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Exhibit le Twinkel Tiffany Inc. Statement of Financial Performance for the years ended December 31 DRAFT 2019 $ Sales revenue Unrealized gain/Loss) on FV-OCl investment

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Exhibit le Twinkel Tiffany Inc. Statement of Financial Performance for the years ended December 31 DRAFT 2019 $ Sales revenue Unrealized gain/Loss) on FV-OCl investment 1,664 253 20.718 1,684,971 Expenses Interest expense Salaries and wages expense Cost of goolds sold Administrative and general expenses Depreciation and amortization Income tax expense (30%) Marketing and sales expenses Total expenses 120,000 186,532 938,552 33,648 221,959 38,338 56.489 1,595,517 Net Income 89,454 ttttttttttt VI. Case - Revenue Recognition and Others (25 points) Twinkle Tiffany Inc. (TTI) is a privately held toy retail chain headquartered in Toronto. TTI was incorporated in 2000, has grown from a single, small local toy store in Toronto to over 10 stores throughout Ontario. With the success in retail business, TTI acquired two small apartment buildings in 2015 to earn extra income. Rental income earned in 2019 was $360,000. TTI recently hired you as a controller in anticipation of initial public offering that the company plans in 2022. Today is January 2, 2020. The company follows calendar year end, and the book has not been closed yet. This means that you have the ability to make necessary adjustments to TTI's financial statement for the year-ended December 31, 2019. TTI follows IFRS, and tax rate is 30%. paid $20,000 on December 30, 2019 when the contract was signed. The contract stipulates that the remaining amount (i.e. $30,000) should be paid upon delivery of toys (scheduled on January 10, 2020). Assume collectability is reasonably assured. On December 30, 2019, APC carefully chose the toys they want, and asked TTI to hold them until the date of the party (i.e. January 10, 2020) as APC does not have place to store them. Per request, TTI packed up the items, put them in the corner of its own warehouse with a note saying "Belong to APC, delivery scheduled on January 10, 2020". The products became ready to ship on December 31, 2019. Cost of goods sold is $25,000. TTI recorded the following entries on December 30, 2019. $20,000 Dr. Cash Cr. Sales Revenue $20.000 TTI is 100% owned by Tony. His wife, Jenny, has been handling all financial matters, including preparing/recording journal entries and maintaining books and records. She never took any accounting courses, and often relied on common sense in making accounting choices. She prepared a draft statement of financial performance for the 2019 fiscal year to the best of her ability (Exhibit I). TTI's investment bank recommended that TTI adopt a multiple-step statement of financial performance, by function, to support a successful IPO. Tony and Jenny agreed. Tony asked you to review the statement of financial performance, identify deficiencies and provide suggestions how they can be improved (ignore EPS calculation). Tony also asked you to review the below transactions, and provide a complete discussion and analysis based on the appropriate criteria. In doing so, provide recommendations, implications, and adjusting journal entries where applicable. For the time being, ignore statement of financial position, statement of changes in shareholder's equity and statement of cash flow. In 2019, TTI started a wholesale distribution business, customers being other local toy retailors. Total sales made by the wholesale business was $550.000, with a warranty guarantee that the product was free of defects. Cost of good sold is $440,000. The standardized, assurance warranties extent for two-year period with estimated cost of $44.000 (no warranty claim was made in 2019). In addition, TTI sold extended warranties to one customer for one-year beyond the standard two-year period for $5,000 (Stand-alone value of the extended warranties). Finally, to boost sales, TTI offered a 5% volume discount if customers purchase at least $100,000 of its product during the calendar year. No customer met the threshold in 2019. Two customers asked if TTI will continue to offer the volume discount in 2020 as they foresee a surge in toy demand so that that they might be qualified for receiving it in 2020. No estimation is available at this point. To record the sales, TTI made the following journal entries in 2019. Dr. Cash Cr. Sales Revenue $555,000 $555,000 Dr. Cost of Goods Sold Cr. Inventory $440,000 $440,000 TTI invested in an arrangement with a children furniture design and manufacturing firm called Frozen Furniture Inc. (FFI). TTi's apartment building had some unused ground-floor space, and TTI converted that into "pop-up kids furniture stores. TTI acquired sufficient volume of furniture from FFI to stock these pop-up stores at excellent price on the inventory. While the pop-up stores were open to the general public, TTI assumed that the primary customers would be tenants of the buildings where the pop-up stores were located. Management reasoned that tenants would appreciate having the ability to purchase beautiful and high-quality furnishings without having to leave their building. On October 1, 2019, a couple pop-up furniture stores opened in TTI's apartment buildings. Sales have been surprisingly slow. To improve sales in November, TTI offered a Black Friday promotion to tenants of the buildings in which the pop-up stores were located. A furniture purchase of $2,000 or more would entitle the tenant to free rent in January 2020. In total, 27 tenants took advantage of this deal and made qualifying purchases in 2019. Total sales made is $185,000 (normal selling price irrespective of whether customers receive free rent or not). TTI completed all delivery, all of which was paid in full upon delivery in December 2019. Total cost of sale is $100,000, based on the prices charged by FFI. The total January rent revenue forgone by TTI is $25,600. This rent would have been due from tenants in January of 2020. To record the sales, Jenny made the following journal entries in December 2019. Required: respond to the requirements related to the above information/transactions. Dr. Cash Cr. Sales Revenue $185,000 $185,000 Dr. Cost of Goods sold Cr. Inventory $100,000 $100,000 On December 21, 2019, TTI was approached by a local event planner, Awesome Party Co. (APC). APC is planning to throw a party for children on January 10, 2020, and wants to order $50,000 worth of toys from TTI. As APC is a new customer, TTI requested APC to make a 40% non-refundable deposit. APC agreed, Exhibit le Twinkel Tiffany Inc. Statement of Financial Performance for the years ended December 31 DRAFT 2019 $ Sales revenue Unrealized gain/Loss) on FV-OCl investment 1,664 253 20.718 1,684,971 Expenses Interest expense Salaries and wages expense Cost of goolds sold Administrative and general expenses Depreciation and amortization Income tax expense (30%) Marketing and sales expenses Total expenses 120,000 186,532 938,552 33,648 221,959 38,338 56.489 1,595,517 Net Income 89,454 ttttttttttt VI. Case - Revenue Recognition and Others (25 points) Twinkle Tiffany Inc. (TTI) is a privately held toy retail chain headquartered in Toronto. TTI was incorporated in 2000, has grown from a single, small local toy store in Toronto to over 10 stores throughout Ontario. With the success in retail business, TTI acquired two small apartment buildings in 2015 to earn extra income. Rental income earned in 2019 was $360,000. TTI recently hired you as a controller in anticipation of initial public offering that the company plans in 2022. Today is January 2, 2020. The company follows calendar year end, and the book has not been closed yet. This means that you have the ability to make necessary adjustments to TTI's financial statement for the year-ended December 31, 2019. TTI follows IFRS, and tax rate is 30%. paid $20,000 on December 30, 2019 when the contract was signed. The contract stipulates that the remaining amount (i.e. $30,000) should be paid upon delivery of toys (scheduled on January 10, 2020). Assume collectability is reasonably assured. On December 30, 2019, APC carefully chose the toys they want, and asked TTI to hold them until the date of the party (i.e. January 10, 2020) as APC does not have place to store them. Per request, TTI packed up the items, put them in the corner of its own warehouse with a note saying "Belong to APC, delivery scheduled on January 10, 2020". The products became ready to ship on December 31, 2019. Cost of goods sold is $25,000. TTI recorded the following entries on December 30, 2019. $20,000 Dr. Cash Cr. Sales Revenue $20.000 TTI is 100% owned by Tony. His wife, Jenny, has been handling all financial matters, including preparing/recording journal entries and maintaining books and records. She never took any accounting courses, and often relied on common sense in making accounting choices. She prepared a draft statement of financial performance for the 2019 fiscal year to the best of her ability (Exhibit I). TTI's investment bank recommended that TTI adopt a multiple-step statement of financial performance, by function, to support a successful IPO. Tony and Jenny agreed. Tony asked you to review the statement of financial performance, identify deficiencies and provide suggestions how they can be improved (ignore EPS calculation). Tony also asked you to review the below transactions, and provide a complete discussion and analysis based on the appropriate criteria. In doing so, provide recommendations, implications, and adjusting journal entries where applicable. For the time being, ignore statement of financial position, statement of changes in shareholder's equity and statement of cash flow. In 2019, TTI started a wholesale distribution business, customers being other local toy retailors. Total sales made by the wholesale business was $550.000, with a warranty guarantee that the product was free of defects. Cost of good sold is $440,000. The standardized, assurance warranties extent for two-year period with estimated cost of $44.000 (no warranty claim was made in 2019). In addition, TTI sold extended warranties to one customer for one-year beyond the standard two-year period for $5,000 (Stand-alone value of the extended warranties). Finally, to boost sales, TTI offered a 5% volume discount if customers purchase at least $100,000 of its product during the calendar year. No customer met the threshold in 2019. Two customers asked if TTI will continue to offer the volume discount in 2020 as they foresee a surge in toy demand so that that they might be qualified for receiving it in 2020. No estimation is available at this point. To record the sales, TTI made the following journal entries in 2019. Dr. Cash Cr. Sales Revenue $555,000 $555,000 Dr. Cost of Goods Sold Cr. Inventory $440,000 $440,000 TTI invested in an arrangement with a children furniture design and manufacturing firm called Frozen Furniture Inc. (FFI). TTi's apartment building had some unused ground-floor space, and TTI converted that into "pop-up kids furniture stores. TTI acquired sufficient volume of furniture from FFI to stock these pop-up stores at excellent price on the inventory. While the pop-up stores were open to the general public, TTI assumed that the primary customers would be tenants of the buildings where the pop-up stores were located. Management reasoned that tenants would appreciate having the ability to purchase beautiful and high-quality furnishings without having to leave their building. On October 1, 2019, a couple pop-up furniture stores opened in TTI's apartment buildings. Sales have been surprisingly slow. To improve sales in November, TTI offered a Black Friday promotion to tenants of the buildings in which the pop-up stores were located. A furniture purchase of $2,000 or more would entitle the tenant to free rent in January 2020. In total, 27 tenants took advantage of this deal and made qualifying purchases in 2019. Total sales made is $185,000 (normal selling price irrespective of whether customers receive free rent or not). TTI completed all delivery, all of which was paid in full upon delivery in December 2019. Total cost of sale is $100,000, based on the prices charged by FFI. The total January rent revenue forgone by TTI is $25,600. This rent would have been due from tenants in January of 2020. To record the sales, Jenny made the following journal entries in December 2019. Required: respond to the requirements related to the above information/transactions. Dr. Cash Cr. Sales Revenue $185,000 $185,000 Dr. Cost of Goods sold Cr. Inventory $100,000 $100,000 On December 21, 2019, TTI was approached by a local event planner, Awesome Party Co. (APC). APC is planning to throw a party for children on January 10, 2020, and wants to order $50,000 worth of toys from TTI. As APC is a new customer, TTI requested APC to make a 40% non-refundable deposit. APC agreed

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