Trendz is a small boutique clothing manufacturer located in Toronto. The company is privately owned, and has chosen to use ASPE. You have been asked to assist with preparing the company's financial statements for the year ended December 31, 2020.

1. Trendz provides a one-year warranty on all purchases. For the year ended December 31, 2020, cash sales totaled $6,000,000 and $25,000 was paid in cash to settle warranty claims on these sales. It is expected that total warranty claims will be 1.5% of 2020 sales, with the rest of the warranty amounts being settled in 2021. The company treats warranties as an integral part of the sales, and because of the low estimated percent, costs have only been recorded as they have been paid. Prepare necessary journal entries for the sales and for the warranty for the year ended December 31, 2020. State whether you agree with the company's treatment of warranty costs and why. Ignore GST/HST for this part.
2. On July 1, 2020, Trendz issued $500,000 of 4% bonds. In order to attract investors, the bonds were sold to yield 6%. Interest is payable on January 1 and July 1 each year. The bonds mature on July 1, 2025. The company uses the amortized cost model, and amortizes premiums and discounts using the straight-line method. $10,000 in bond issuance costs were paid in cash. Prepare the journal entries for the year ended December 31, 2020. Include the date(s) for the entry(ies).
3. On December 1, 2020, a modelling agency asked to use some of Trendz clothing for a Christmas gala fashion show that they were hosting. The agency paid a $5,000 deposit for this clothing, and will receive a full refund when the clothing is returned. It is expected that the return will be in January 2021 . Prepare the journal entries for the year ended December 31, 2020. Clearly state whether this transaction meets the definition of a liability, and explain your conclusion.
4. On September 1, 2020, Trendz paid $200 for a call option on 2,000 shares in Cottonelle, one of its main fabric suppliers. The option allows Trendz to purchase Cottonelle shares for $40 any time between September 1, 2020 and January 31, 2021. At the time the option was purchased, Cottonelle's shares were trading for $40. On December 31, 2020, the shares were trading for $45 and the intrinsic value of the option was $11,000. On January 31, 2021, Trendz net settled the option when the shares were trading at $47. Prepare the journal entries for the year ended December 31, 2020 and on January 31, 2021. Include the date(s) for the entry(ies).
5. On October 5, 2020, Trendz was sued for by a competitor for patent infringement. The lawsuit is for $1,000,000 however, the company's lawyer has identified that the lawsuit is likely to be settled in 2021 for an amount between $10,000 and $30,000, with an 80% likelihood of $23,000. Prepare the journal entry for the year ended December 31, 2020. Also, provide any note disclosure that is required.

1. On December 31, 2020, Trendz financial statements showed a $200,000 bank loan payable that was due on January 10, 2021. On the due date, the company paid $50,000 cash and issued shares for the rest of the loan. Assume that the financial statements will be published on January 31, 2021. How would this bank loan be shown on Trendz financial statements for the year ended December 31, 2020? Explain your answer. [No journal entry is needed for this part.]
2. During December, Trendz purchased on account $50,000 of inventory from an Ontario supplier that charged 13% Ontario HST. This inventory was sold for $80,000 cash to a customer in a province with 5% GST and 7% PST. Prepare the journal entries for the purchase and sale of these goods.
3. On August 1, 2020, Trendz issued 1,000 common shares in exchange for advertising in a local newspaper. The regular cost for similar advertising was $14,000. As a small privately owned company, Trendz most recent sale of shares had been three months earlier for $18. It was a difficult year for Trendz. Sales were not going well, and the company hoped that the additional advertising would help boost profitability. Prepare the journal entries for this transaction. Ignore GST/HST.