1. Genius Products is a public company with a December 31 year end. The company has a $100,000 note payable that had been issued at par and was due to be paid to Federal Bank on January 1, 2020. On January 1, 2020, Genius entered into a debt restructuring agreement with Federal Bank that granted a reduction in the principal obligation to $90,000, an extension of the maturity date to January 1, 2022, and a reduction of interest from 6% to 4%.
2. a)Determine whether this is a settlement of debt or a modification of debt. Show calculations to support your conclusion.
3. b)Prepare the entry for Genius Products for January 1, 2020.
4. c)Briefly explain two reasons why Federal Bank would agree to these delayed terms, and
5. reduced payments.
6. Strathcona is a public company with a December 31 year end. On January 1, 2020 Strathcona offered a share subscription program that allowed investors to purchase 100 common shares for $15 per share. Subscribers were required to make two $5 per share instalments, with the first payment due immediately upon subscription and the final payment due on April 1, 2020. 20 investors joined this program, and all 20 completed the program by making both payments.

a) Prepare the journal entries for January 1, 2020 and for April 1, 2020. Clearly label the dates in your answer.

3. Livingston Inc. is a public company with a December 31 year end. The company had the following balances in its equity accounts on December 1, 2020. On this date, the company declared a $2 dividend to the common shareholders. No dividends had been declared in 2019, however all years prior to 2019 had been paid in full.

Preferred Shares,

($1.75 dividend, cumulative, fully participating, 30,000 authorized, 6,000 issued)

Common Shares, (unlimited authorized, 26,000 issued) Contributed Surplus, from preferred share transactions Retained Earnings

159,000

600,000 8,000 300,500

a) Prepare the journal entry for the declaration of the dividends, recording the payable for the common shares separately from the preferred shares. Assume that the payment will be made in January 2021. (You do not need to record the entry for January 2021 - only for Dec 1, 2020.)

5

4. Gretchen Limited is a public company with a December 31 year end. On May 15, 2020, Gretchen purchased 1,000 of its own preferred shares for $55 and retired them. Prior to the purchase the company's equity section showed the following:

Preferred Shares (20,000 authorized, 8,000 issued and outstanding) Common Shares, (unlimited authorized, 100,000 issued) Contributed Surplus, from preferred share transactions

Retained Earnings

Accumulated Other Comprehensive Income

a) Prepare the journal entry for this transaction.

320,000 200,000 8,000

300,500 45,000

5. Buckley Industries is a public company with a December 31 year end. On January 1, 2020, Buckley granted 10,000 employee stock options to its CEO. Each option allowed the CEO to purchase one of Buckley's shares at a price of $15 per share. On the grant date, this was the value of the shares. The options have a three-year vesting period and an option pricing model determined that their value was $120,000. After the vesting period, the CEO could exercise the options over the following three years. Assume that on August 1, 2025, when the market price of the shares was $22 per share, the CEO exercised options to purchase 6,000 shares. Although the CEO did not leave the company, the rest of the options expired on January 1, 2026. Buckley follows IFRS and has a December 31 year end.

1. a)Prepare Buckley's journal entries for the employee stock options on the following dates.
2. Clearly show the dates in your answer. It is not necessary to record entries for any other dates.
3. December 31, 2020
4. August 1, 2025
5. January 1, 2026
6. b)Explain two reasons why the CEO may not have exercised the options that expired.