1. Linda Coronado established Coronado Ltd. in mid-2019 as the sole shareholder. The accounts on June 30, 2020, the companys year end, just prior to preparing the required adjusting entries, were as follows:

Current assets $100,000 Capital assets Land $34,000 Building 85,000 Equipment 60,000 179,000 Current liabilities 34,000 Long-term bank loan 120,000 Common shares 94,000 Net income prior to depreciation 31,000

All the capital assets were acquired and put into operation in early July 2019. Estimates and usage information on these assets were as follows:

Building: 25-year life, $20,000 residual value Equipment: Five-year life, 15,000 hours of use, $5,000 residual value. The equipment was used for 1,100 hours in 2019 and 1,500 hours in 2020 up to June 30.

Linda Coronado is now considering which depreciation method or methods would be appropriate. She has narrowed the choices down for the building to the straight-line or double-declining-balance method, and for the equipment to the straight-line, double-declining-balance, or activity method. She has requested your advice and recommendation. In discussions with her, the following concerns were raised:

1. The company acquires goods from suppliers with terms of 2/10, n/30. The suppliers have indicated that these terms will continue as long as the current ratio does not fall below 2 to 1. If the ratio falls lower, no purchase discounts will be given. 2. The bank will continue the loan from year to year as long as the ratio of long-term debt to total assets does not exceed 46%. 3. Linda Coronado has contracted with the companys manager to pay him a bonus equal to 50% of any net income in excess of $14,000. She prefers to minimize or pay no bonus as long as conditions of agreements with suppliers and the bank can be met. 4. In order to provide a strong signal to attract potential investors to join her in the company, Ms. Coronado believes that a rate of return on total assets of at least 5% must be achieved.

(a)

Prepare a report for Linda Coronado that (1) presents tables, (2) analyzes the situation, (3) provides a recommendation on which method or methods should be used, and (4) justifies your recommendation by considering her concerns and the requirement that the method(s) used be considered generally acceptable accounting principles. (Round ratio and percentage answers to 1 decimal place, e.g. 52.7 and all other answers to 0 decimal places, e.g. 527.)

Double- Straight- Declining Line Activity Method Method Method Building: DDB: (1) SL: (2) Equipment: DDB: (3) SL: (4) UOP: (5)

Method Depreciation Depreciation Total Net Total Current Combinations Buildings Equipment Expense Income Assets Ratio Long-term debt to total assets Net increase on total assets 1 and 3 $ $ $ $ $

% % 1 and 4

% % 1 and 5

% % 2 and 3

% % 2 and 4

% % 2 and 5

% %

The consequences of this analysis are that the following combination of methods meets your concerns for 2020. (List method combinations in order presented in the table above.)

1. Current ratio greater than 2.

2. Long-term debt to total asset ratio less than 46%.

3. Net income less than $14,000.

4. Rate of return on total assets of at least 5% is achieved in the following combinations:

method(s) examined are permitted under both ASPE and IFRS.

2.

The following is a schedule of property dispositions for Flounder Corp.:

SCHEDULE OF PROPERTY DISPOSITIONS Cost Accumulated Depreciation Cash Proceeds Fair Market Value Nature of Disposition Land $37,000 $29,000 $29,000 Expropriation Building 13,800 3,300 Demolition Warehouse 64,000 $15,000 68,000 68,000 Destruction by fire Machine 7,500 2,600 800 6,600 Trade-in Furniture 9,000 7,200 2,900 Contribution Vehicle 8,500 3,180 2,720 2,720 Sale

The following additional information is available:

Land On February 15, land that was being held mainly as an investment was expropriated by the city. On March 31, another parcel of unimproved land to be held as an investment was purchased at a cost of $32,000.

Building On April 2, land and a building were purchased at a total cost of $69,000, of which 20% was allocated to the building on the corporate books. The real estate was acquired with the intention of demolishing the building, which was done in November. Cash proceeds that were received in November were the net proceeds from the building demolition.

Warehouse On June 30, the warehouse was destroyed by fire. The warehouse had been purchased on January 2, 2017, and accumulated depreciation of $15,000 had been properly recorded to the date of the fire. On December 27, the insurance proceeds and other funds were used to purchase a replacement warehouse at a cost of $83,000.

Machine On December 26, the machine was exchanged for another machine having a fair market value of $5,800. Cash of $800 was also received as part of the deal. The transaction has commercial substance.

Furniture On August 15, furniture was contributed to a registered charitable organization. No other contributions were made or pledged during the year.

Vehicle On November 3, the vehicle was sold to Jared Dutoit, a shareholder.

(a)

Prepare the entries to record the transactions. Assume that Flounder follows ASPE. (Credit account titles are automatically indented when the 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. Do not net the expense.)

Date Account Titles and Explanation Debit Credit Land February 15

March 31

Building April 2

November

Warehouse June 30

December 27

Machine December 26

Furniture August 15

Vehicle November 3

There are two questions here. The second one is from number 2 "Schedule of property dispositions"

hegg.com/homework-help/questions-and-answers/1-linda-coronado-established head Textbook Solutions Expert Q&A Study Pack method(s) examined are permitted under both ASP The following is a schedule of property dispositions SCHEDULE OF PROPERTY DISPOSITIONS Cost Accumulated Depreciation Cash Proceeds Fair Market Value Nature of Disposition Land $37,000 - $29,000 $29,000 Expropriation Building This question has 13.800 3,300 Ask a Demolition Warehouse 64.000 $15.000 68.000 68.000 Destruction by fire hegg.com/homework-help/questions-and-answers/1-linda-coronado-established head Textbook Solutions Expert Q&A Study Pack method(s) examined are permitted under both ASP The following is a schedule of property dispositions SCHEDULE OF PROPERTY DISPOSITIONS Cost Accumulated Depreciation Cash Proceeds Fair Market Value Nature of Disposition Land $37,000 - $29,000 $29,000 Expropriation Building This question has 13.800 3,300 Ask a Demolition Warehouse 64.000 $15.000 68.000 68.000 Destruction by fire