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Ayayai Hotels Ltd. (AH L) is a small boutique hotel that provides 35 suites that can be rented by the day, week, or month. Food service is available through room service as well. In addition, there are two suites that have been rented on a long-term basis to corporate tenants, who have access to their suites anytime throughout the year without making a reservation. The company has a December 31 year end, and you are preparing the year-end nancial statements using IFRS. The following issues require your consideration: 1. Cash 0 The hotel keeps a signicant amount of euro currency on hand to meet the needs of its guests. At year end, there was 14,640 on hand. The year-end exchange rate was $1.25, and the average rate for the year was $1.32. 0 The bank statement balance at December 31 was $193,117. There were outstanding cheques of $63,898 and an outstanding deposit of $18,894. Bank charges per the bank statement were $79 for the month of December and have been recorded. 2. Accounts receivable and allowance for doubtful accounts 0 The hotel charges $183 per night for accommodation in one of the rental suites, and guests pay at the end oftheir stay, with daily revenue being accrued as it is earned. At December 31, the amount outstanding from shortterm guests was $12,810. At year end, management expects to be unable to collect an amount equal to 5% of the outstanding receivables for this type of suite. During the year, Service Revenue amounted to $2,135,000, and the balance in Allowance for Doubtful Accounts at the end of the previous year was $18,300. During the year, $39,040 in accounts was written off. 0 The two corporate suites are rented for $54,900 apiece per year. The payment for these longer term rentals is due in advance each July 1 for the following 12 months. One of these corporate suites has been in use for part of the year, but the corporate tenant went bankrupt and was unable to pay the $54,900 fee. Hotel management had hoped the tenant would eventually be able to pay, and it allowed the company to use the suite until the end of October. Since then, the hotel has been in negotiations with the bankruptcy accountant and expects to eventually receive a settlement of $12,200. The balance will become uncollectible; no allowance for doubtful accounts has been recorded with respect to these suites as there have never been collection problems in the past. 3. l nve ntory PHLfollows a policy of FIFO costing, and values items at the lower of cost and net realizable value based on an individual item basis. 0 The hotel has a standing weekly order at set prices with a local cateringrm. If the food is not eaten before the next delivery is received, it is donated to the local women's shelter. This ensures that all meals are of appropriate quality for the hotel guests. 3. Inventory PHLfollows a policy of FIFO costing, and values items at the lower of cost and net realizable value based on an individual item basis. The hotel has a standing weekly order at set prices with a local cateringrm. If the food is not eaten before the next delivery is received, it is donated to the local women's shelter. This ensures that all meals are of appropriate quality for the hotel guests. On December 31, the following items were delivered: Item Unit Cost Net Realizable Value 38 chicken dinners $4 $11 32 beef dinners $5 $14 65 frozen vegetable servings $1 $2 65 units of fresh fruit $1 $2 90 desserts $3 $5 The invoice for the food delivery on December 31 included an additional delivery charge of $0.10 per item, totalling $29.00. On December 31, an ice storm resulted in a loss of electricity to the hotel building. As a result, 18 chicken and 8 beef dinners thawed and were unusable. The hotel also maintains an inventory ofwhite terry cloth bathrobes and towels that are available for sale to its clients. At December 31, the following information is available: Product Quantity Cost/Unit Selling Price/Unit Bathrobes, assorted sizes 35 $47.50 $78.00 Towels, extra-large 22 $18.30 $17.00* Towels, large 19 $13.00 $26.00 *The extra-large towels are no longer popular and management has decided to discontinue them. It offers the hotel staff a 20% commission for all extra-large towels they sell at the sale price of $17.00. Investments On December 1, PHL purchased a $122,000, 90day Canadian government treasury bill for $119,608 to yield 8%. During the year, PHL purchased 30% of the shares in Western Hotel Company, a company that owns a similar hotel property in a nearby city, for $5 million, a price corresponding to 30% of its book value. Subsequently, Western Hotel Company paid a dividend totalling $122,000 and earned income of $305,000. The fair value of the common shares as at December 31 was $6,222,000. PHL also purchased common shares of Dufort Corp. as a temporary investment for $58,560. At the end of the year, these shares had a fair value of $57,340, according to the December 31 closing price on the Toronto Stock Exchange. A dividend of $6 10 was received during the year. Cash and investments presentation Determine whether each financial instrument should be presented in the cash and cash equivalents or in the investments section of the statement of financial position. Financial Instrument Euro currency Cash and Cash Equivalents Bank account Cash and Cash Equivalents v 90-day Canadian government treasury bill Cash and Cash Equivalents v Western Hotel Company common shares Investments Dufort Corp. common shares Investments VBank reconciliation Prepare a bank reconciliation for PHL as at December 31 to determine the adjusted cash balance per the general ledger. Enter the description and amount of any adjustment in the table below. (Description) (5) Cash per bank account: $ Add: Outstanding deposits V Deduct: Outstanding cheques V Adjusted cash per general ledger: $ Investment income Calculate the carrying amount as at December 31 and investment income for the year ended December 31 for each of the financial instruments listed below. (Round answers to O decimal places, e.g. 5,275. Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45). Use 365 days for calculation.) Financial instrument Carrying Amount ($) Investment Income ($) 90-day Canadian government treasury bill Using: amortized cost $ Western Hotel Company common shares Using: equity method $ to Western Hotel Company common shares Using: FV-OCI $ to Dufort Corp. common shares Using: FV-NI $Inventory carrying values Calculate the carrying amount of each inventory item as at December 31. Identify any inventory that requires a writedown. ( Round answers to 2 decimal places, eg. 52.75.) Carrying Amount ($) Food: Chicken dinners v Beef dinners v Vegetable servings v Fruit servings v Desserts v Bathrobes and towels: Bathrobes v Towels, extra-large v Towels, large v Accounts receivable Calculate the accounts receivable, allowance for doubtful accounts, and bad debt balances as at December 31. (Round answers to 0 decimal places, as. 5,2 75.) Amount as at December 31 Accounts receivable $ Allowance for doubtful accounts 33 Bad debt expense $