Cinefilm (CF) is an entertainment and media company established in 1979 by two brothers in Toronto. Originally, the company started with a single movie theatre in Toronto. CF has grown into a large, nationally recognized company that is publicly traded on the TSX with the symbol CF. CF has three operating segments: movie theatres, streaming content, and advertising. The movie theatre segment generates revenues from theatre attendance, including box office, food service, and gaming revenues. CF operates 100 theatres from coast to coast. The streaming content segment offers pay-per-view movies, specialty programming, and online games. The services are provided through the Internet or large cable providers. The advertising segment consists of all in-theatre advertising revenues and costs (such as pre- show, show-time, magazine, and lobby advertising) and streaming-content advertising (such as commercials and banner ads). CF's shares are widely held and have a strong following of analysts. CF's share price has experienced significant growth in recent years due to strong growth in all three operating segments. The management team is preparing the company's financial statements for the December 31, 2020 year end. Analysts' expectations for fiscal 2020 can be summarized as follows: Expectation Earnings per share $1.45 (diluted) Revenue $145 million 1.5:1 Debt to equity ratio Return on assets 10% (net income/total assets) The CFO and accounting department are currently analyzing the following issues in preparing the year- The CFO and accounting department are currently analyzing the following issues in preparing the year- end financial statements. 1. During the year, CF launched a new loyalty program called the Movie Points Program (MPP). Individuals can sign up for a loyalty card and earn 1 MP for every movie ticket purchased. Seven MPs are required for a free movie. The program has been a big success, and 345,548 MPs were issued during 2020, with 25,152 free movies being awarded. Management expects that 14% of the points will never be redeemed (that is, 1 of 7 points). No journal entries have been recorded in the financial statements related to the MPP. On average, a movie ticket has a retail value of $10 and a total cost of $3. 2. On January 1, 2018, the company issued a $1-million, five-year bond with a coupon rate of 5% when the market rate was 6%. The bond pays interest annually and has no conversion features. The bond was issued for $957,876. On December 31, 2020, the company reacquired the bond for $950,000. The bond discount is amortized with the effective interest method. 3. On December 1, 2020, the company reacquired 210,000 common shares from the public market for $60 per share. Management reacquired the common shares to signal to shareholders that they believe the shares are undervalued. Prior to the acquisition, the shareholders' equity section of the SFP was as follows: Preferred shares (250,000 authorized, 250,000 issued) cumulative dividend of $1 per share Common shares (unlimited authorized, 9,500,000 issued) Contributed surplus, common share retirement Retained earnings $2,500,000 228,000,000 545,000 125,575,000 4. On December 31, 2020, the board of directors declared a total dividend of $714,500 to be paid out to the preferred and common shareholders. Instructions Part A: Movie Points (14 marks) Note that the revenue approach is the only option under IFRS. The expense approach is adopted in this question for illustration purposes only. a. Record the year-end journal entry to recognize the loyalty program under both the revenue and the expense approach. (8 marks) b. Place only one "X" in each row in the table below in assessing whether the revenue or expense approach will have the most negative impact on the metric identified for 2020. (5 marks) Both Approaches Not Revenue Approach Expense Have the Approach Same Impact Determinable Earnings per share Warranty expense Revenue Debt to equity ratio Return on assets Part B: Bond Derecognition (12 marks) a. Complete the amortization table below up to December 31, 2020. Round to the nearest dollar. Part B: Bond Derecognition (12 marks) a. Complete the amortization table below up to December 31, 2020. Round to the nearest dollar. Beginning Value Cash Interest Interest Expense Amortization December 31, 2018 $957,876 December 31, 2019 Ending Value December 31, 2020 b. Record the journal entry to reflect the derecognition of the bond. c. Determine the impact of the bond reacquisition journal entry on the financial statement key metrics. Use the following words to describe the impact for each metric: positive, negative, no impact, or not determinable. Reacquisition of bond Earnings per Share Debt to Revenue Equity Return on Assets Part C: Share Reacquisition (8 marks) f. Prepare the journal entry to record the reacquisition of the common shares. g. Determine the impact of the share reacquisition journal entry on the financial statement key metrics. Use the following words to describe the impact for each metric: positive, negative, no impact, or not determinable. Part C: Share Reacquisition (8 marks) f. Prepare the journal entry to record the reacquisition of the common shares. g. Determine the impact of the share reacquisition journal entry on the financial statement key metrics. Use the following words to describe the impact for each metric: positive, negative, no impact, or not determinable. Earnings per Share Debt to Revenue Equity Return on Assets Reacquisition of common shares Part D: Dividend Payment (6 marks) Calculate the dividend per share for the common shareholders