Limo Belle Services, Media Medium and Fortress Reconstruction Inc.

Scenario #1: Financial statements and ratios Below you will find the list of accounts of Limo Belle Services Inc. (in Canadian dollars)   September 30, 2012 September 30, 2011 Accumulated Depreciation – limousines 30,000 20,000 Depreciation Expense – limousines 10,000 Other expenses 70,000 Retained earnings 4,000 4,000 Share capital 1,000 1,000 Income taxes 35,000 Wages 100,000 Limousines 90,000 60,000 Dividends declared 80,000 Cash 2,000 4,000 Note payable (non-current) 50,000 30,000 Expenses payable 10,000 Accounts Receivable 1,000 Sales 300,000 Wages payable 2,000   From this list of accounts, prepare the following: an Income Statement for period ended Sept. 30, 2012 a Balance Sheet as of Sept. 30, 2012 with comparative figures for 2011 – a Statement of Stockholders’ Equity as of Sept.…

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Murungi Co. Ltd. Extracted the following trial balance

Murungi Co. Ltd. Extracted the following trial balance as on 31st December, 2004. Dr                               Cr Shs.                              Shs. Share Capitalrrtt 250,000 ordinary shares of Shs.100 each                                                                         25,000,000 125,000 10% preference shares of Shs. 100 each                                                             12,500,000 10% debentures                                                                                                             10,000,000 Freehold premises at cost                                                           25,000,000 Motor vehicles at cost                                                                 7,500,000 Fixtures and fittings                                                                    1,300,000 Plant and machinery at cost                                                         2,500,000 Profit and loss A/C, 1 Jan 2004                                                                                        2,685,000 Sales                                                                                                                            59,475,000 Stock at 1 Jan 2004                                                                   10,775,000 Bad debts written off                                                                      125,000 Purchases                                                                                 16,900,000 Dividends paid at 30 June 2004 Preference dividend                                                                       625,000 Ordinary dividend                                                                       1,250,000 Debenture interest paid at 30 June 2004                                            500,000 Trade Debtors/Creditors                                                               2,700,000                    1,500,000 Accumulated depreciation…

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The cash flows shown below were extracted from the accounts of Jason Taylor

Question 1 The cash flows shown below were extracted from the accounts of Jason Taylor, a music shop owner. Repayment of loan $390 000 Sale of property 390 000 Interest received 1 560 Payment to employees 78 000 Receipts from customers 273 000 Expenses paid 23 400 Computer equipment purchase 23 400 GST paid 780 Payments to suppliers 156 000 Income taxes paid 3 120 Beginning cash balance 7 800 A. Prepare a statement of cash flows using the direct method. B. Outline some cash flow warning signals. Question 2 Selected information for two companies competing in the catering industry is presented in the table below: Account Name  Lawson  Dawson Current assets $110,500 $167,900 Non-current assets $250,000 $299,000 Current Liabilities $58,600…

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An item of depreciable machinery is acquired on 1 July 2016 for $280 000

Question 1 An item of depreciable machinery is acquired on 1 July 2016 for $280 000. It is expected to have a useful life of 10 years and a zero-residual value (straight-line). On 1 July 2020, it is decided to revalue the asset to its fair value of $150 000. Required: Provide journal entries to account for the revaluation.   Question 2 On 1 July 2018 BMW Ltd issues $2 million in 10-year debentures that pay interest each six months at a coupon rate of 10 per cent. At the time of issuing the securities, the market requires a rate of return of 12 per cent. Interest expense is determined using the effective-interest method. Required: (i) Determine the issue price of…

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The Ronald Co Ltd (RCL) is contemplating a $40 million

The Ronald Co Ltd (RCL) is contemplating a $40 million national duplication of its replica division. It has forecast after-tax cash flows for the project of $10 million per year in perpetuity. The average yield to maturity of RCL’s is 8 per cent, and its cost of equity capital is 15 per cent. The tax rate is 30 per cent. Harry Lehman, the company’s chief financial officer, has come up with two financial options: A $20 million issue of 10-year debt at 8 per cent interest. The issue costs would be 1 per cent of the amount raised. A $20 million issue of ordinary shares. The issue costs would be 12 per cent of the amount raised. The target debt/equity ratio of…

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Tassie Ltd is considering replacing an old management system with a new one

Tassie Ltd is considering replacing an old management system with a new one. Use the following information to determine the feasibility of this replacement plan.   Costs of new system: ……………………………………………………………….. $80,000 Costs of old system: ………………………………………………………………… $95,000 Depreciations of new system: …………………………………….. Prime-cost to zero Depreciations of old system: ………………………………………….. $5,000 per year Life of old system: ……………. will be written off in 5 years if no replacement Life of new system: ………………………………………………………………….. 5 years Salvage value of new system at the end of its life: ………………………. $18,000 Salvage value of old system at the end of its life: ………………………………… $0 Market value of the old system now: …………………………………………. $55,000 Total savings from the new system: ………………………………. $10,000 per year…

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Halley Company – Cash Flow – Indirect Method

The comparative financial statements for Halley Company for 2018 and 2019 are presented below. Halley Company Comparative Balance Sheets For years ended 2018 and 2019 June 30 2019 June 30 2018 Assets $ $ Cash 53,000 52,000 Accounts receivable 106,000 93,000 Inventory 162,000 151,000 Land 300,000 300,000 Buildings and equipment (at cost) 845,000 790,000 Less: Accumulated depreciation (514,000) (460,000) Total Assets 952,000 926 Liabilities and Share Equity Accounts payable 141,000 136,000 Interest payable 8,000 10,000 Mortgage payable 109,000 120,000 Share capital 520,000 520,000 Retained earnings 174,000 140,000 Total Liabilities and Share Equity 952,000 926,000   Halley Company Statement of Profit and Loss for the year 2019 $ $ Sales revenue 1,200,000 Cost of goods sold (788000.00) Gross profit 412000.00 Other expenses:…

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The comparative financial statements for Halley Company for 2018 and 2019

The comparative financial statements for Halley Company for 2018 and 2019 are presented below. Halley Company Comparative Balance Sheets For years ended 2018 and 2019 June 30 2019 June 30 2018 Assets $ $ Cash 53,000 52,000 Accounts receivable 106,000 93,000 Inventory 162,000 151,000 Land 300,000 300,000 Buildings and equipment (at cost) 845,000 790,000 Less: Accumulated depreciation (514,000) (460,000) Total Assets 952,000 926 Liabilities and Share Equity Accounts payable 141,000 136,000 Interest payable 8,000 10,000 Mortgage payable 109,000 120,000 Share capital 520,000 520,000 Retained earnings 174,000 140,000 Total Liabilities and Share Equity 952,000 926,000   Halley Company Statement of Profit and Loss for the year 2019 $ $ Sales revenue 1,200,000 Cost of goods sold (788000.00) Gross profit 412000.00 Other expenses:…

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Amara Ltd was founded on 1st January 2019

Amara Ltd was founded on 1st January 2019. Amara sells bed frames to customers. The company has adopted a periodic inventory system together with the average cost cost-flow assumption (AVCO) to determine the Cost of Goods Sold for the year. The company’s inventory transactions for its first year of operation to December 31st, 2019 are as follows:   Date   Description   Units Cost price per unit Selling price per unit Jan 1 Beginning Balance 100 $160 Feb 2 Purchase 500 $140 Mar 15 Sales 350 $200 Jul 28 Purchase 150 $120 Oct 25 Sales 200 $200 Dec 26 Sales 100 $200 Dec 29 Purchase 200 $100 Required: What amount will Amara Ltd report as its Inventory balance in the Current…

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Bluebird Ltd has provided the following forecasted items for the months

Bluebird Ltd has provided the following forecasted items for the months of July through to September 2020. July August September $ $ $ Sales 13,000 14,000 15,000 Purchases 9,400 8,000 10,000 Operating expenses 3,600 6,400 5,000   Other Information: 35% of Sales are cash sales, the remaining 65% of credit sales which are collected as follows: 30% in the month of the sale 50% in the month after the sale 28% in the 2nd month after the sale 2% are never collected due to the customer going bankrupt Sales in the months of May and June were $11,000 and $10,000 respectively. Operating expenses include depreciation expense. Depreciation expense each month is $900. All expenses and purchases are paid for in the…

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Redcliff Ltd acquired the entire share capital

Question 1 Redcliff Ltd acquired the entire share capital of ABC Ltd for $18,000 cash on 31 December 20X4. The balance sheets of the two companies as at that date were as follows: Redcliff ltd.                                                   ABC. Ltd $                       $                                                      $ Current assets                                                                                 240,000                                           28,800 Non-current assets: Investments in ABC at cost                          18,000 Other assets                                                  96,000               114,000                                        9,600 Total assets                                                                                         354,000                                       38,400 Current liabilities                                                                               198,000                                        20,400 Net assets                                                                                            156,000                                       18,000 paid up capital                                                                                     120,000                                       12,000 retained profits                                                                                     36,000                                           6,000 owners. Equity                                                                                     156,000                                          18,000 Prepare the consolidated balance sheet of Redcliff Ltd and its subsidiary as at 31 December 20X4.     Question 2 Based on the information provided below, prepare appropriate consolidation journal entries for possible account adjustment or elimination. Parent paid…

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Victoria Corp acquired 80 per cent of the share capital of Whitehorse Corp

Victoria Corp acquired 80 per cent of the share capital of Whitehorse Corp on 1 July 2019. As at the date of acquisition, Whitehorse’s retained earnings was $40,000. On this date, the fair value of the 20% non-controlling interest in Whitehorse was $25,000. Ignore the tax rate. The statements of the financial position of Victoria Corp and Whitehorse Corp as at 30 June 2020 are as follows: Victoria Corp ($) Whitehorse Corp ($) Current assets 320,000 168,000 Non-current assets: Property, plant and equipment 190,000 36,000 Investment (in Whitehorse) 100,000 – 290,000 36,000 610,000 204,000 Current liabilities 270,000 94,000 Shareholders’ equity: Share capital 200,000 60,000 Retained earnings 140,000 50,000 610,000 204,000 Required: (a) Calculate the amount of goodwill arising from the acquisition…

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