Mastering Journal Entries and Balance Sheets in Accounting
School
Western University**We aren't endorsed by this school
Course
BUSINESS 451
Subject
Accounting
Date
Dec 11, 2024
Pages
6
Uploaded by DrField1387
Assignment 2ACCT 451
Question 1:a) Relevant Journal Entries 01-Dec-22 Accounts Receivable (US$) 222,390 Sales ($) 222,390 to record sale and receivable (US$180,000 x CDN$1.2355) 03-Dec-22 Memorandum Entry The company entered into a forward contract to pay US$180,000 to the bank in exchange for (US$180,000 x CDN$ 1.238) from the bank in 90 days. The spot element of the payable to the bank will offset the receivable from the customer. The forward element of the payable to the bank will be accounted for as hedge revenue over the term of the forward contract.31-Dec-22 Accounts Receivable (US$) 1,800 Exchange Gain 1,800 To adjust A/R to the Dec 31 spot rate US$180,000 x (CDN$1.2455 - CDN$1.2355) Exchange loss (spot) 1,800 OCI - exchange loss (forward) 1,440 Forward Contract 3,240 To adjust the forward contract to the Dec 31 forward rate (CDN$1.256 - CDN$1.238) x US$180,000 OCI - Exchange gains and losses (forward) 150 Hedge Revenue 150 To amortize the premium US$180,000 x (CDN$1.238 - CDN$1.2355) x 1/3 01-Mar-23 Accounts receivable (US$) 450 Exchange Gain 450 To adjust A/R to the Dec 31 spot rate US$180,000 x (CDN$1.248 - CDN$1.2455) Forward contract 1440 Exchange loss (spot) 450 OCI - Exchange gain 1890 OCI - Exchange gains and losses (forward) 300 Hedge Revenue 300
Cash 224,640 Accounts Receivable 224,640 Record collection of payment from U.S. client (US$180,000 x CDN$1.2480) Forward Contract 1,800 Cash ($) 222,840 Cash (US$) 224,640 Record settlement of forward contract (CDN$1.238 x US$180,000) b) Partial Balance Sheet Partial Balance Sheet Syrup, Inc. As at, Dec 31, 2022 Assets Accounts Receivable $ 224,190 Liabilities & Shareholders' Equity Forward Contract $ 3,240 Exchange gain $ 1,800 c) Journal entries without hedge No entry to record forward contract under net method. 03-Dec-22 Memorandum Entry Company entered into a forward contract to pay US$180,000 to the bank in exchange for $224,640 to be received from the bank in 90 days.31-Dec-22 To revalue the forward contract at fair value: Exchange Loss 3,510 Forward contract 3,510 US$180,000 x (CDN$1.2355 - CDN$1.255) 01-Mar-23 To revalue the forward contract and close the forward contract: Forward Contract 1,260 Exchange Gain 1,260 US$180,000 x (CDN$1.255 - CDN$1.248) Cash ($) 2,250 Forward contract 2,250 Settle on net basis (3,510 –1,260)
Question 2:a) USD CAD Balance, Jan 1 2023 $ (15,000) 1.325 $ (19,875) (50,000 - 45,000 - 20,000) Changes - 2023 Sales $ 50,000 1.335 $ 66,750 Purchases (15,000+50,000-40,000) $ (25,000) 1.335 $ (33,375) Other expenses $ (3,000) 1.335 $ (4,005) Dividends $ (10,000) 1.35 $ (13,500) Calculated Monetary Position $ (4,005) Actual position, Dec 31 2023 (65,000 - 48,000 - 20,000) $ (3,000) 1.35 $ (4,050) Exchange Loss - 2023 $ (45) b) USD CAD Sales $ 50,000 1.335 $ 66,750 COGS $ (15,000) calculated $ (19,375) Depreciation $ (5,000) 1.325 $ (6,625) Exchange loss calculated $ (45) Other Expenses $ (3,000) calculated $ (4,005) Net Income $ 27,000 $ 36,700 COGS calculation: USD CAD Inventory O/B $ 40,000 1.325 $ 53,000 Add: Purchases $ 25,000 1.335 $ 33,375 Less: Ending inventory $ (50,000) 1.34 $ (67,000) COGS $ 15,000 $ 19,375 c) USD CAD Current Monetary Assets $ 65,000 1.35 $ 87,750 Inventory $ 50,000 1.34 $ 67,000 Plant and Equipment $ 20,000 1.325 $ 26,500 Assets $ 135,000 $ 181,250 Current Liabilities $ 48,000 1.35 $ 64,800 Bonds Payable $ 20,000 1.35 $ 27,000 Common Shares $ 30,000 1.325 $ 39,750 Retained Earnings $ 20,000 1.325 $ 26,500 Net Income $ 27,000 calculated $ 36,700 Dividends $ (10,000) 1.35 $ (13,500) Liabilities and Equity $ 135,000 $ 181,250
d) Larmer Inc. Consolidated Balance Sheet As at Dec 31, 2023 Current Monetary Assets (42,050 + 87,750) $ 129,800 Inventory (60,000 + 67,000) $ 127,000 Plant and Equipment (23,000 + 26,500 + 5,300) $ 54,800 Goodwill $ 7,950 Assets $ 319,550 Current Liabilities (50,000 + 64,800) $ 114,800 Bonds Payable (35,000 + 27,000) $ 62,000 NCI (20%) $ 15,900 Common Shares $ 60,000 Retained Earnings (plug) $ 66,850 Liabilities and Equity $ 319,550 Calculation of acquisition differential: USD CAD Cost of investment (80%) $ 50,000 1.325 $ 66,250 Implied 100% value $ 62,500 1.325 $ 82,813 Carrying value of sub. net assets $ 50,000 1.325 $ 66,250 Acquisition differential $ 12,500 1.325 $ 16,563 Allocated as: (FV-CA) Plant and Equipment (30,000 - 25,000) $ 5,000 1.325 $ 6,625 Balance - Goodwill $ 7,500 1.325 $ 9,938 Changes to Acquisition Differential Schedule: Plant & Equip. Goodwill Total 01-Jan-23 $ 5,000 $ 7,500 $ 12,500 Depreciation (5 yrs)/ Impairment $ (1,000) $ (1,500) $ (2,500) 31-Dec-23 $ 4,000 $ 6,000 $ 10,000 Exchange rate 1.325 1.325 1.325 Translated balance $ 5,300 $ 7,950 $ 13,250 Calculation of NCI: USD CAD Common shares $ 30,000 1.325 $ 39,750 Retained earnings $ 20,000 calculated $ 26,500 $ 66,250 Add: undepleted acquisition differential $ 13,250 $ 79,500 NCI % 20% NCI $ 15,900
e) USD CAD Net Assets $ 50,000 1.325 $ 66,250 2023 Net income $ 27,000 1.335 $ 36,045 Dividends $ (10,000) 1.35 $ (13,500) Calculated net assets $ 88,795 Actual net assets $ 67,000 1.35 $ 90,450 Exchange gain - 2023 (OCI) $ 1,655 Question 3:a) Deferral Method Equipment 1,500,000 Deferred contributions - capital assets 1,500,000 To record the donation of the equipment Amortization expense 150,000 Accumulated amortization 150,000 To record annual amortization Deferred contributions - capital assets 150,000 Contribution revenue 150,000 To record annual recognition of deferred contribution Land 2,000,000 Net assets - donated land 2,000,000 No deferral of land as no expenses associated b) Restricted Fund Method Equipment 1,500,000 Contribution revenue - donated equipment 1,500,000 Fair value of the donated capital asset is recognized as revenue in the capital fund Land 2,000,000 Contribution revenue - donated land 2,000,000 Fair value of the donated capital asset is recognized as revenue in the capital fund Amortization expense 150,000 Accumulated amortization 150,000 To record annual amortization