Question 2 – 12 points (22 minutes)

On January 1, 20X7, the Gaga Company sold commodities in exchange for a promissory note of $ 5,000, due December 31, 20X8 and bearing no interest. At the effective interest rate of 12%, the fair value of the note is $ 3,986. The Gaga Company’s fiscal year-end is December 31.

Work to do :

A) Make the entries in Gaga’s books to record all operations relating to the above transaction for the years ended December 31, 20X7 and 20X8.

B) Now suppose that on January 1, 20X8, Gaga receives information confirming that her client has just declared bankruptcy and that the estimated amount to be received on December 31, 20X8 is only $ 3,000. In fact, on December 31, his client reimbursed him $ 3,000. Make the entries in Gaga’s books to record the transactions relating to the note receivable for the year ended December 31, 20X8.

Question 3 – 30 points (54 minutes)

Part A – (20 points)

The Beaubardier company specializes in the wholesale of various products. Its fiscal year ends on October 31. Here is the detail of the “Receivables” item at the end of the previous fiscal year, i.e. October 31, 20X8:

Debit                     Credit

Customers, gross $                                                          310,000

Advance to a shareholder                                            30,000

Taxes to be collected                                                     6,000

Interest receivable on bank deposits                      2,000

Provision for customer valuation adjustments                                    $ 12,000

On November 15, 20X8, the Beaubardier company grants one of its clients additional time to pay his account of $ 24,000, due for three months already. In exchange for additional settlement time, the Company obtains a note receivable of $ 24,000 due February 15, 20X9 and bearing interest at an annual rate of 10%. The note was cashed on the due date.

On February 25, 20X9, Beaubardier receives $ 5,000 in interest income on its bank deposits covering the period August 25, 20X8 to February 25, 20X9.

On February 28, 20X9, the company makes a credit sale of $ 30,000 and decides to immediately grant a 15% wholesale discount to its customer.

On April 23, 20X9, the Company was notified that one of its customers, who owed $ 16,000 for a credit sale made on January 20, 20X9, was now bankrupt and that there was no possibility of collection.

On July 23, 20X9, Beaubardier recovers a customer account of $ 1,000 which had been derecognized the previous year.

On September 17, 20X9, the shareholder reimburses the company for the amount of its advance.

On October 31, 20X9, the company agrees to sell its accounts receivable. The contract contains a clause which indicates that Beaubardier transfers all contractual rights and all the risks and rewards inherent in the receivables. Beaubardier sold his receivables at 75% of the gross value of his <Customers> account. Following this sale of its customer accounts, the balances of the <Customers> account and of the <Provision for customer value adjustments> account will be 0.

During the year ended October 31, 20X9, all of her sales were made on credit and were $ 4,300,000. Beaubardier had cashed $ 4,200,000 in accounts receivable during the year.

The derecognition of customers for non-payment is posted to the account <Provision for customer value adjustment>.

Work to do :

Prepare all necessary journal entries in Beaubardier’s books to record transactions for the fiscal year ending October 31, 20X9. Ignore taxes.

Part B – (10 points)

Here is some information about Mauvaisbardierinc. :

Cash sales                                                                                                           200,000$

Customers, gross amount at September 1, 20X8                                                30,000

Provision for trade receivables at September 1, 20X8                      4000

Customers, gross amount as of August 31, 20X9                                                32,000

Provision for customer value adjustments at August 31, 20X9     3,200

Expected credit losses-customers                                                            2,000

Credit sales receipts                                                                                       300,000

The derecognition of customers for non-payment is posted to the account <Provision for customer value adjustment>.

Work to do :

Calculate the amount of sales for the year ended August 31, 20X9.

Question 4 – 12 points (22 minutes)

Exception: For this question do not round off your calculations. Consider two decimal places for the calculated average costs.

Noda inc. is a distributor of t-shirts. As of June 30, 20X6, the year end date, she had 100 t-shirts in stock at a cost of $ 99.50 per unit. The t-shirts are priced at $ 375 per unit.

Here are the operations carried out for the quarter of July, August and September 20X6:

July                                        Sales                      50 units

August                                  Purchases           25 units at $ 100 per unit

September                         Purchases           150 units at $ 115 per unit

September 30                   Sales                      65 units

1. Noda inc. uses a periodic inventory system and the average cost method to determine the cost of its inventory. Calculate the cost of its ending inventory as of September 30, 20X6.

Noda inc. uses a periodic inventory system and the first in, first out method to determine the cost of its inventory. Calculate the cost of his closing inventory as of September 30, 20X6.

3. Noda inc. uses a perpetual inventory system and the average cost method to determine the cost of its inventory. Calculate the cost of its ending inventory as of September 30, 20X6.

4. Noda inc. uses a perpetual inventory system and the first in, first out method to determine the cost of its inventory. Calculate the cost of its ending inventory as of September 30, 20X6.

Question 5 – 18 points (32 minutes)

Part A – (12 points)

The sub-questions of this part are independent of each other.

1. On July 18, 20X3, Lebateauinc. buys stocks in France and the terms of the contract are <FOB port of Marseille>. The price paid is $ 350,000. Here is the breakdown of the cost of transport: road transport from the French company to the port of Marseille, $ 1,100; sea ​​transport from the port of Marseille to the port of Montreal, $ 5,500; road transport from the Port of Montreal to Lebateau Inc. warehouses, $ 700. Lebateauinc. also paid customs fees of $ 6,000, of which $ 1,500 was non-refundable. Calculate the cost of acquiring inventory for Lebateauinc.

2. Lebeauinc. must estimate the cost of its inventory as of December 31, 20X4. The gross profit margin usually achieved by Lebeauinc. is 40% of sales. For the year ending December 31, 20X4, sales were $ 3,800,000; inventories as of Jan. 1, 20X4 were $ 1,375,000. Purchases for the year total $ 2,500,000. Calculate inventory as of December 31, 20X4.

3. On December 31, 20X5, Lebateauinc. proceeds to its physical count. There are $ 800,000 worth of goods in his warehouse. Among these stocks, Lebateauinc. has $ 70,500 in consignment inventory from one of its suppliers. In its administrative offices, there is $ 30,000 in inventory used for demonstration purposes. Lebateauinc. put $ 200,000 worth of inventory on consignment with one of its clients. There is $ 68,000 in inventory purchased from its supplier in Vancouver and the terms of this contract are FOB-point of arrival. These stocks are in a truck near Toronto. On December 31, 20X5, Lebateau sold merchandise for $ 40,000 at a cost of 40% of that amount. These stocks were on the docks of Lebateauinc. and were not included in the $ 800,000 count. Calculate inventory as of December 31, 20X5.

4. On December 31, 20X6, the net realizable value of Lebeauinc. is $ 2,137,600, while their cost of acquisition is $ 2,200,000.Calculate the ending inventory that will be presented on the statement of financial position as at December 31, 20X6.

5. Make the accounting entry relating to the previous sub-question in order to take into account the cost at which the stocks must be presented as of December 31, 20X6.

Part B – (6 points)

Here are operations independent of each other.

1. At the end of the fiscal year, the company received an invoice for goods shipped from the seller <FOB-point of arrival> and these goods have still not reached their destination. The company has not yet made any postings and has not included this commodity in its closing inventory.

2. The company received goods valued at $ 20,000 and included them in its closing inventory. The accountant did not record the cost of these goods in the <Purchases> account. The company uses the periodic inventory method.

3. The company has sent goods on consignment to one of its customers. At the time of shipment, the accountant debited the <Cost of sales> account and credited the <Goods inventory> account. The customer still has not sold these goods. The company uses the periodic inventory method and has not included these stocks in the count of its physical inventory.

4. The company uses the perpetual inventory method. When selling goods, she makes the following two entries: (1) debits account <Cash> and credits account <Sales> and (2) debits account <Cost of sales> and credits account <Inventory of goods >.

Work to do :

For each transaction, indicate whether the company made an accounting error. If it is an error, indicate its effect on the following items (overvalued, undervalued or no effect):

a) closing stock;

b) cost of sales;

c) gross margin and net income.

Question 6 – 12 points (22 minutes)

Here is the balance of certain accounts drawn from the regularized trial balance of Kayak Ltd. for the year ended December 31, 20X8:

Gross sales                                                                         $ 400,000

Returns and discounts on purchases                       12,500

Sales discounts                                                                                 600

Provision for customer value adjustments           6,430

Expected credit losses – customers                          4,780

Customers, gross                                                             76,350

Closing stock (1)                                                               43,470

Gross margin                                                                     184,940

Shipping costs                                                                   23,700

Transport on purchases                                                                1,300

Customs charges (2)                                                       2,400

Returns and sales discounts                                        1,650

Discounts on purchases                                                                480

Purchases                                                                           ?

(1) During the physical count of inventory at December 31, 20X8, $ 1,300 was included in supplier inventory that was on consignment in Kayak’s warehouses.

(2) An amount of $ 1,960 will not be refundable.

On the Statement of Financial Position as at December 31, 20X7, inventories were $ 39,000.

Work to do :

Calculate the amount of Kayak Ltd. purchases for fiscal year 20X8.

Question 7 – 6 points (10 minutes)

According to international financial reporting standards, indicate the information to be provided in the financial statements with respect to inventories.

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