Instructions Financial Accounting courses focus heavily on nding solutions for quali tative and quantitative problems. With that in mind, most units will in- clude many study exercises. For each exercise, you will need to provide more than a simple numerical response. Your solutions should thoroughly address the issue and present the ndings in a meaningil format similar to those developed within the chapters and as part of the review exercises solutions. Part value may be assigned for incorrect responses. Unit 5 Study Exercises Question 5.1 marks; 2 marks per line) (Total: 20 Healthy Farms Company is testing a number of new agricultural seeds which it they have recently harvested. To generate interest, the company has decided to grant ve of its largest customers the unconditional right to return these products if not frilly satised. The right of return extends for 4 months. Healthy Farms sells these seeds on account for $1.5 million on April 2, 2020. The cost of these seeds were $800,000.Customers are re quired to pay the ill amount due by June 15, 2020. In addition, Healthy Farms is a public company and as a result follows IFRS. Required 1. Prepare the journal entry for Healthy Farms at April 2, 2020, assum- ing Healthy Farms estimates returns of 20% based on prior experience. 2. Assmne that one customer returns the seeds on July 1, 2020. Prepare the journal entry to record this transaction, assuming this customer pur chased $100,000 of seeds from Healthy Farms. Question 5.2 marks; 2 marks per line) (Total: 12 Red Fish Corporation shipped $20,000 of merchandise on consignment to Blue Fish Corporation. Red Fish paid freight costs of $2,000. Blue Fish paid $500 for local advertising, which is reimbursable from Red Fish. By year end, 60% of the merchandise had been sold for $21,500. Blue Fish notied Red Fish, retained a 10% commission, and remitted the cash due to Red Fish. Required 1. Prepare Red Fish's journal entry when cash is received. Question 5.3 (Total: 20 marks) Gigabit Inc., a software company sells new accounting sowarc and user support bundled together. The fair value of the soware is $1,500 and the fair value of the user support is $500. The user support is valid for a pe- riod of 12 months from the date of soware purchase. To be able to compete with a competitor's offering, Gigabit decided to sell the bundle at a discount for $1,800. During its rst month of sales, 100 units of this soware bundle were sold at the discounted price, and expenses were $50,000. Required 1. Calculate the sale price that should be allocated to each component of the bundle using the adjusted market assessment approach. 2. Calculate the sale price that should be allocated to each component of the bundle using the residual approach. 3. Assuming that the relative fair value method is used and income tax rate is 30%, calculate the net income applicable to Gigabit's rst month of sales. Question 5.4 (Total: 14 marks; 2 marks per line) Frigid Temperatures Inc. has sold 1,000 refrigerators during 2020 at a to- tal price of $ 1,620,000, with a warranty guarantee that the product was free from any defects. The cost of the refrigeratetors sold was $1,080,000. The warranty covers one year, with an estimated cost of $ 10,000. In addi- tion, Frigid Temperatures Inc. sold extended warranties on 600 refrigera- tors for four years beyond the one-year period for $ 210,000. Required 1. Prepare the journal entries to record the sale and related warranties for 2020. Question 5.5 (Total: 34 marks) The board of directors for Apache Construction Corp. is meeting to choose between the completed-contract method and the percentage-of- completion method of accounting for long-term contracts in the compa- ny's financial statements. You have been engaged to assist Apache's con troller in the preparation of a presentation to be given at the board meet- ing. The controller provides you with the following information: Apache commenced doing business on January 1, 2020. Construction activities for the year ended December 31, 2020, were as follows: Total Contract Billings through Cash collections through ijed. Price 1251/10 12/3 1120 A 5 615,000 5 340,000 5 310,000 B 450,000 135,000 135,000 0 475,000 475,000 390,000 D 500,000 240,000 160,000 E 480,000 400,000 400,000 $2,610,000 3 1,590,000 5 1,395,000 Contact costs incurred Estimated additional costs on through 12/31/20 amplele emu M A 5 510,000 3 120,000 B 130,000 260,000 c 350,000 .0. D 370,000 290,000 E 320,000 00,000 8 1,680,000 5 750,000 Each contract is with a different customer. Any work remaining to be done on the contracts is expected to be completed in 2021. Required 1. Prepare a schedule by project, calculating the amount of gross prot (or loss) for the 2020 calendar year, which would be reported un- der: a. The completedcontract method. b. The percentage-ofcompletion method (based on estimated costs). 2. Prepare the general journal entry to record revenue and gross prot on project B for 2020, assuming that the percentageofcompletion method is used. 3. Indicate the balances that would appear in the statement of nancial position at December 31, 2020 for the following accounts for Project D, assuming that the percentageofcompletion method is used. a. Accounts Receivable b. Billings on Construction in Process c. Construction in Process How would the balances in the accounts discussed in part 3 above change (if at all) for Project D, if the completedcontract method is used? EMI ct document