Question 6.1 (Total: 35 marks)

By December 31, 2020, PEI Potato Corp. had performed a significant amount of environmental consulting services for Spud Ltd. Spud was short of cash, and PEI Potato agreed to accept a $200,000, non-interest-bearing note due December 31, 2022, as payment in full. Spud is a bit of a credit risk and typically borrows funds at a rate of 12%. PEI Potato is much more creditworthy and has various lines of credit at 9%. PEO Potato Corp. reports under IFRS.

Required

1. Prepare the journal entry to record the transaction on December 31, 2020, for PEI Potato Corp.
2. Assuming PEI Potato's fiscal year end is December 31, prepare the journal entry required at December 31, 2021.
3. Assuming PEI Potato's fiscal year end is December 31, prepare the journal entry required at December 31, 2022.
4. What are the amount and classification of the note on PEI Potato Corp.'s SFP as at December 31, 2021?
5. Assume instead that PEI Potato reports under ASPE and uses the straight-line method to amortize the discount on the note. What would the interest income be relating to the note for 2021 and 2022?
6. If an appropriate market rate of interest for the note receivable is not known, how should the transaction be valued and recorded on December 31, 2020?

Question 6.2 (Total: 18 marks)

Emerge Solutions Company deposits all receipts and makes all payments by cheque. The following information is available from the cash records:

MARCH 31 BANK RECONCILIATION

Balance per bank	$35,160
Add: Deposits in transit	4,200
Deduct: Outstanding cheques	(3,200)
Balance per books	$36,160

The month of April Results

	Per Bank	Per Books
Balance April 30	$38,000	$42,140
April deposits recorded	11,200	17,300
April cheques recorded	12,010	11,320
Items on bank statement but not in books:
Note collected by bank	5,500	-0-
Bank service charge	50	-0-
Customer's NSF cheque returned by the bank	1,800	-0-

Required

1. Calculate the amount of the April 30:

a. Deposits in transit

b. Outstanding cheques

2. What is the April 30 adjusted cash balance? Show all work.

Question 6.3 (Total: 27 marks)

Almond Limited uses a periodic inventory system. On June 24, the company sold 600 units. The following additional information is available:

	Units	Unit Cost	Total Cost
June 1 inventory	200	$12	$2,400
June 3 purchase	400	14	5,600
June 23 purchase	400	15	6,000
TOTAL	1,000		$14,000

Required

3. Calculate the June 30 inventory and the June cost of goods sold, using the weighted average cost formula. Round per-unit cost to two decimal places.

4. Calculate the June 30 inventory and the June cost of goods sold, using the FIFO formula.

5. Assume that 200 units sold on June 24 had a unit cost of $12; 300 had a unit cost of $14; and the remaining 100 units had a unit cost of $15. Calculate the June 30 inventory and the June cost of goods sold, using the specific identification method.

Question 6.4 (Total: 20 marks)

As noted in the table below, items are omitted in each of the following tabulations of income statement data for a business following ASPE.

Required

1. Fill in the amounts that are missing.

	2018	2019	2020
Sales	$290,000	$ (d)	$410,000
Sales returns	6,000	13,000	(g)
Net sales	(a)	347,000	(h)
Beginning inventory	20,000	32,000	(i)
Ending inventory	(b)	(e)	(j)
Purchases	(c)	260,000	298,000
Purchase returns and allowances	5,000	8,000	10,000
Transportation in	8,000	9,000	12,000
Cost of goods sold	238,000	(f)	303,000
Gross profit on sales	46,000	91,000	97,000