REQUIRED

Prepare journal entries to record the events, as well as the income statement for year 10 and balance sheet as at 31 December Year 10, under the exit price method. Assume the debenture is not part of capital and is a financial investment

prepare journal entries, income statement, and balance sheet under exit price method

PROBLEM 6.3 Consider the balance sheet of Circle Lid on an exit price basis at the beginning of the year: Cash Inventory (1000 x $15) Investment in Y shares Building Land TOTAL CIRCLE LTD Balance Sheet as at 1 January Year 10 $ 20000 Accounts Payable 15000 Debentures Payable 10% 20 000 Ordinary Capital 90 000 Capital Maintenance Adjustment 10000 Retained Earnings $155 000 $ 20 000 50 000 75 000 8333 1667 $155 000 The building was purchased for $90 000 and the shares and debentures were issued when the general price index was 90 on 1 January Year 9. The beginning inventory has an historical cost of $5 each. A FIFO basis is used. The general price index is 100 at the beginning of the year. The following events are mentioned in chronological order for Year 10. 1. Purchased on account 5000 units of inventory at $6 each. The exit price is $15 each. The general price index is 105. 2. Sold on account 5000 units for $15 each. The general price index is 105. 3. At year-end, the building's current value is $200 000 and the value of the land is $20 000. The sales price of the inventory is increased to $19 each. The market price of the share investment is $25 000. The market price of the debentures is $45 032 on 31 December. The current rate of interest is 12 per cent. The average market rate of interest was 11 per cent for the year. The remaining life of the debentures is 8 years on 31 December. 4. On 31 December, half the land is sold for $10 000. 5. On 31 December, operating expenses of $15000 are paid. Interest of $5000, which is not included in the $15000, is also paid. 6. The general price index at the end of the year is 120. The average for the year is 108. CM 63 Consider the balance sheet of Circle Ltd on an exit price basis at the beginning of the year: Cash Inventory (1000 x $15) Investment in Y shares Building Land TOTAL CIRCLE LTD Balance Sheet as at 1 January Year 10 $ 20 000 Accounts Payable 15 000 Debentures Payable 10% 20 000 Ordinary Capital 90000 Capital Maintenance Adjustment 10000 Retained Earnings $155 000 $ 20 000 50 000 75 000 8333 1667 $155 000 The building was purchased for $90 000 and the shares and debentures were issued when the general price index was 90 on 1 January Year 9. The beginning inventory has an historical cost of $5 each. A FIFO basis is used. The general price index is 100 at the beginning of the year. The following events are mentioned in chronological order for Year 10 1. Purchased on account 5000 units of inventory at $6 each. The exit price is $15 each. The general price index is 105. 2. Sold on account 5000 units for $15 each. The general price index is 105. 3. At year-end, the building's current value is $200 000 and the value of the land is $20 000. The sales price of the inventory is increased to $19 each. The market price of the share investment is $25 000. The market price of the debentures is $45 032 on 31 December. The current rate of interest is 12 per cent. The average market rate of interest was 11 per cent for the year. The remaining life of the debentures is! 8 years on 31 December. 4. On 31 December, half the land is sold for $10 000. 5. On 31 December, operating expenses of $15 000 are paid. Interest of $5000, which is not included in the $15000, is also paid. 6. The general price index at the end of the year is 120. The average for the year is 108. REQUIRED Prepare journal entries to record the events, as well as the income statement for year 10 and balance sheet as at 31 December Year 10, under the exit price method. Assume the debenture is not part of capital and is a financial investment PROBLEM 6.3 Consider the balance sheet of Circle Lid on an exit price basis at the beginning of the year: Cash Inventory (1000 x $15) Investment in Y shares Building Land TOTAL CIRCLE LTD Balance Sheet as at 1 January Year 10 $ 20000 Accounts Payable 15000 Debentures Payable 10% 20 000 Ordinary Capital 90 000 Capital Maintenance Adjustment 10000 Retained Earnings $155 000 $ 20 000 50 000 75 000 8333 1667 $155 000 The building was purchased for $90 000 and the shares and debentures were issued when the general price index was 90 on 1 January Year 9. The beginning inventory has an historical cost of $5 each. A FIFO basis is used. The general price index is 100 at the beginning of the year. The following events are mentioned in chronological order for Year 10. 1. Purchased on account 5000 units of inventory at $6 each. The exit price is $15 each. The general price index is 105. 2. Sold on account 5000 units for $15 each. The general price index is 105. 3. At year-end, the building's current value is $200 000 and the value of the land is $20 000. The sales price of the inventory is increased to $19 each. The market price of the share investment is $25 000. The market price of the debentures is $45 032 on 31 December. The current rate of interest is 12 per cent. The average market rate of interest was 11 per cent for the year. The remaining life of the debentures is 8 years on 31 December. 4. On 31 December, half the land is sold for $10 000. 5. On 31 December, operating expenses of $15000 are paid. Interest of $5000, which is not included in the $15000, is also paid. 6. The general price index at the end of the year is 120. The average for the year is 108. CM 63 Consider the balance sheet of Circle Ltd on an exit price basis at the beginning of the year: Cash Inventory (1000 x $15) Investment in Y shares Building Land TOTAL CIRCLE LTD Balance Sheet as at 1 January Year 10 $ 20 000 Accounts Payable 15 000 Debentures Payable 10% 20 000 Ordinary Capital 90000 Capital Maintenance Adjustment 10000 Retained Earnings $155 000 $ 20 000 50 000 75 000 8333 1667 $155 000 The building was purchased for $90 000 and the shares and debentures were issued when the general price index was 90 on 1 January Year 9. The beginning inventory has an historical cost of $5 each. A FIFO basis is used. The general price index is 100 at the beginning of the year. The following events are mentioned in chronological order for Year 10 1. Purchased on account 5000 units of inventory at $6 each. The exit price is $15 each. The general price index is 105. 2. Sold on account 5000 units for $15 each. The general price index is 105. 3. At year-end, the building's current value is $200 000 and the value of the land is $20 000. The sales price of the inventory is increased to $19 each. The market price of the share investment is $25 000. The market price of the debentures is $45 032 on 31 December. The current rate of interest is 12 per cent. The average market rate of interest was 11 per cent for the year. The remaining life of the debentures is! 8 years on 31 December. 4. On 31 December, half the land is sold for $10 000. 5. On 31 December, operating expenses of $15 000 are paid. Interest of $5000, which is not included in the $15000, is also paid. 6. The general price index at the end of the year is 120. The average for the year is 108. REQUIRED Prepare journal entries to record the events, as well as the income statement for year 10 and balance sheet as at 31 December Year 10, under the exit price method. Assume the debenture is not part of capital and is a financial investment