Get Instant Help From 5000+ Experts For
question

Writing Get your essay and assignment written from scratch by PhD expert

Rewriting: Paraphrase or rewrite your friend's essay with similar meaning at reduced cost

Editing:Proofread your work by experts and improve grade at Lowest cost

loader
Phone no. Missing!

Enter phone no. to receive critical updates and urgent messages !

Add File

Error goes here

Files Missing!

Please upload all relevant files for quick & complete assistance.

Guaranteed Higher Grade!

Preprep's Essay: Accounting For Goods Purchase And Forward Contract.

11 Pages / 2,680 Words Published On: 20-11-2020

Journal Entries for Preprep Co.

On December 15, 20X8, Preprep Co., a Canadian company, entered into a contract to purchase goods from Mega-Lu Ltd., a foreign corporation. The terms of the contract call for the goods to be delivered to Preprep’s Edmonton location on March 31, 20X9. The cost of the goods is FC500,000, to be settled on April 30, 20X9.

On December 15, 20X8, Preprep Co. also arranged for a forward contract through its bank for FC500,000. The goods were delivered on time and Preprep settled with Mega-Lu on April 30. Preprep has a February 28 year-end.

The spot and forward rates are as follows:
                                                                                           Spot Rate             Forward Rate
            December 15, 20X8                                    FC1 = $1.40 CDN    FC1 = $1.44 CDN
            February 28, 20X9                                                   $1.42                          $1.46

March 31, 20X9                                                        $1.43                          $1.47 

April 30, 20X9                                                           $1.48                          $1.48

Required:

Prepare Preprep’s journal entries to reflect the above, assuming
a)  the hedge is a cash flow hedge, and

  1. b) the hedge is a fair value hedge.

    Problem 2                                                                                                                (60 marks)

    On January 1, 20X8, Liv Ltd. (LL), a Canadian company, acquired 90% of Marcus Co. (MC), a foreign company for FC 623,200. At the acquisition date, the carrying value of MC’s net assets equaled their fair value except for the equipment, which had a carrying value of FC 800,000 and a fair value of FC 880,000. At the acquisition date, MC’s equipment had a remaining useful life of 10 years. There was an FC 4,000 impairment of the goodwill which occurred evenly throughout 20X8.
    Selected financial statements for LL and MC are presented below.Liv Ltd.

Statement of Financial Position
As of December 31, 20X8

(in $ CDN)

            Assets:
            Noncurrent assets:
                        Plant and equipment, net                                                     2,752,000
                        Investment in Marcus Co.                                                     1,371,040
                                                                                                                          4,123,040

            Current assets:

                        Inventory                                                                                 1,376,000
                        Accounts receivable                                                                 700,000
                        Cash and cash equivalents                                                    562,080

                                                                                                                          2,638,080
            Total assets                                                                                         6,761,120

Shareholders’ Equity:

                        Share capital                                                                           1,376,000
                        Retained earnings                                                                 2,601,520
                                                                                                                          3,977,520
            Liabilities:
            Noncurrent liabilities:

                        Notes payable                                                                        1,860,000

            Current liabilities:

                        Accounts payable and accrued liabilities                             923,600
            Total liabilities                                                                                    2,783,600
            Total shareholders’ equity and liabilities                                       6,761,120

Liv Ltd.

Statement of Income

For the year ended December 31, 20X8

(in $ CDN)

                        Sales                                                                          16,472,000

                        Dividend income                                                           180,080

                                                                                                            16,652,080

                        Cost of sales                         8,256,000
                        Other expenses*                  7,124,000                  15,380,000

                        Net income                                                                  1,272,080

                        *includes depreciation

LL declared and paid dividends of $928,000 CDN on December 31, 20X8.

Marcus Co.

Statement of Financial Position

(in FC)                                                                                     Dec. 31,                       Jan. 1
                                                                                        20X8                          20X8

Assets:Noncurrent assets:

            Equipment, net                                                720,000                     800,000

Current assets:

            Inventory                                                          484,000                     364,000

            Accounts receivable                                       408,000                     280,000

            Cash                                                                 360,000                     164,000

                                                                                    1,252,000                     808,000

Total assets                                                               1,972,000                  1,608,000

Shareholders’ equity:

            Share capital                                                    400,000                     400,000
            Retained earnings                                          390,000                     146,000

                                                                                       790,000                     546,000

Liabilities:

Noncurrent liabilities:

            Notes payable                                                 640,000                     640,000

Current liabilities:

            Accounts payable                                           542,000                     422,000

Total liabilities                                                          1,182,000                  1,062,000

Total shareholders’ equity and liabilities             1,972,000                  1,608,000

Marcus Co.

Statement of Income

For the year ended December 31, 20X8

(in FC)

                        Sales                                                                                      8,400,000
                        Cost of sales                                     5,304,000
                        Other expenses*                              2,688,000                  7,992,000

                                                                                                                           408,000

                        *includes depreciation

Marcus Co.

Statement of Changes in Equity – Retained Earnings Section

For the year ended December 31, 20X8

(in FC)

                        Retained earnings, January 1, 20X8                                146,000
                        Net income                                                                            408,000

                        Dividends declared                                                            (164,000)

                        Retained earnings, December 31, 20X8                          390,000

MC declared and paid FC164,000 in dividends on December 31, 20X8.

Selected Exchange Rates

                        January 1, 20X8                                                       FC1 = $2.20 CDN
                        December 31, 20X8                                                FC1 = $2.44 CDN

                        Date when ending inventory was purchased      FC1 = $2.38 CDN

                        Average rate for 20X8                                             FC1 = $2.32 CDN

Required:

  1. Prepare consolidated financial statements at December 31, 20X8 under each of the following assumptions:

    i) the functional currency is $CAD, and
    ii) the functional currency is the FC.

  2. Assume that LL is a private company and reports under ASPE. LL uses the equity method to report its investment in MC. LL’s functional currency is $CAD. Calculate LL’s Investment in Marcus Co.’s account at December 31, 20X8.  There is no need to prepare financial statements. 

Problem 3                                                                                                                 (20 marks)

Community Assist for Refugees (CAR) is a not-for-profit organization that assists refugees with various services including language and cultural training, transportation, a food bank, and translation services. Some selected transactions for CAR are presented below.

  1. CAR received a $5,000 cheque from a local radio station. The letter that came with the donation says that it can be used by CAR on whatever is most urgent.

  2. CAR received a $10,000 donation from the Literacy Fund for a homework assistance project. The project is expected to start in a few months.

  3. CAR received a $25,000 endowment contribution from Dr. Koe for a scholarship fund.

  4. CAR received a donation of 50 student desks for its homework assistance project from City Office Supplies Ltd. The desks are valued at $10,000 and are expected to last 10 years.

  5. The city donated a tract of land, valued at $30,000 to CAR. CAR plans to raise funds to construct a new centre on the land.

  6. Assume that the homework assistance program is underway. The $10,000 donation in part (b) has been spent on materials and a part-time instructor.

  7. Assume that at the end of the year, the endowment contribution in part (c) earned $500 in interest. Dr. Koe had specified that interest must be spent on future scholarships. CAR will wait until there is at least $2,000 in accumulated interest before distributing any scholarships.

  8. At the end of the year, CAR records depreciation on the desks, using the straight-line method.

Required: 

Prepare journal entries to record the above transactions on CAR’s books using

 i)  the deferral method, and

  1. ii) the restricted fund method.
Cite This Work

To export a reference to this article please select a referencing stye below:

My Assignment Help. (2020). Preprep's Essay: Accounting For Goods Purchase And Forward Contract.. Retrieved from https://myassignmenthelp.com/free-samples/acct451-accounting/statement-of-financial.html.

"Preprep's Essay: Accounting For Goods Purchase And Forward Contract.." My Assignment Help, 2020, https://myassignmenthelp.com/free-samples/acct451-accounting/statement-of-financial.html.

My Assignment Help (2020) Preprep's Essay: Accounting For Goods Purchase And Forward Contract. [Online]. Available from: https://myassignmenthelp.com/free-samples/acct451-accounting/statement-of-financial.html
[Accessed 23 September 2023].

My Assignment Help. 'Preprep's Essay: Accounting For Goods Purchase And Forward Contract.' (My Assignment Help, 2020) <https://myassignmenthelp.com/free-samples/acct451-accounting/statement-of-financial.html> accessed 23 September 2023.

My Assignment Help. Preprep's Essay: Accounting For Goods Purchase And Forward Contract. [Internet]. My Assignment Help. 2020 [cited 23 September 2023]. Available from: https://myassignmenthelp.com/free-samples/acct451-accounting/statement-of-financial.html.


Stuck on Any Question

Our best expert will help you with the answer of your question with best explanation.

question

Writing: Get your essay and assignment written from scratch by PhD expert

Rewriting: Paraphrase or rewrite your friend's essay with similar meaning at reduced cost

Editing: Proofread your work by experts and improve grade at Lowest cost

question
We will use e-mail only for:

arrow Communication regarding your orders

arrow To send you invoices, and other billing info

arrow To provide you with information of offers and other benefits

Phone no. Missing!

Enter phone no. to receive critical updates and urgent messages !

loader
250 words
Error goes here

Error goes here

Files Missing!

Please upload all relevant files for quick & complete assistance.

Other Samples
icon
5% Cashback

On APP - grab it while it lasts!

Download app now (or) Scan the QR code

*Offer eligible for first 3 orders ordered through app!

screener
ribbon
callback request mobile
Have any Query?
close
Subtraction Payment required!

Only one step away from your solution of order no.