Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Drabble, Inc. owns 40 percent of the outstanding stock of Gilliam Company. During 2014, Drabble received a $4,000 cash dividend from Gilliam. What effect did

Drabble, Inc. owns 40 percent of the outstanding stock of Gilliam Company. During 2014, Drabble received a $4,000 cash dividend from Gilliam. What effect did this have on Drabble's 2014 financial statements? (Assume that Drabble has substantial influence over Gilliam)

Question 1 options:

Increased total assets

Decreased total assets

Increased income

Decreased investment account

Question 2 (1 point)

Which one of the following items is not a liability?

Question 2 options:

Accrued estimated warranty costs

Dividends payable in shares

Advances from customers on contracts

The portion of long-term debt due within one year

Question 3 (1 point)

A company had sales of $1 million. Coupons in the amount of $1 per $10 in sales were given to paying customers. History has shown that 50% of all coupons are redeemed. Which of the following statements is correct?

Question 3 options:

A provision for $50,000 must be recognized.

A provision for $100,000 must be recognized.

A provision for $1 million must be recognized.

No provision is necessary.

Question 4 (1 point)

JMR bought 15 Z Corporation's $1,000 bonds for $15,270 total, on April 1, 2014, (five years prior to maturity). The bonds pay 8% semi-annual interest on April 1 and October 1. On December 31, 2014, JMR purchased these bonds at:

Question 4 options:

Par.

A premium.

A discount.

A discount plus accrued interest.

Question 5 (1 point)

A stock dividend is recorded as:

Question 5 options:

An increase in share capital and a decrease in inventory

An increase in share capital and a decrease in retained earnings

An increase in share capital and a decrease in contributed capital

A decrease in share capital and an increase in retained earnings

Question 6 (1 point)

ABC Inc. engages in a non-cash exchange with a third party whereby ABC Inc. issues common shares to the third party in exchange for some highly specialized Machinery & Equipment. The value of the shares issued was $15,000 while the appraised value of the Machinery & Equipment was $12,000. At what amount would this transaction be valued on ABC's books?

Question 6 options:

$12,000 under IFRS and $15,000 under ASPE.

$15,000 under IFRS and $12,000 under ASPE.

$12,000 under either ASPE or IFRS.

$15,000 under either ASPE or IFRS.

Question 7 (1 point)

An example of a compound financial instruments is:

Question 7 options:

A perpetual bond

A convertible bond

Common shares

Stock options

Question 8 (1 point)

At the end of 2014, the only expected future temporary difference is implied by the following account found in the balance sheet: Prepaid rent = $22,000 The footnotes reveal that the prepaid rent applies only to 2015. You would also expect to find which of the following in the balance sheet:

Question 8 options:

Current deferred tax liability

Current deferred tax asset

Noncurrent deferred tax liability

Noncurrent deferred tax asset

Question 9 (6 points)

On 1 January 2020, Maple Ltd. purchased $500,000 of Pine Ltd. 7% bonds. The bonds pay semi-annual interest each 30 June and 31 December. The market interest rate was 8% on the date of purchase. The bonds mature on 31 December 2025.

Required: a) Calculate the price paid by Maple Ltd. b) Assume that the bond is classified as a FVTPL investment, and the fair value at the end of 2020 was $505,000. Prepare the entries for each interest period in 2020, and adjust the bond to fair value at the end of each fiscal year.

Note: PV tables provided in the textbook.

Question 9 options:

Question 10 (10 points)

On 2 January 2017, White-Stone Ltd. commenced a mining operation. White-Stone Ltd. is required by the terms of provincial legislation to remediate the mine site when mining is completed, likely in 8 years time. This means that a provision for decommissioning must be recorded. White-Stone Ltd. estimates that decommissioning will cost $610,000 in 8 years. A reasonable market interest rate is 5%. White-Stone Ltd.'s year end is on December 31. Note: PV tables provided in the textbook.

Required: a) Calculate the present value of the decommissioning obligation on January 2, 2017. b) Prepare a table that shows the balance of the obligation for three years (only).

Year Opening Net Liability Interest Expense Market Rate Closing Net Liability
2017 a. b. c.
2018 d. e. f.
2019 g. h. i.

c) Assume that at the end of 2019, White-Stone Ltd. estimates that the cost of remediation will be $708,500, and that interest rates are now in the range of 7%. Calculate the interest expense for 2019, the new present value, and the adjustment to the obligation for the change in estimates.

Question 10 options:

Question 11 (6 points)

Bob Smith, The accountant of ABC Ltd. has been tasked with redeeming part of the shares outstanding for his corporation. Bob is unsure how he should charge the cost of the redemption to shareholder's equity accounts.

Required:

Explain to Bob how the cost should be charged to shareholders equity accounts. Please provide specific responses for the following circumstances:

1) When the cost is lower than the average price per share.

2) When the cost is higher than the average price per share.

Question 11 options:

Question 12 (10 points)

At the end of 2019, Durham Mining Corp. reported the following in Shareholders Equity as indicated in Table-1 below:

Table-1:

Common shares, no-par value, authorized, unlimited shares, issued 2,000,000 shares. Outstanding 1,900,000 shares $ 3,200,000
Contributed Capital on Treasury Stock Transactions 50,000
Retained Earnings 4,000,000
Treasury Stock, 100,000 common shares (700,000)

The company had treasury stock transactions in the following sequence during 2020:

i) Purchased 50,000 common shares as treasury stock at $10 per share. ii) Reissued 20,000 treasury shares at $11 per share. iii) Reissued 25,000 treasury shares at $5 per share.

Required: a) Prepare journal entries for the treasury stock transactions b) Calculate the balances in each equity account after the effects of the transactions in requirement (a). (ie: update the Table-1 information)

Question 12 options:

Question 13 (10 points)

Big-Funds Ltd. granted stock options to executives in early 2018. The stock options vest over four years and expire after six years. In total, the options allow the purchase of 50,000 shares at $10 per share. Option pricing models indicate that the options have a total fair value of $800,000. Estimates of retention are 75% at the end of 2018 and 70% at the end of 2019.

Required: a) Provide the journal entries to be recorded with respect to the options at the end of 2018 and 2019. b) What would the balance be in the equity account for stock options at the end of the forth year if retention remained at 70%? c) Assume that actual retention was 70%, and the options were exercised at the end of the fourth year when the market price of common shares is $25. Provide the entry for exercise. d) Assume that retention was 70% but the options were allowed to lapse after six years when the price of common shares is $4. Provide the entry for the lapse.

Question 13 options

Question 14 (10 points)

High Tech Inc. reported earnings before income taxes of $3,150,000 in 2019. The tax rate for this year is 40%.

Item Amt.
a. Golf club dues $ 44,000
b. Depreciation expense 66,000
c. Development costs incurred during year; capitalized for accounting purposes 220,000
d. Warranty costs accrued during year 42,000
e. Interest and penalty for late payment payroll taxes 55,000
f. CCA 420,000
g. Amortization of capitalized development costs 22,000

Required: a) Identity 2 permanent differences and 2 temporary differences from items (a) to (g) shown in the table above. b) Calculate the Taxable Income c) Calculate the Income Tax payable

Question 14 options:

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

More Books

Students also viewed these Accounting questions

Question

Discuss how software can assist in project quality management

Answered: 1 week ago

Question

How would you train others to perform the task? Explain.

Answered: 1 week ago

Question

Why is it important for a firm to conduct career development?

Answered: 1 week ago