Gotcha Covered Inc. (GCI), a publicly traded corporation, sells outdoor furniture, home dcor, pools, spas and clothing in its retail stores. An accountant who reports to you advised of the following issues: With the economic downturn and job losses caused by COVID-19 lockdowns, GCI has estimated it required an allowance for doubtful accounts equal to 18% of gross accounts receivable as at March 31, 2021. In years prior to the pandemic, the allowance for doubtful accounts was equal to 10% of gross accounts receivable. The accountant responsible for determining depreciation expense for the year ended March 31, 2021 discovered depreciation expense for the year ended March 31, 2020 had been understated due to an incorrect formula in the spreadsheet used to calculate depreciation You have decided to prepare a memo regarding the issues that will be shared with GCI's auditors. For BOTH issues, you plan to IDENTIFY the type of accounting change AND BRIEFLY DESCRIBE the appropriate accounting treatment according to LAS 8 Accounting Policies, Changes in Accounting Estimates and Errors. You do NOT plan to prepare any joumal entries at this time (4 marks). . With the issues raised by the accountant resolved and any adjustments to the financial statements made, you have gathered the following information related to the year ended March 31, 2021: GCI reported nerincome and comprehensive income of $35,500,000 GCI pays corporate income taxes at a rate of 30% on all types of income. GCI had convertible bonds issued at the face amount of $20,000,000 outstanding throughout the year. The bonds pay interest at a stated rate of 6% per annum. The bonds are convertible into 600,000 common shares. The weighted average number of common shares outstanding is 10,000,000. The common shares traded at an average of $35 per share throughout the year GCI had stock options outstanding throughout the year that if converted would result in the issuance of 1,050,000 common shares. Each stock option exercised allows for the purchase of 1 GCI common share at a price of $40 per share. GCI had $18,000,000 convertible preferred shares outstanding throughout the year. According to GCI's articles of incorporation, the preferred shares are cumulative with an 8% dividend rate and convertible into 900,000 common shares. . . You intend to calculate basic AND, if applicable, diluted earnings per share. You plan to clearly Inhoud dat Hledaocincolantation and conditionat other than those With the economnie downthen and job loosen caused by COVID 19 lockt wns, GCI estimated it required an allowance for doubtful accounts equal to 18% of gross accounts receivable as at March 31, 2021 In years prior to the pandemic, the allowance for doubtful accounts was equal to 10% of gross accounts receivable, The accountant responsible for determining depreciation expense for the year ended March 31, 2021 discovered depreciation expense for the year ended March 31, 2020 had been understated due to an incorrect formula in the spreadsheet used to calculate depreciation You have decided to prepare a meno regarding the issues that will be shared with GCT's auditors. For BOTH issues, you plan to IDENTIFY the type of accounting change AND BRIEFLY DESCRIBE the appropriate accounting treatment according to IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors. You do NOT plan to prepare any journal entries at this time (4 marks). With the issues raised by the accountant resolved and any adjustments to the financial statements made, you have gathered the following information related to the year ended March 31, 2021: GCI reported net income and comprehensive income of $35,500,000. GCI pays corporate income taxes at a rate of 30% on all types of income. GCI had convertible bonds issued at the face amount of $20,000,000 outstanding throughout the year. The bonds pay interest at a stated rate of 6% per annum. The bonds are convertible into 600,000 coimon shares. The weighted average number of common shares outstanding is 10,000,000. The common shares traded at an average of $35 per share throughout the year. GCI had stock options outstanding throughout the year that if converted would result in the issuance of 1,050,000 common shares. Each stock option exercised allows for the purchase of 1 GCI common share at a price of $40 per share. GCI had $18,000,000 convertible preferred shares outstanding throughout the year. According to GCI's articles of incorporation, the preferred shares are cumulative with an 8% dividend rate and convertible into 900,000 common shares. . . You intend to calculate basic AND if applicable, diluted earnings per share. You plan to clearly label your work, provide detailed supporting calculations and round all amounts other than those expressed per share to the nearest dollar or common share. Any per share amounts should be founded to the nearest cent (11 marks)
