Question 1 On January 2, 2021, Vampire Inc. entered into a contract to construct a high-rise building for $9,000,000. Construction started shortly after the contract was signed and was completed at the end of 2022. Vampire Inc. uses the percentage-of-completion method for recording long term contracts. The following additional information is available: 2021 2022 Costs incurred $4,860,000 $5,400,000 Estimated costs to complete building 5,200,000 0 Collections during the year 4,800,000 7,200,000 Required (25 marks): a) How much revenue should Vampire Inc. report in 2021 and 2022? b) How much gross profit should Vampire Inc. report in 2021 and 2022? c) Prepare the journal entries for 2021 and 2022 for this contract? Question 2 In an effort to increase sales Boo in the Streets (BITS), a private company following ASPE, implemented a customer loyalty program that rewards its customers. For every $25 of merchandise purchased the customer is rewarded with one loyalty point. Each point is redeemable for a $2.50 discount on any purchases of BITS merchandise in the next two years. After the program launched in 2021, customers purchased merchandise for $250,000 and thus, earned 10,000 points redeemable on future purchases. BITS sells all their merchandise at a price to ensure a 30% gross profit. The stand-alone selling price of the merchandise sold is $250,000. Based upon previous experience with this type of loyalty program, BITS expects that 8,000 points will be redeemed from these sales. Required (13 marks): a) Explain whether or not BITS has a separate performance obligation related to their bonus point program. If a separate performance obligation is identified, explain what point in time this performance obligation will be satisfied. b) Prepare the journal entries for the cash sales and issuance of loyalty points for BITS in 2021. Question 3 Eco Appliances Ltd. (EAL), a company that follows IFRS, manufactures environmentally friendly appliances that are great demand due to growing awareness of climate change and global warming. Pricing and cost information for EAL's main products is as follows: Item Stand-Alone Selling Price (Cost) Combined laundry unit $1,050 (600) Refrigerator $ 780 (390) Stove $ 840 (430) Customers are able to purchase any of the three items individually at the stated prices or can obtain a three-item bundle for a price of $2,500, which includes delivery and installation. EAL provides delivery and installation as a stand-alone service for any of its products for $250. Required (25 marks): Assuming that each of the following scenarios are separate revenue arrangements for EAL, answer what is required for each. a) Haunted Condo Corporation (HCC) owns multiple condo complexes across western Canada. On April 1, 2021, EAL signs a contract with HCC for 200 appliance bundles to be delivered and installed in two of its new buildings in Brandon. HCC pays 30% cash at contract signing and will pay the balance upon delivery and installation no later than August 1, 2021. a. Prepare journal entries for EAL on (1) April 1, 2021, and (2) August 1, 2021 when the appliances are delivered and installed. b) on September 1, 2021, EAL sold 160 combined laundry units without installation to Spooky Times Inc. (STI) on credit. STI is uncertain how these new, "greener appliances will work so EAL offers a 60-day return privilege and estimates, based on past experience with sales of these products, that 5% of the units will be returned. a. Prepare journal entries for the sale and COGS on September 1, 2021. c) Nightmare Rental Ltd. (NRL) is building a new rental property in the south end of Brandon. The rental property will consist of 80 units and on March 1, 2021, EAL signs a contract with NRL for delivery and installation of 80 bundles. Under this agreement, EAL will hold the appliance bundles in its warehouses until the new rental property is ready to have the appliances delivered and installed. NRL pays 15% cash at contract signing On May 1, 2021, EAL completes the manufacture of the appliances in the NRL bundle order and places them in their warehouse. Both EAL and NRL have documented the warehouse arrangement and identified the units designated for NRL. The units are ready to ship and EAL may not sell these units to other customers. a. List the criteria that need to be met for control to pass under a bill-and-hold arrangement b. Conclude if control has passed. c. Prepare journal entries for EAL on (1) March 1, 2021 and (2) May 1, 2021. Question 4 Spooky Hollow Inc.'s unadjusted trial balance included the following accounts and balances: Accounts receivable $280,000 debit Allowance for doubtful accounts $1,780 credit Sales $850,000 credit Sales returns and allowances $12,000 debit Required (8 marks): Prepare adjusting journal entries under each of the following independent situations assuming that the estimate of uncollectible accounts is determined by using: a) 3% of gross accounts receivable b) 1% of net sales. Question 5 On December 31, 2020 Black Cat Corporation (BCC) finished providing consultation services and due to the customer finding themselves in a cash shortage, agreed to accept a three-year promissory note in exchange for their services. The promissory note has a face value of $600,000 and a stated rate of 5% with interest being paid at the end of each year. The fair value of the consultation services is not readily available and the note is not readily marketable. Under the circumstances, the note is considered to have an appropriate imputed rate of interest of 10% Required (16 marks); a) Compute the present value of the note receivable. (Hint: remember to calculate the amount of annual interest paid at the rate stated in the note and then present value it using the market rate (or imputed rate). b) Prepare journal entries for the note receivable on the following dates assuming that BCC uses the effective interest method. (Hint: it may be easiest to prepare an amortization table first.) a. December 31, 2020 b. December 31, 2021 C. December 31, 2022 d. December 31, 2023 00 U MLAVIS) Question 10 Wicked Witches Ltd. (WWI), a public company following IFRS, has the following items in its ending inventory: B D E Cost Replacement cost Net realizable value 4.80 4.60 4.90 5.10 5.20 5.00 6.30 6.30 6.50 7.70 7.50 7.60 8.20 8.60 8.80 Required (9 marks): a) Determine the value of ending inventory for WWI using the lower of cost and net realizable value applied on an individual item basis. You can assume that there are 1,000 units of each of A, B, C, D, and E. b) Prepare any adjusting entry required to adjust ending inventory to reflect LC&NRV. Question 9 Cobweb Corporation (CC), a company that follows IFRS, asks you to review its December 31. 2021 inventory values. You have been provided the following information: 1) A physical count of the inventory on December 31, 2021 shows actual inventory on hand to be $343,000. 2) Not included in the physical inventory count is $8,750 of inventory purchased on December 16, 2021. The inventory was shipped from the supplier on December 28. 2021 f.o.b. shipping point and arrived on January 2, 2022. The invoice arrived and was recorded on December 31, 2021. 3) Included in the inventory count was $12,500 of inventory held by CC on consignment from Dark Horse Ltd. 4) Included in the inventory count was merchandise sold to Zombie Scream Ltd. (ZSL). f.o.b. shipping point. The inventory was shipped after it was counted on December 31, 2021. The invoice was prepared and recorded as a sale for $27,500 on December 31, 2021. The cost of this inventory was $21,000 and ZSL received the inventory on January 4, 2022. 5) Included in the inventory count was $8,500 sold to Broomstick Ltd. (BL) f.0.b. destination. The merchandise was shipped after it was counted and BL received it on January 2, 2022. 6) Excluded from the inventory count was a crate of inventory with a note stating "please accept for credit". The crate had merchandise costing $2,000 that had been sold to the customer for $2,900. No entry has been made to the books to record the return and the inventory does not appear to be damaged. Required (10 marks): a) Determine what the inventory balance should actually be at December 31, 2021. (Show your computations) Question 8 The following table is a list of inventory transactions that occurred in July 2021 for Black Night (): 9.00 Date June 1 Opening inventory June 3 Purchase June 9 Purchase June 11 Sale June 16 Purchase June 18 Sale June 22 Purchase June 26 Purchase June 28 Sale June 30 Purchase Selling Quantity Cost Price 2,000 6.40 12,000 6.30 3,000 6.50 -6,000 2,000 6.70 -11,000 4,000 6.65 5,000 6.70 -7,500 1,500 6.75 9.10 9.25 Required (20 marks) **Note: show your calculations for both parts of the question: a) Assuming that BNI uses a periodic inventory system and the weighted average cost formula, calculate the ending balance of inventory (both the number of units and cost). b) Assuming that BNI uses a perpetual inventory system and the moving average cost formula, calculate the ending balance of inventory (both the number of units and cost)