All companies referred to in this project are publicly reportable enterprises and have a December 31 year end.

Unless instructed otherwise, round all calculations to the nearest dollar. You will not be penalized for rounding errors of less than $10. All companies referred to in this project are publicly reportable enterprises and have a December 31 year end. Question 1 (5 marks) . Your review of the December 31. 20x7, accounting records of Let's Go Crazy Inc. reveals the following balances: 0 book balance: $1,388,301 0 bank balance: $1,385,366 - A $21,591 deposit made by the company on December 31 is not credited to the company's bank account. The deposit included two payments on accounts receivable from customers and one payment on the principal of a note receivable, for which the accounts receivable and note receivable have already been credited. The breakdown of this deposit is as follows: 0 ABC Co. for $10,500 0 XYZ Inc. for $6,500 0 $4,591 payment from Wong Holdings 0 The December 24, 20x7, deposit for $7,200 was recorded by the bank as $2,700. EIQ The monthly property and liability insurance premium payment to Big Insurance Company was deducted from the bank on December 28, 20x7, for $1,654. The bank charged bank fees of $65 for December 20x7. The bank credited Let's Go Crazy's bank account on December 31, 20x7, for $75 of interest earned during the month. On December 30, 20x7, JKL Co. paid its $24,800 outstanding account receivable in full by way of an electronic transfer of funds from JKL's bank directly to Let's Go Crazy's bank account Required: a) Prepare Let's Go Crazy's bank reconciliation as at December 31, 20x7. (1 mark) b) Prepare any journal entries required from the bank reconciliation. Ensure that yourjournal entry(ies) includes an explanation as to the reason for the adjustment on the bank reconciliation. (4 marks) Question 2 (5 marks) Sell on Credit Corp.'s (SCC) aged accounts receivable list is available in Excel in the Project 1 Data file. Other pertinent facts include the following: 8005 balance in its "allowance for doubtful accounts\" account on January 1, 20x7, was a $4,600 credit. On March 31, 20x7, 300 unexpectedly collected a $1,950 accounts receivable due from KML Corp. that it wrote off in 20X6. During the year, 5500 wrote off a total of $3,800 in uncollectable accounts. SCC uses a balance sheet approach (aging method) to estimate its uncollectable accounts. Based on historical experience, 800 provides for bad debts as follows: Aging period Days outstanding 0-30 31 -60 61-90 > 91 Historical percent loss 1% 5% 10% 30% Required: a) Prepare all journal entries required during the year and at year end to properly reflect 8008 accounting for its bad debt expenseiallowance for doubtful accounts. Ensure that yourjournal entry(ies) includes an explanation as to the nature of the transaction. (4 marks) b) Use a T-account to reconcile the change in the opening (January 1, 20X?) and closing (December 31, 20X?) balances in the allowance for doubtful accounts. Ensure that the reconciliation includes all the journal entries you prepared in part (a). (1 mark) Question 3 (5 marks) Building Supplies Inc. (BSI) sells various construction-related materials to builders and retail customers. BSI purchases its inventory from various vendors on trade terms. Most suppliers offer BSI 30-day terms; however, one supplier offers BSI credit terms of 2110, net 30. BSI made two purchases from this supplier during 20x7: 0 On April 20, BSI purchased $20,000 of inventory. The invoice was paid on April 29. . On October 18, BSI purchased $30,000 of inventory. The invoice was paid on October 31. BSI uses the net method to value its inventory when discounts for early payment are offered by suppliers. BSl's inventory holdings for its year ended December 31, 20x7, are available in Excel in the Project 1 Data file. The company applies the lower of cost and net realizable value (LCNRV) rule when valuing inventory for nancial statement reporting purposes. Required: a) Prepare the journal entries to record the two inventory purchases detailed above, together with payment of the related invoices. (2 marks) b) Determine the LCNRV for each item and the inventory as a whole. Prepare a journal entry to adjust the inventory to the LCNRV. (3 marks) Ensure that yourjournal entries include an explanation as to the nature of the transaction. Question 4 (1f.| marks) On January 1, 20x4, XYZ Equipment Corp. delivered a road grader and an excavator to a client. Pertinent details of the transaction follow: 0 XYZ paid $290,000 for the road grader. It normally sells these graders for $377,000 cash. :- XYZ paid $218,000 for the excavator. It normally sells these excavators for $273,000 cash. o XYZ received $75,000 cash on delivery of the equipment and accepted a $600,000, three- year, interest-free note receivable payable at $200,000 per year, first payable on January 1, 20x5. 0 The market rate of interest for transactions of this nature is 4% per annum. XYZ, whose scal year end is December 31, prepares its nancial statements in accordance with IFRS. It uses the specific identification method to account for inventory. All payments on the notes receivable were made on the scheduled dates. XYZ only prepares accruals and adjusting entries at year end. Required: a) Allocate the purchase price between the two deliverables. (2 marks) b) Prepare XYZ's journal entries pertaining to the sale of the equipment on January 1, 20x4. (2 marks) c) Prepare XYZ's journal entries for each of December 31, 20x4, January 1, 20X5, December 31, 20X5, January 1, 20X6, December 31, 20X6, and January 1, 20x7. (6 marks) Note: Round all percentages to three signicant decimal places (for example. 34.6%) for all calculations. Round all journal entries to the nearest dollar. Question 5 (5 marks) In 20x7, D&D Construction Corp. (D&D) successfully bid on a project with the Acadia Recreation Authority (Acadia) to build a regional recreation centre that includes an Olympic- sized swimming pool. a gym with weight-training facilities. a running track. and two multi-use rooms for meetings and other events. Construction began in August 20x7. The latest completion date permitted is June 15, 20X8. The xed value of the contract is $6,358,000. At this price, D&D expects to earn a prot of $578,000 on the project. A performance bonus is available for completing the project early, according to the following schedule. Project completion is considered a single performance obligation that will be satised over time. Potential Bonus Estimated completion date payment probability March 31, 20X8 $158,750 15% April 30, 20X8 80,000 20% May 31 , 20X8 40,000 30% June 15, 20X8 0 25% June 16, 20X8, or later 0 10% 100% Costs incurred to December 31, 20x7, totalled $2,918,900 and were debited to the contract asset account in the normal manner. Total budgeted costs for the project remain unchanged at $5,780,000. Management remains condent that the project will be completed on time and the estimated probabilities of completion are still valid. D&D reports its financial results in accordance with IFRS. Its year end is December 31. It uses the cost-to-cost method to determine construction revenue and the most likely amount in determining the transaction price of the contract. On December 29, 20x7, in accordance with the contract, D&D billed Acadia $3,500,000 for work completed to date. This was the first time D&D invoiced Acadia for this project. Required: a) Prepare the journal entry to record the interim billing on December 29, 20x7. (0.5 marks) b) Calculate the variable consideration and determine the transaction price including the variable consideration. (1 mark) 0) Prepare the journal entry to record revenue for the year ended December 31, 20x7, on this project. (1 mark) d) Prepare extracts from D&D's statement of financial position as at December 31, 20X?, reporting all construction-related asset and liability accounts in the prescribed manner. Make sure that you clearly indicate how the various accounts are classied (current or long- term; asset or liability). (1.5 marks) e) In part (d) you will have reported either a net asset or net liability pertaining to contract assets and billings. Briey explain what the reported number represents. Be succinct one short paragraph is sufficient. (1 mark) Question 6 (8 marks) In 20x5, BuildIt Corp. (BIC) was awarded a xedprice contract of $9,400,000 to construct a warehouse for a client. Work began in 20X5 and was completed in 20x7. BIC originally estimated the project costs at $8,500,000. A schedule of actual costs and revised estimates, together with progress billings and collections, follows: (in $'ODOs) 20X5 20X6* 20X?" Cumulative costs incurred 1,900 8,400 8,800 Estimated costs to complete 6,800 2,800 0 Progress billing during the year 2,200 6,800 400 Collections during the year 1,500 7,000 900 * This revised cost data was not known in 20x5. ** This revised cost data was not known in 20X6. BIC reports its financial results in accordance with IFRS. Its year end is December 31. It uses the cost-to-cost method to determine construction revenue. Project completion is considered a single performance obligation that will be satised over time. Required: Prepare all required summaryjournal entries complete with explanations for each of the 20X5, 20X6, and 20X? fiscal years. (Round the percentage of completion to one signicant decimal place for example, 16.4% to determine the amount of revenue to be recognized in each year.) Question 7 (7 marks) Extracts from Bonsai Products Corp.'s (BPC) unadjusted trial balance for its year ended December 31, 20x7, appear below: Bonsai Products Corp. Unadjusted trial balance (extracts) As at December 31, 20X? Account Debit Credit Prepaid expenses 3,500 Note receivable 69,302 Ofce building 400,000 Accumulated depreciation ofce building 215,625 Computer equipment 16,400 Accumulated depreciation computer equipment 7,900 BPC reports its nancial results in accordance with IFRS. It uses a perpetual system to account for its inventory. The company's policy is that it only prepares accruals and adjusting entries at year end. Pertinent information follows: . On June 1, 20x7, BPC paid $2,400 for an insurance policy that provides for re damage from June 1, 20x7, to May 31, 20X8. The insurance premium was debited to prepaid expenses. The pre-existing balance in this account was for another annual insurance policy that expired on May 31, 20x7. 0 BPC depreciates its building on a straight-line basis over 20 years. The estimated residual value of the building at the end of its useful life is $25,000. . BPC depreciates its computer systems using the declining balance method at a rate of 40% per year. There were no additions or disposals of computers during the year. . On October 1, BPC sold a 24-month service agreement for $24,000 covering the period from December 1, 20x7, to November 30, 20X9, crediting unearned revenue. BPC's policy is to recognize revenue equally over the life of the service agreement. Related expenses have already been recognized in the company's accounts. 0 The note receivable was taken on February 1, 20x7. It is repayable at $20,000 per annum, rst due February 1, 20X8. The payment includes interest at 6% per annum, which is the market rate of interest for loans of this nature. 0 BPC's review of its shipping records indicates that inventory costing $700 was sold FOB destination on account for $1,100 on December 28, 20x7, but was not delivered until January 8, 20KB. BPC recorded the sale on December 28. Required: Prepare all required adjusting journal entries for the year ended December 31, 20x7. Question 8 (9 marks) International Gourmet Experience Inc. (IGE) is a rapidly expanding company that specializes in planning luxurious gourmet experience escapes to exotic locations. for discerning \"foodies." IGE has been in business for 18 months. It faces stiff competition from a number of established companies offering similar services. The key to IGE's early success has been extremely satised customers, which has resulted in repeat business as well as favourable word of mouth and web reviews. IGE's current accounting information system (AIS) is very rudimentary, consisting of a basic accounting software package that does not include a payroll module and that cannot be upgraded. IGE uses various spreadsheets to keep track of payroll, bookings, and customer satisfaction ratings of the different experience packages offered. The company's management recognizes that in order to continue to grow, the company must maintain its high level of customer satisfaction while controlling costs. To facilitate this, management knows that it must upgrade the AIS to better manage the organization. The vice- president of operations has asked you, CPA. IGE's chief accountant, to research what options are available and to make a recommendation as to how to proceed. The VP stated that the criteria considered should include functionality, cost, reliability, compatibility with online purchases by customers. ability to accommodate continuing growth, and reducing duplicative data entry. You have six people working for you in the accounting department, three of whom work out of their home ofces. As such, a networked system with multi-user capabilities is required. You are aware of the inadequacies of the current system and the issues they are causing and have researched various possibilities. You have narrowed the choice to three options as described below, all of which meet the requirements for multi-user functionality, network capability, compatibility, and reducing duplicative data entry. 0 Standard software package (SSP) This software, which is widely used and is the industry norm, could be ready for use in six weeks. It can be purchased for $90,000. Your colleagues in the industry who use this product confirm that the software package is very reliable and meets their needs. SSP represents a significant improvement over IGE's current AIS and includes 100% of the identified \"must haves.\" It also includes about 70% of IGE's \"nice to haves.\" The capacity of the software package can be easily expanded at a later date on relatively short notice. The expected useful life of the software is four years. a Cloud-computing software rental (CCS) IGE can arrange to rent a hosted solution of the SSP detailed above at a cost of $2,500 per month based on a 24-month rental agreement. Arranging access takes about two weeks. When a hosted solution is used, expanding capacity is relatively seamless although the costs do rise incrementally. Obsolescence isn't a concern as the host upgrades the system on an ongoing basis. - Customized software package (CSP) A reputable software designer quoted a fixed price of $100,000 to custom-build a system that meets all of IGE's identified needs. The designer suggests that it will take between six to nine months before the system is ready to go live, with nine months being the absolute maximum. The designer's proposed contract stipulates that the contracted price will be reduced by $300 per day for every day in excess of 270 days until the system is ready to go live. The expected useful life of the software is four years. The system can be expanded at a later date; however, the expansion would have to be a customized solution designed by a software developer, at a cost that will likely be substantively higher than acquiring additional capacity for the SSP. Required: Use the CPA Way to analyze this situation and make a recommendation to the vice-president of operations of IGE