Question 1 :Roxy Equipment Inc. sells heavy-duty forklift trucks. Model 1 has a stand-alone price of $100,000. Roxy offers to sell the Model 1 inclusive of a three-year service contract for $150,000.

Required:

Prepare a journal entry to record the sale of one Model 1 forklift truck plus service contract for $140,000 assuming:

1.A comparable service contract is sold separately for $0,000. Roxy uses the relative stand-alone value method for multiple deliverables.

2.The service contract has a variable stand-alone value ranging from $30,000 to $60,000 and Roxy uses the residual value method.

Question 2:

At 31 December 2018, Ester Ltd. reported gross accounts receivable of $3,501,800. Investigation showed the following:

a.The credit balance in the allowance for doubtful accounts was $280,400 after write-offs for the year but before any bad debt adjustment. Bad debt expense is based on a percentage of receivables. Based on the latest available facts, $320,000 will not be collected due to collection issues.

b.Terms of 2/10, n/30 were granted to all customers. Accounts receivable were recorded gross, and the discounts taken were recorded when taken by the customers in a discounts account, reported contra to the sales account. Estimated discounts inherent in the closing accounts receivable balance were $50,500. The allowance for sales discounts account was established at $35,800 last year and has not been adjusted since.

Required:

1.Prepare year-end adjusting entries with respect to accounts receivable.

2.Show how the net accounts receivable would appear on the statement of financial position on 31 December 2018.

Question 3: On 1 January 2019, Bill Ltd. purchased $5,000,000 of six-year, Sung Ltd. 4.1% bonds. The bonds pay semi-annual interest each 30 June and 31 December. The market interest rate was 5.5% on the date of purchase. Bill Ltd. is a private company that complies with ASPE and uses straight-line amortization.

Required:

1.Calculate the price paid by Bill Ltd.

2.Construct a table that shows interest revenue reported by Bill and the carrying value of the investment for four interest periods. Use the straight-line method.

3.Give entries for the first four interest periods based on your calculations in requirement 2.