Question 1(20 marks)

Brilliant Companyuses the periodic inventory system. The company's beginning inventory and later purchases of inventory during June 2020 were as below:

Jun 01: Beginning inventory,45 units @ $25 per unit.

Jun 17:Inventory purchased, 80 units @ $28 per unit.

Jun 25:Inventory purchased, 65 units @ $32 per unit.

Brilliant company sold 100 units during the month of June 2020.

Required:

a.Calculate the cost of goods sold and ending inventory for June 2020 using both the Weighted Average cost and First in, first out (FIFO) method. (14 marks)

b.Also record the journal entries for the June 17 purchase of inventory and when 55 units from this lot were sold for $45 each. Assume both purchase of inventory and its sale are on account. (6 marks)

Question 2(20 marks)

Sunshine Corporation purchased a new machine on Jan 4, 2018 for $185,000 cash. The machine has a useful life of five years or of 26,000 hours. After the useful life the machine will have a residual value of $3,000. The machine was used for 3,600 hours in 2018 and 4,500 hours in 2019.

Required:

a.Calculate the depreciation expense for 2018 and 2019 under each of the following methods:

i.Straight-line (3 marks)

ii.Double diminishing-balance (5 marks)

iii.Units-of -production (5 marks)

b.Calculate the carrying amount at the end of 2019 for the machine when the company is using the Straight-line depreciation method.(3 marks)

c.Record the journal entry for the cash purchase of the machine on Jan 4, 2018 and for its depreciation expense for the year ended December 31, 2019 under the units-of-production method. (4 marks)

Question 3(20 marks)

a.Milton Electronics Inc. purchased inventory costing $48,000 by signing an 8-month, 6% note payable on Sept12019. The note will be repaid with interest at maturity. Prepare journal entries to record the purchase of the inventory, accrual of interest on Dec 31, 2019 and the final repayment of the note at maturity. (10 marks)

b.Milton Electronics Inc. started its business in 2019 and sold electronics worth $185,000 in 2019. The company provided a 2- year limited warranty for all sales. As per company estimate warranty costs would be 1% of sales in the first year and 3% of sales in the second year. By end of 2019 Milton Electronics Inc had already spent $1,510 on warranty repairs. Prepare all journal entries related to the warranty for 2019. Also Calculate the amount of Estimated Warranty Payable to be reported on the Balance Sheet on Dec 31, 2019 (10 marks)

Question 4(20 marks)

Multigrain Health Foods Inc. is authorized to issue 5,000,000 common shares. In its initial public offering during 2010, it issued 500,000 common shares for $7.00 per share. Over the next year Multigrain' share priceincreased,and the company issued 400,000 additional shares at an average price of $8.50.

During the next seven years, from 2010 to 2016, It earned a net income of $920,000 and declared and paid cash dividends of $140,000. A 10% stock dividend was distributed to the shareholders in 2016 on the shares outstanding. The market price was $8.00 per share when the stock dividend was distributed. At December 31, 2016, the company has total assets of $14,500,000 and total liabilities of $6,820,000.

Required:

Show the computation of the total shareholder's equity at December 31, 2016. Present a detailed computation of each element of shareholder's equity. (you are required to provide the breakdown of C/S and S/E).

Question 5(20 marks)

ThecomparativeBalance SheetsandtheIncome statementfor theMarineCorporationare as follow:

MarineCorporation

Balance Sheet

Assets

2018

2019

Cash

$45,000

$50,000

Marketable Securities

175,000

160,000

Accounts Receivable

240,000

220,000

Inventories

230,000

275,000

Investments

70,000

55,000

Total current assets

$760,000

$760,000

Plant and Equipment

1,300,000

1,550,000

Less Accumulated Amortization

450,000

600,000

Net plant and Equipment

$850,000

$950,000

Total Assets

1,610,000

1,710,000

LIABILITIES AND SHAREHOLDERS' EQUITY

Accounts payable

$110,000

$85,000

Notes payable

65,000

10,000

Accrued Expenses

30,000

5,000

Income Taxes Payable

5,000

10,000

Bonds Payable (2016)

800,000

900,000

Common Stock (100,000 shares)

200,000

200,000

Retained Earnings

400,000

500,000

Total Liabilities' and Shareholders' Equity

$1,610,000

$1,710,000

MarineCorporation

Income Statement

For the Year Ended December 31, 2019

Sales

$ 5,500,000

Less: Cost of Goods Sold

4,200,000

Gross Profit

1,300,000

Less: Selling, General & Administrative Expenses

260,000

Operating profit

1,040,000

Less: Amortization Expense

150,000

Earnings Before Interest and Taxes

890,000

Less: Interest Expense

90,000

Earnings Before Taxes

800,000

Less: Taxes (50%)

400,000

Net Income

$ 400,000

Required:

Prepare a Statement of Cash Flowsin good formfor the year ended December 31, 2019using the Indirect Method?