Week 1 part 2 discussion with questions e4.1, e4.4, e4.13, e4.16, p4.2, p4.13 PDF

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This is the assignment submitted for week 1 and part 2 discussion under the subject intermediate financial accounting 1 of the york university,this assignment will help and assist students in better understanding of the subject and can be used for referening...

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Intermediate Financial Accounting (CSAC 3594) Professor - Supinder Babra

E4.1 Reach Out Card Company Limited Statement of Comprehensive Income For the Year Ended 2020

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Sales Revenue Less:- Cost Of Goods Sold Gross Profit Operating Expenses Less:- Selling and Administrative Expenses Income from Operations Add:- Gain on Disposal Of Building Net Income Add:- Unrealised Gain on OCI investments Comprehensive Income

$1200000 ($750000) $450000 ($320000) $120000 $250000 $380000 $18000 $398000

E4.4

A-Part Income from Continuing Operations before Income Tax* Less:- Income Tax Income From Continuing Operations (A)

$144000 $43200 $100800

Income from discounted operations After Tax Loss Of Asset After Tax (25000 – 5000) *(1 –0.3)

$4200 ($14000)

Total Discounted Operations (B)

($9800)

Net Income(A+B)

($91000)

*(Net Income – Income from Operations + Loss on Asset)/ (1-Tax rate) =($91000 - $4200+$14000) / (1 – 0.3) = $108000 /70% = $144000

B-Part Under Accounting Standard for Private Enterprises (ASPE) rules : 

Office Equipment should be shown in balance sheet as non-current asset at its fair value which is estimated to be $8000. But it is measured at $5000 which is its selling price.

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C-Part According to International Financial Reporting Standards (IFRS) rules, items which are kept for general sale are deemed to be termed as current asset therefore office equipment should be presented as current assets in the balance sheet. D-Part As Diamond doesn’t have a formal plan in place to dispose of blue division, they don’t qualify for treatment as discontinued operation, and the related net loss of $9800 incurred in the business should be presented under continuing operations. As per GAAP it will be unfaithful representation of their financial position if they present it as discontinued operation.

E4.13 Quality Fabrication Limited Income Statement As on December 31, 2020 Sales revenue Less:- Sales Returns and Allowances Less:- Sales Discounts Net Sales Revenue Less:- Cost Of Goods Sold Gross Profit Operating Expenses: Selling Expenses Administrative Expenses Loss From Storm Damage Depreciation Expense Total Operating Expenses

$1120000 ($118000) ($40000) $962000 ($504000) $458000

($160000) ($80000) ($124000) ($50000) ($414000)

Operating Income Other Revenues and Gains Add:- Interest Income

$44000 $70000

Earnings Before Interest and Taxes(EBIT) Less:- Interest Expense

$114000 ($50000)

Earnings Before Taxes (EBT) Less:- Income Tax Expense*

$64000 ($16000)

Earnings After Tax (EAT) -A Total Outstanding shares -B Earning Per Share (EPS)- (A/B)

$48000 150000 $0.32

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*Income Tax = $64000 *25% = $16000

E4.16 Statement of changes in equity of Rainy Day Umbrella Corporation As on Year Ended December 31, 2020

Particulars Opening Balance Comprehensive Income Net income Unrealised holding gain Dividend to Preferred share Dividend to common share Issue common share Ending Balance

Preferred Shares $3,375,000

Common Shares $8,903,000

Retained Earnings $23,040,000

Accumulated Total OCI $2,568,000 $41,630,000

$7,320,000 $585,000

$3,375,000

$9,188,000

Contributed Surplus Total Paid capital Retained earnings Accumulated OCI Total Stockholder’s Equity

$7,320,000 $585,000

($30,000)

($30,000)

($20,000)

($20,000)

$285,000

Particulars Preferred share capital Common share capital

P4.2

Contributed Surplus $3,744,000

$285,000 $3,744,000

$30,310,000

$3,153,000

Amount(In Thousands) $3375 $9188 $12563 $3744 $16307 $30310 $3153 $49770

$49,770,000

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(a) The Rocketeer assets should be recorded separately on the balance sheet of Campbell Corporation’s at its net realisable value. It can be showed by separate disclosure as a note in the financial statement.

(b) The discounted operations should be reported as a separate component after income from continuing operations and before extraordinary items. The operating loss should be presented at net of tax as an separate component. The assets which are going to be divided should be measured lower of book value and market value less its cost for selling.

(c) The operating loss on June 30, 2008 is reported as separate item after earning from continuing operations after tax. Loss on disposal of asset should also be reported as a different component of discontinue operations.

(d) Firstly Rocketeer Division financial results should be shown as a discontinued operation because management has decided to dispose the division. The division is separate component of entity. The assets are not available for immediate sale in the present state. For user, showing a discontinued operations at the bottom of the Income statement after income tax expense and with its own earnings per share information, provides more information about the quality and recurrence of earning

P4.13 INCOME STATEMENT For the Year Ended 2020 I) REVENUE Income from continued operations Other income Add:- Profit from sale of equipment Add:- Receivable from breach of law suit Total II) EXPENSES Other Expenditure Bad Debts Amortization of intangible assets Loss from discontinued subsidiaries Total

Amount $2,710,000 $96,000 $520,000 $3,326,000

$54,000 $46,667 $290,000 $390,667

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III) Profit before tax (I-II) IV) Tax (25%) V) Profit after tax (III-IV) VI) Earning per share (2201500/100000)

$2,935,333 $733,833 $2,201,500 $22

Working Notes 1. Profit from Equipment = Selling price – written down value =$140,000 - $44000 = $96,000 2. Received $520,000 for asset posted in income statement. 3. Loss during the year before tax is $ 290000 to be reflected in income statement. 4. Accounts receivable is $54000 and to be listed as expense. 5. Internal audit found out that asset is $35000 net taxes and is charged against retained earnings....