Question: McNamara Limited's ledger shows the following

> In 2019, Capstone Ltd. issued $50,000 of 8% bonds at par, with each $1,000 bond being convertible into 100 common shares. The company had revenues of $75,000 and expenses of $40,000 for 2020, not including interest and tax. (Assume a tax rate of 25%.) Th

> At January 1, 2020, Ming Limited's outstanding shares included the following: Net income for 2020 was $2,130,000. No cash dividends were declared or paid during 2020. On February 15, 2021, however, all preferred dividends in arrears were paid, together

> A portion of the combined statement of income and retained earnings of Snap Ltd. for the current year ended December 31, 2020, follows: Note 1. During the year, Snap Inc. suffered a loss from discontinued operations of $400,000 after the applicable inco

> On January 1, 2020, Trigson Ltd. had 580,000 common shares outstanding. During 2020, it had the following transactions that affected the common share account: The company's year end is December 31. Instructions a. Determine the weighted average numbe

> On January 1, 2020, Logan Limited had shares outstanding as follows: To acquire the net assets of three smaller companies, the company authorized the issuance of an additional 330,000 common shares. The acquisitions were as follows: On May 14, 2020, Lo

> Mustafa Limited began operations on January 2, 2019. Mustafa employs nine individuals who work eight-hour days and are paid hourly. Each employee earns 10 paid vacation days and 6 paid sick days annually. Vacation days may be taken after January 15 of th

> The payroll of Sumerlus Corp. for September 2020 is as follows. Total payroll was $485,000. Pensionable (CPP) and insurable (EI) earnings were $365,000. Income taxes in the amount of $85,000 were withheld, as were $8,000 in union dues. The EI rate was 1.

> Vanstone Corp., a public company, adopted a stock option plan on November 30, 2020, that designated 70,000 common shares as available for the granting of options to officers of the corporation at an exercise price of $8 a share. The market value was $12

> Financial information for Cao Inc. follows. Instructions a. Calculate the following ratios or relationships of Cao Inc. Assume that the ending account balances are representative unless the information provided indicates differently. 1. Current ratio

> At December 31, 2020, Reddy Inc. has three long-term debt issues outstanding. The first is a $2.2-million note payable that matures on June 30, 2023. The second is a $4- million bond issue that matures on September 30, 2024. The third is a $17.5-million

> Kawani Corporation has been operating for several years. On December 31, 2020, it presented the following SFP. Cost of goods sold in 2020 was $420,000, operating expenses were $51,000, and net income was $27,000. Accounts payable suppliers provided oper

> The following are various accounts: 1. Bank loans payable of a winery, due March 10, 2024 (the product requires aging for five years before it can be sold) 2. $10 million of serial bonds payable, of which $2 million is due each July 31 3. Amounts with

> Vargo Limited owes $270,000 to First Trust Inc. on a 10-year, 12% note due on December 31, 2020. The note was issued at par. Because Vargo is in financial trouble, First Trust Inc. agrees to extend the maturity date to December 31, 2022, reduce the princ

> Use the information in E14.24 and the assumptions in E14.26 and answer the following questions related to Green Bank (the creditor). Instructions a. What interest rate should Green Bank use to calculate the loss on the debt restructuring? b. Using 1

> Parsons Limited established a share appreciation rights program that entitled its new president, Brandon Sutton, to receive cash for the difference between the shares' fair value and a pre-established price of $32 (also fair value on December 31, 2019),

> At the end of its fiscal year, December 31, 2020, Javan Limited issued 200,000 share appreciation rights to its officers that entitled them to receive cash for the difference between the fair value of its shares and a pre-established price of $12. The fa

> Barrett Limited established a share appreciation rights (SARs) program that entitled its new president, Angela Murfitt, to receive cash for the difference between the Barrett Limited common shares' fair value and a pre-established price of $32 (also fair

> Anchovy Corp. issued a $1-million, four-year, 7.5% fixed-rate interest only, non-prepayable bond on December 31, 2019. Anchovy later decided to hedge the interest rate and change from a fixed rate to variable rate, so it entered into a swap agreement wit

> The books of Binkerton Corporation carried the following account balances as at December 1, 2020: The preferred shares have dividends in arrears for the past year (2019). On December 21, 2020, the board of directors declared the following: The current y

> On January 2, 2020, Yellowknife Corp. issues a $10-million, five-year note at LIBOR, with interest paid annually. To protect against the cash flow uncertainty related to interest payments that are based on LIBOR, Yellowknife entered into an interest rate

> On January 2, 2020, Thompson Corp. issued a $100,000, four-year note at prime plus 1% variable interest, with interest payable semi-annually. On the same date, Thompson entered into an interest rate swap where it agreed to pay 6% fixed and receive prime

> On January 1, 2020, Kasan Corp. granted stock options to its chief executive officer. This is the only stock option plan that Kasan offers and the details are as follows: On January 1, 2025, 2,000 of the options were exercised when the fair value of the

> On January 1, 2020, Waldorf Corporation granted 40,000 options to key executives. Each option allows the executive to purchase one share of Waldorf's common shares at a price of $30 per share. The options were exercisable within a two-year period beginni

> Brush Inc. recently purchased Paint Pro, a home-painting corporation. One of the terms of the merger was that, if Paint Pro's net income for 2021 was $110,000 or more, 10,000 additional shares would be issued to Paint Pro's shareholders in 2022. Paint Pr

> On January 1, 2020, Tiamund Corp. sold at 103, 100 of its $1,000 face value, five-year, 9% non-convertible, retractable bonds. The retraction feature allows the holder to redeem the bonds at an amount equal to three times net income, to a maximum of $1,2

> Standard Corp's net income for 2020 is $150,000. The only potentially dilutive securities outstanding were 1,000 call options issued during 2019, with each option being exercisable for one share at $20. None have been exercised, and 30,000 common shares

> Hayward Corporation had net income of $50,000 for the year ended December 31, 2020, and weighted average number of common shares outstanding of 10,000. The following information is provided regarding the capital structure: 1. 7% convertible debt, 200 bo

> Use the same information as in E17.13 (ignoring part c). In addition, 40% of the convertible bonds were converted to common shares on April 1, 2020. The balances at December 31, 2020, appearing in E17.13 do not reflect the conversion of April 1, 2020.

> Mininova Corporation is preparing earnings per share data for 2020. The net income for the year ended December 31, 2020, was $400,000 and there were 60,000 common shares outstanding during the entire year. Mininova has the following two convertible secur

> Laurentian Mills Ltd. had the following shareholders' equity at January 1, 2020. The contributed surplus accounts arose from amounts received in excess of the par value of the shares when issued. During 2020, the following transactions occurred: 1. Equ

> Sporon Corp. is a fast-growing Canadian private company involved in the manufacture, distribution, and retail of specially designed yoga and leisure wear. Sporon has recently signed 10 leases for new retail locations and is looking to sign about 30 more

> On June 1, 2018, Gustav Corp. and Gabby Limited merged to form Fallon Inc. A total of 800,000 shares were issued to complete the merger. The new corporation uses the calendar year as its fiscal year. On April 1, 2020, the company issued an additional 400

> Buon Appetito Limited has been experiencing increased customer demand for its specialty food products. To meet this demand, the company has bought additional refrigeration units to hold more inventory. To finance this purchase, Buon Appetito issued a fou

> The following data were taken from the SFP accounts of Bedard Corporation on December 31, 2020: Instructions Prepare the required journal entries for the following unrelated events in January 2021. a. A 6% stock dividend is declared at their fair valu

> The following is the shareholders' equity section of Suozzi Corp. at December 31, 2020: The preferred shares have a $2 dividend rate, are cumulative, and participate in distributions in excess of a $3 dividend on the common shares. Instructions a. No

> On January 1, 2020, Fresh Juice Ltd. entered into a purchase commitment contract to buy 10,000 oranges from a local company at a price of $0.50 per orange any time during the next year. The contract provides Fresh Juice with the option either to take del

> On April 1, 2020, Petey Ltd. paid $175 for a call to buy 700 shares of NorthernTel at a strike price of $27 per share any time during the next six months. The market price of NorthernTel's shares was $27 per share on April 1, 2020. On June 30, 2020, the

> On January 2, 2020, Jackson Corporation purchased a call option for $500 on Walter's common shares. The call option gives Jackson the option to buy 1,000 shares of Walter at a strike price of $30 per share any time during the next six months. The market

> Refer to E16.2. Assume the same facts except that the forward contract is a futures contract that trades on the Futures Exchange. On January 1, 2020, Roper is required to deposit $65 with the stockbroker as a margin. Instructions a. Prepare the journa

> On November 1, 2019, Aymar Corp. adopted a stock option plan that granted options to key executives to purchase 45,000 common shares. The options were granted on January 2, 2020, and were exercisable two years after the date of grant if the grantee was s

> On September 1, 2020, Oxford Corp. sold at 102 (plus accrued interest) 5,200 of its $1,000 face value, 10-year, 9% non-convertible bonds with detachable stock warrants. Each bond carried two detachable warrants; each warrant was for one common share at a

> Original Octave Inc. (OOI) is a widely held, publicly traded company that designs equipment for tuning musical instruments. Information about its shareholders' equity is as follows. The preferred share dividend was not paid in 2019. Several transaction

> On January 1, 2020, Olson Corporation issued $6 million of 10-year, 7% convertible debentures at 104. Investment bankers believe that the debenture would have sold at 102 without the conversion privilege. Interest is to be paid semi-annually on June 30 a

> Somerton Corporation had two issues of securities outstanding: common shares and a 6% convertible bond issue in the face amount of $6 million. Interest payment dates of the bond issue are June 30 and December 31. The conversion clause in the bond indentu

> On January 1, 2020, when the fair value of its common shares was $80 per share, Hammond Corp. issued $10 million of 8% convertible debentures due in 20 years. The conversion option allowed the holder of each $1,000 bond to convert the bond into five comm

> Dadayeva Inc. has $5 million of 6% convertible bonds outstanding. Each $1,000 bond is convertible into 50 no par value common shares. The bonds pay interest on January 31 and July 31. On July 31, 2020, the holders of $1,250,000 of these bonds exercised t

> The shareholders' equity accounts of Abbasi Inc. have the following balances on December 31, 2020: Common shares are currently trading on the Toronto Stock Exchange at $59. Instructions Prepare the appropriate journal entries for each of the followin

> Collins Corporation bought a computer on December 31, 2020, paying $30,000 down with a further $75,000 payment due on December 31, 2023. An interest rate of 10% is implicit in the purchase price. Collins uses the effective interest method and has a Decem

> RIT Co. has an investment of 5,000 shares in a public company, SIT Ltd. In October 2020, RIT Co. purchased 5,000 put options for SIT Ltd. shares at a price of $2 per put option. The strike price associated with the put options is $100 per share, which is

> Refer to the information for Darby Corporation in E13.2. Instructions a. Prepare the journal entries for the payment of the notes at maturity. Assume no other accruals of interest were recorded since the December 31, 2020 year end. b. Repeat part (a)

> Diagnostics Corp. follows IFRS and sells its products in expensive, reusable containers that can be tracked. The customer is charged a deposit for each container that is delivered and receives a refund for each container that is returned within two years

> Stellar Corp. had the following shareholders' equity on January 1, 2020: The contributed surplus arose from net excess of proceeds over cost on a previous cancellation of common shares. Stellar prepares financial statements in accordance with ASPE. The

> As at December 31, 2019, Cayenne Ltd., a public company, had 40,000 common shares outstanding. During 2020, Cayenne had the following transactions. 1. Issued 6,000 common shares at $29 per share, less $2,000 in costs related to the issuance of the share

> Use the same information as in E14.24 but assume now that Green Bank reduced the principal to $1.6 million rather than $1.9 million. On January 1, 2024, Troubled Inc. pays $1.6 million in cash to Green Bank for the principal. The market rate is currently

> Assume the same information as in E14.24 and answer the following questions related to Green Bank (the creditor). Green Bank prepares financial statements in accordance with IFRS 9. There is no evidence of a significant increase in credit risk and 12-mon

> On December 31, 2020, Green Bank enters into a debt restructuring agreement with Troubled Inc., which is now experiencing financial trouble. The bank agrees to restructure a $2-million, 12% note receivable issued at par by the following modifications: 1

> Strickland Inc. owes Heartland Bank $200,000 plus $18,000 of accrued interest. The debt is a 10-year, 10% note. During 2020, Strickland's business declined due to a slowing regional economy. On December 31, 2020, the bank agrees to accept an old machine

> On December 31, 2019, Mohr Inc. borrowed $81,241 from Par Bank, signing a $125,000, five-year, non–interest-bearing note. The note was issued to yield 9% interest. Unfortunately, during 2020 Mohr began to experience financial difficulty. As a result, thi

> Selzer Equipment Limited sold 500 Rollomatics on account during 2020 for $6,000 each. Ignore any cost of goods sold. During 2020, Selzer spent $30,000 servicing the two-year warranties that are included in each sale of the Rollomatic. All servicing trans

> On January 2, 2015, Kowalchuk Corporation, a small company that follows ASPE, issued $1.5 million of 10% bonds at 97 due on December 31, 2024. Legal and other costs of $110,000 were incurred in connection with the issue. Kowalchuk Corporation has a polic

> Anaconda Inc. has issued three types of debt on January 1, 2020, the start of the company's fiscal year: 1. $10 million, 10-year, 13% unsecured bonds, with interest payable quarterly, priced to yield 12% 2. $2.5 million par of 10-year, zero-coupon bond

> The following account balances are available from the ledger of Yutao Shui Corporation on December 31, 2019: On January 2, 2020, the corporation put into effect a shareholder-approved reorganization by agreeing to pass the common shares over to the cred

> The following amortization and interest schedule is for the issuance of 10-year bonds by Capulet Corporation on January 1, 2020, and the subsequent interest payments and charges. The company's yearend is December 31 and it prepares its financial statemen

> On June 30, 2013, Auburn Limited issued 12% bonds with a par value of $800,000 due in 20 years. They were issued at 98 and were callable at 104 at any date after June 30, 2020. Because of lower interest rates and a significant change in the company's cre

> Brubacher Corporation's post-closing trial balance at December 31, 2020, was as follows: At December 31, 2020, Brubacher had the following numbers for its common and preferred shares: The dividends on preferred shares are $5 cumulative. In addition, th

> On June 30, 2020, Mosca Limited issued $4 million of 20-year, 13% bonds for $4,300,920, which provides a yield of 12%. The company uses the effective interest method to amortize any bond premium or discount. The bonds pay semi-annual interest on June 30

> Radford Corporation's charter authorized 1 million $11 par value common shares, and 300,000 6% cumulative and non-participating preferred shares, with a par value of $100 per share. The corporation made the following share transactions through December 3

> On January 1, 2020, Copeland Ltd. (a public company) had the following shareholders' equity accounts: The following selected transactions occurred during 2020: Instructions a. Prepare journal entries to record the transactions above, as well as the c

> Miss M's Dance Studios Ltd. is a public company, and accordingly uses IFRS for financial reporting. The corporate charter authorizes the issuance of an unlimited number of common shares and 50,000 preferred shares with a $2 dividend. At the beginning of

> Falkon Corp. reported the following amounts in the shareholders' equity section of its December 31, 2019 SFP: During 2020, the company had the following transactions that affect shareholders' equity. 1. Paid the annual 2019 $8 per share dividend on pre

> Yang Inc. was organized on January 1, 2020. It is authorized to issue an unlimited number of common shares and 100,000 preferred shares with a $4 dividend. The following share transactions were completed during the first year: Instructions Prepare the

> Desrocher Ltd. issued an instalment note on January 1, 2020 (with a required yield of 9%) in exchange for land that it purchased from Safayeni Ltd. Safayeni's real estate agent had listed the land on the market for $120,000. The note calls for three equa

> Two independent situations follow. 1. On January 1, 2020, Spartan Inc. bought land that had an assessed value of $390,000 at the time of purchase. A $600,000, non–interest-bearing note due on January 1, 2023, was given in exchange. There was no establis

> Access the audited annual financial statements of Rogers Sugar Inc. for the year ended September 30, 2017, from SEDAR (www.sedar.com) or the company's website. Instructions a. Identify the components of the company's shareholders' equity, including the

> On January 1, 2020, Landlord Corporation acquired the following properties: 1. Investment property consisting of land and an apartment building in Toronto for $1.5 million. To finance this transaction, Landlord Corporation issued a five-year interest-fr

> Two independent situations follow: 1. On January 1, 2020, Divac Limited issued $300,000 of 10-year, 9% bonds at par. Interest is payable quarterly on April 1, July 1, October 1, and January 1. 2. On June 1, 2020, Verbitsky Inc. issued at par, plus accr

> Refer to E14.18 and Auburn Limited. Instructions Repeat the instructions of E14.18 assuming that Auburn Limited follows IFRS and uses the effective interest method. Provide an effective interest table for the bonds from the inception of the bond to the d

> Friedman Corporation had bonds outstanding with a maturity value of $500,000. On April 30, 2020, when these bonds had an unamortized discount of $10,000, they were called in at 104. To pay for these bonds, Friedman had issued other bonds a month earlier

> Sunshine Incorporated provides solar energy services to Toronto. Sunshine needed to buy additional solar energy panels to meet the demand for its energy product. The Government of Ontario offered an interest-free forgivable loan to Sunshine in the amount

> Four independent situations follow. 1. Wen Corporation incurred the following costs when it issued bonds: printing and engraving costs, $25,000; legal fees, $69,000; and commissions paid to underwriter, $70,000. 2. Griffith Inc. sold $3 million of 10-y

> Minor Inc. sells 10% bonds having a maturity value of $3 million for $2,783,713. The bonds are dated January 1, 2020, and mature on January 1, 2025. Interest is payable annually on January 1. Instructions a. Set up a schedule of interest expense and d

> Cinderella Shoes Inc., a private company following ASPE, is having difficulty meeting its working capital requirements. As a result, on January 1, 2020, the company sold bonds with a face value of $1 million, receiving $800,000 in cash. The bonds have an

> On January 1, 2020, Osborn Inc. sold 12% bonds having a maturity value of $800,000 for $860,652, which provides the bondholders with a 10% yield. The bonds are dated January 1, 2020, and mature on January 1, 2025, with interest payable on January 1 of ea

> On December 31, 2020, Zimmer Corporation has $7.9 million of short-term debt in the form of notes payable that are due in 2021 to Provincial Bank. On January 28, 2021, Zimmer enters into a refinancing agreement with the bank that permits it to refinance

> Access the audited annual financial statements of Goldcorp Inc. for its year ended December 31, 2017, from SEDAR (www.sedar.com) or the company's website. Instructions a. Describe the business that Goldcorp Inc. operates in. b. Identify the component

> On December 31, 2020, Hornsby Corporation had $1.2 million of short-term debt in the form of notes payable due on February 2, 2021. On January 21, 2021, in order to ensure that it had sufficient funds to pay for the short-term debt when it matured, Horns

> Shaddick Corp., a public company following IFRS, began its 2020 fiscal year with a debit balance of $11,250 in its Income Tax Receivable account. During the year, Shaddick made quarterly income tax instalment payments of $8,100 each. In early June, a che

> Harold Limited's condensed financial statements provide the following information: Instructions a. Determine the following: 1. Current ratio at December 31, 2020 2. Acid-test ratio at December 31, 2020 3. Accounts receivable turnover for 2020 4. I

> Four independent situations follow. Situation 1: During 2020, Sugarpost Inc. became involved in a tax dispute with the Canada Revenue Agency. Sugarpost's tax lawyers have told management that Sugarpost will likely lose this dispute. They also believe th

> Islim Limited manufactures faux fur coats of all types and sizes that are sold to specialty stores throughout Canada. Sales to retailers provide for payment within 60 days of delivery and the retailer may return a maximum of 25% of an order at the retail

> St. Thomas Auto Repairs is preparing the financial statements for the year ended November 30, 2020. As the accountant, you are looking over the information regarding short-term liabilities, and determining the amounts that should be reported on the balan

> Three independent situations follow. Situation 1: Marquart Stamp Corporation records stamp service revenue and provides for the cost of redemptions in the year stamps are sold to licensees. The stamps can be collected and then redeemed for discounts on

> Moleski Limited, a private company following ASPE, includes one coupon in each box of soap powder that it produces, and 10 coupons are redeemable for a premium (a kitchen utensil). In 2020, Moleski purchased 8,800 premiums at $0.90 each and sold 120,000

> To increase sales, Bélanger Inc., a public company following IFRS, implemented a customer loyalty program that rewards a customer with one loyalty point for every $10 of purchases on a select group of products. Each point is redeemable for a $1 discount

> Novack Machinery Co. manufactures equipment to a very high standard of quality; however, it must still provide a warranty for each unit sold, and there are instances where the machines do require repair after they have been put into use. Novack started i

> Corby Spirit and Wine Limited is a leading Canadian marketer and distributor of premium spirits and wine brands. Obtain a copy of the company's comparative financial statements for the year ended June 30, 2018, from the company's website (www.corby.ca).

> Cool Sound Ltd. manufactures a line of amplifiers that carry a three-year warranty against defects. Based on experience, the estimated warranty costs related to dollar sales are as follows: first year after sale—2% of sales; second year

> Cléroux Corporation sold 150 colour laser copiers in 2020 for $4,000 each, including a one-year warranty. Maintenance on each machine during the warranty period averages $300. Instructions a. Prepare entries to record the machine sales and the related

> On January 1, 2020, Schmitt Inc.'s general ledger had these liability accounts: In addition, Schmitt had a balance in HST Receivable of $4,260 at January 1, 2020. Schmitt uses a periodic inventory system, operates in the Province of Ontario where HST is

> On May 1, 2020, Green Machine Inc. entered into a contract to deliver one of its specialty mowers to Schroeter Landscaping Co. The contract requires Schroeter to pay the contract price of $3,200 in advance on May 15, 2020. Schroeter pays Green Machine on