other revenue and expenses as part of continuing operations, and provide examples for a retail business.
Problem3.
Below is the trial balance in no particular order for Hughey Ltd. as at December 31, 2021:
Hughey Ltd.
Trial Balance
As at December 31, 2021
Debits Credits
Cash $ 250,000
Accounts receivable 1,015,000
Allowance for doubtful accounts $ 55,000
Prepaid rent 40,000
Inventory 1,300,000
Investments – available for sale (FVOCI) 2,100,000
Land 530,000
Building 770,000
Patents (net) 25,000
Equipment 2,500,000
Accumulated depreciation, equipment 1,200,000
Accumulated depreciation, building 300,000
Accounts payable 900,000
Accrued liabilities 300,000
Notes payable 600,000
Bond payable 1,100,000
Common shares 2,500,000
Accumulated other comprehensive income 245,000
Retained earnings 1,330,000
$ 8,530,000 $ 8,530,000
Additional information as at December 31, 2021:
1.The inventory has a net realizable value of $1,350,000. The company uses FIFO method of inventory valuation.
2.Investments in available for sale securities (FVOCI) have a fair value of $2,250,000.
3.The company purchased patents of $60,000 on January 1, 2015.
4.Bonds are 8%, 25-year and pay interest annually each January 1, and are due December 31, 2030.
5.The 7%, notes payable represent bank loans that are secured by investments in available for sale securities (FVOCI) with a carrying value of $800,000. Interest is paid each December 31 and no principal is due until its maturity on April 30, 2022.
6.The capital structure for the common shares are # of authorized, 100,000 shares; issued and outstanding, 80,000 shares.
Required:
a.Prepare a classified statement of financial position as at December 31, 2021, in good form, including all required disclosures identified in Chapter 4.
b.Calculate the annual amortization for the patent.
c.Does this company follow IFRS or ASPE? Explain your answer.
Problem2.
Below are adjusted accounts and balances for Ace Retailing Ltd. for the year ended December 31, 2020:
Cost of goods sold |
750,000 |
Dividends declared (common shares) |
245,000 |
Dividends declared (preferred shares) |
82,000 |
Gain on disposal of discontinued J division |
115,000 |
Gain on sale of FVNI investments |
45,000 |
Interest income |
15,000 |
Loss on impairment of goodwill |
12,000 |
Loss due to warehouse fire |
175,000 |
Loss from operation of discontinued J division |
285,000 |
Loss on disposal of unused equipment from F division |
82,000 |
Retained earnings, January 1, 2020 |
458,000 |
Sales revenue |
1,500,000 |
Selling and administrative expenses |
245,000 |
Unrealized gain on FVOCI investments (OCI) |
18,600 |
Additional information:
- Ace decided to discontinue the J division operations. A formal plan to dispose of J division has been completed. There are no plans to dispose of F division at this time.
- During 2020, 400,000 common shares were outstanding with no shares activity for 2020.
- Ace's tax rate is 27%.
- Ace follows IFRS and accounts for its investments in accordance with IFRS 9 meaning that any unrealized gains/losses for FVNI are reported through net income and FVOCI are reported in OCI.
Required:
- Prepare a multiple-step statement of income for the year ended December 31, 2020, in good form reporting expenses by function.
- Prepare a combined statement of income and comprehensive income in good form reporting expenses by function.
- How would the answer in part (b) differ if a statement of comprehensive income were to be prepared without combining it with the statement of income?
- Prepare a single-step statement of income in good form reporting expenses by function.
- Explain what types of items are to be reported in other revenue and expenses as part of continuing operations, and provide examples for a retail business.
Problem3.
Below is the trial balance in no particular order for Hughey Ltd. as at December 31, 2021:
Hughey Ltd. |
||||||
Trial Balance |
||||||
As at December 31, 2021 |
||||||
|
|
|
Debits |
|
|
Credits |
Cash |
|
$ |
250,000 |
|
|
|
Accounts receivable |
|
|
1,015,000 |
|
|
|
Allowance for doubtful accounts |
|
|
|
|
$ |
55,000 |
Prepaid rent |
|
|
40,000 |
|
|
|
Inventory |
|
|
1,300,000 |
|
|
|
Investments – available for sale (FVOCI) |
|
|
2,100,000 |
|
|
|
Land |
|
|
530,000 |
|
|
|
Building |
|
|
770,000 |
|
|
|
Patents (net) |
|
|
25,000 |
|
|
|
Equipment |
|
|
2,500,000 |
|
|
|
Accumulated depreciation, equipment |
|
|
|
|
|
1,200,000 |
Accumulated depreciation, building |
|
|
|
|
|
300,000 |
Accounts payable |
|
|
|
|
|
900,000 |
Accrued liabilities |
|
|
|
|
|
300,000 |
Notes payable |
|
|
|
|
|
600,000 |
Bond payable |
|
|
|
|
|
1,100,000 |
Common shares |
|
|
|
|
|
2,500,000 |
Accumulated other comprehensive income |
|
|
|
|
|
245,000 |
Retained earnings |
|
|
|
|
|
1,330,000 |
|
|
$ |
8,530,000 |
|
$ |
8,530,000 |
Additional information as at December 31, 2021:
- The inventory has a net realizable value of $1,350,000. The company uses FIFO method of inventory valuation.
- Investments in available for sale securities (FVOCI) have a fair value of $2,250,000.
- The company purchased patents of $60,000 on January 1, 2015.
- Bonds are 8%, 25-year and pay interest annually each January 1, and are due December 31, 2030.
- The 7%, notes payable represent bank loans that are secured by investments in available for sale securities (FVOCI) with a carrying value of $800,000. Interest is paid each December 31 and no principal is due until its maturity on April 30, 2022.
- The capital structure for the common shares are # of authorized, 100,000 shares; issued and outstanding, 80,000 shares.
Required:
- Prepare a classified statement of financial position as at December 31, 2021, in good form, including all required disclosures identified in Chapter 4.
- Calculate the annual amortization for the patent.
- Does this company follow IFRS or ASPE? Explain your answer.
Managerial Accounting
Student’s Name:
University Affiliation:
Course Number & Name:
Professor:
Date Due:
Problem 2
Part a.
ACE RETAILING LTD
MULTIPLE-STEP STATEMENT OF INCOME
FOR THE YEAR ENDED 31, DECEMBER 2020.
Sales
1,500,000
1,500,000
Cost of goods Sold
(750,000)
-750,000
GROSSPROFIT
750,000
750,000
Operating expenses
Selling & administration expenses
245,000
Loss on impairment of goodwill
12,000 (257,000)
257,000
Income from Operations
493,000
493,000
Non-operating income & expenses
Gain on sale of FVNI investments
45,000
Gain on disposal of discontinued j division
115,000
Interest income
15,000 175,000
175,000
Income before taxes
668,000
668,000
Income tax expense (27%)
180,360
180,360
Net income
487,640
Part b.
ACE RETAILING LTD
COMBINED STATEMENT OF INCOME & COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31, DECEMBER 2020.
Sales Revenue
1500000
Cost of goods sold
(750,000)
Selling and Administration expenses
(245,000)
Loss on Goodwill Impairement
(12,000)
Profit before Tax
493000
Income Tax expense (27%)
133,110
Profit for the year from continued Operations
359,890
Loss for the year from discontinued operations of j division
(285,000)
Profit for the year
74,890
Other Comprehensive Income & Expenses
Interest Income
15,000
Unrealised gain on FVOCI Investiments (OCI)
18,600
Gain on sale of FVNI investments
45,000
Gain on disposal of di...
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