Managerial Accounting for Ace Retailing Ltd.

Problem2.

Below are adjusted accounts and balances for Ace Retailing Ltd. for the year ended December 31, 2020:

Cost of goods sold 750,000

Dividends declared (common shares) 245,000

Dividends declared (preferred shares) 82,000

Gain on disposal of discontinued J division 115,000

Gain on sale of FVNI investments 45,000

Interest income 15,000

Loss on impairment of goodwill 12,000

Loss due to warehouse fire 175,000

Loss from operation of discontinued J division 285,000

Loss on disposal of unused equipment from F division 82,000

Retained earnings, January 1, 2020 458,000

Sales revenue 1,500,000

Selling and administrative expenses 245,000

Unrealized gain on FVOCI investments (OCI) 18,600

Additional information:

1.Ace decided to discontinue the J division operations. A formal plan to dispose of J division has been completed. There are no plans to dispose of F division at this time.

2.During 2020, 400,000 common shares were outstanding with no shares activity for 2020.

3.Ace's tax rate is 27%.

4.Ace follows IFRS and accounts for its investments in accordance with IFRS 9 meaning that any unrealized gains/losses for FVNI are reported through net income and FVOCI are reported in OCI.

Required:

a.Prepare a multiple-step statement of income for the year ended December 31, 2020, in good form reporting expenses by function.

b.Prepare a combined statement of income and comprehensive income in good form reporting expenses by function.

c.How would the answer in part (b) differ if a statement of comprehensive income were to be prepared without combining it with the statement of income?

d.Prepare a single-step statement of income in good form reporting expenses by function.

e.Explain what types of items are to be reported in other revenue and expenses as part of continuing operations, and provide examples for a retail business.



Problem3.

Below is the trial balance in no particular order for Hughey Ltd. as at December 31, 2021:

Hughey Ltd.

Trial Balance

As at December 31, 2021

  Debits   Credits

Cash   $ 250,000  

Accounts receivable   1,015,000  

Allowance for doubtful accounts     $ 55,000

Prepaid rent   40,000  

Inventory   1,300,000  

Investments – available for sale (FVOCI)   2,100,000  

Land   530,000  

Building   770,000  

Patents (net)   25,000  

Equipment   2,500,000  

Accumulated depreciation, equipment     1,200,000

Accumulated depreciation, building     300,000

Accounts payable     900,000

Accrued liabilities     300,000

Notes payable     600,000

Bond payable     1,100,000

Common shares     2,500,000

Accumulated other comprehensive income     245,000

Retained earnings     1,330,000

  $ 8,530,000   $ 8,530,000

Additional information as at December 31, 2021:

1.The inventory has a net realizable value of $1,350,000. The company uses FIFO method of inventory valuation.

2.Investments in available for sale securities (FVOCI) have a fair value of $2,250,000.

3.The company purchased patents of $60,000 on January 1, 2015.

4.Bonds are 8%, 25-year and pay interest annually each January 1, and are due December 31, 2030.

5.The 7%, notes payable represent bank loans that are secured by investments in available for sale securities (FVOCI) with a carrying value of $800,000. Interest is paid each December 31 and no principal is due until its maturity on April 30, 2022.

6.The capital structure for the common shares are # of authorized, 100,000 shares; issued and outstanding, 80,000 shares.

Required:

a.Prepare a classified statement of financial position as at December 31, 2021, in good form, including all required disclosures identified in Chapter 4.

b.Calculate the annual amortization for the patent.

c.Does this company follow IFRS or ASPE? Explain your answer.

Problem2.

Below are adjusted accounts and balances for Ace Retailing Ltd. for the year ended December 31, 2020: 

Additional information:

1. Ace decided to discontinue the J division operations. A formal plan to dispose of J division has been completed. There are no plans to dispose of F division at this time.



2. During 2020, 400,000 common shares were outstanding with no shares activity for 2020.



3. Ace's tax rate is 27%.



4. Ace follows IFRS and accounts for its investments in accordance with IFRS 9 meaning that any unrealized gains/losses for FVNI are reported through net income and FVOCI are reported in OCI.

Required:

1. Prepare a multiple-step statement of income for the year ended December 31, 2020, in good form reporting expenses by function.



2. Prepare a combined statement of income and comprehensive income in good form reporting expenses by function.



3. How would the answer in part (b) differ if a statement of comprehensive income were to be prepared without combining it with the statement of income?



4. Prepare a single-step statement of income in good form reporting expenses by function.



5. Explain what types of items are to be reported in other revenue and expenses as part of continuing operations, and provide examples for a retail business.

Problem3.

Below is the trial balance in no particular order for Hughey Ltd. as at December 31, 2021: 

Additional information as at December 31, 2021:

1. The inventory has a net realizable value of $1,350,000. The company uses FIFO method of inventory valuation.



2. Investments in available for sale securities (FVOCI) have a fair value of $2,250,000.



3. The company purchased patents of $60,000 on January 1, 2015.



4. Bonds are 8%, 25-year and pay interest annually each January 1, and are due December 31, 2030.



5. The 7%, notes payable represent bank loans that are secured by investments in available for sale securities (FVOCI) with a carrying value of $800,000. Interest is paid each December 31 and no principal is due until its maturity on April 30, 2022.



6. The capital structure for the common shares are # of authorized, 100,000 shares; issued and outstanding, 80,000 shares.

Required:

1. Prepare a classified statement of financial position as at December 31, 2021, in good form, including all required disclosures identified in Chapter 4.



2. Calculate the annual amortization for the patent.



3. Does this company follow IFRS or ASPE? Explain your answer.