User Account

All Pages

Comment on the quality of earnings of T Inc

Assignment Help Financial Accounting
Reference no: EM132759227

Question - T Inc. is a USA public company that cultivates and harvests cannabis plants and sells cannabis products into the USA recreational and medical markets. B Inc. is a USA public company that dries and cures harvested cannabis buds and processes it into cannabis products.

The following information is relevant to the two companies:

B Inc. has 25 million common shares and 2 million convertible debentures outstanding. Each debenture can be converted into 1 common share.

T Inc. owns 3.125 million common shares of B Inc. and owns all the convertible debentures of B Inc.

The Chief Operational Officer of T Inc., Mary-Ann, is a member of the board of directors of B Inc.

The two companies signed a "tolling" agreement in 2017 whereby B Inc. would dry and cure all of T Inc.'s harvested cannabis plants (raw materials) and process it into a final product that can be sold to the final consumer. T Inc. kept ownership of the raw materials and final product throughout the process and paid B Inc. a fee for its services.

On July 1, 2019, the two companies agreed to cancel the tolling agreement. During the period July 1 to December 31, 2019, T Inc sold raw materials to B Inc. for $12 million. B Inc. processed the raw materials into a final cannabis product (the same way as it did under the tolling agreement) and sold it to T Inc. for $20 million, who in turn sold the final product for $22 million in 2020.

T Inc. recorded revenue of $36 million in 2019.

B Inc. recorded revenue of $32.5 million in 2019, consists of tolling fees of $8 million and sale of cannabis products of $24.5 million (it also sold to companies other than Dagga Inc.).

T Inc. uses FVTOCI (fair value through other comprehensive income) to account for its investment in B Inc.

Both companies have a December 31 year-end.

REQUIRED -

a. Explain in detail how T Inc. should classify its investment in B Inc. by referring to IFS10 - Consolidated Financial Statements and/or IAS28 - Investments in Associates and Joint Ventures, as applicable.

b. Explain in detail how T Inc. should account for the transactions with B Inc. in its 2019 financial statements.

c. What should T Inc. disclose regarding its transactions with B Inc. under IFRS8 - Operating Segments? Why?

d. Comment on the quality of earnings of T Inc. for 2019.

Reference no: EM132759227

Questions Cloud

What is amazon weighted average cost of capital : The firm's estimated required rate of return on equity is estimated at about 10.8 percent. What's Amazon's weighted average cost of capital (WACC)?
How do the citizens of the country access health care : Prior to beginning work on this discussion, review your assigned textbook chapters, especially the Technologies and Health Care Developments time line.
Organizational structure-managing human resource : 1. Identify a small business you'd like to open. What types of products or services do you plan to offer?
What is the cost of equity for mulberry inc : It can borrow at 10 percent. Mulberry has a target ½ debt/equity ratio. Using the M&M Proposition II, what's the cost of equity?
Comment on the quality of earnings of T Inc : During the period July 1 to December 31, 2019, T Inc sold raw materials to B Inc. for $12 million. Comment on the quality of earnings of T Inc. for 2019
Organizational experience change for the actors involved : How would the situation change? How does the organizational experience change for the actors involved?
What alphabet weighted average cost of capital : risk-free rate is 1 percent and that the market risk premium is 7 percent. The firm's beta coefficient is 0.97. What Alphabet's weighted average cost of capital
What discount rate should the firm apply to a new project : What discount rate should the firm apply to a new project's cash flows if the project has the same risk as the firm's typical project?
Which column total is larger : The receipt of 3,000 from a client on account was posted as a 3,000 debit to cash and a 3,000 credit to sales. Which column total is larger

Reviews

Write a Review

Financial Accounting Questions & Answers

  Is the company selected involved in litigation

What largest current liability?Is the company you selected involved in litigation? If so, what can be concluded from its disclosures regarding this litigation?

  What will the cash flows for project be during year

$66,000 per year in before-tax operating costs, mainly labor. The firm's marginal tax rate is 30 percent. What will the cash flows for project be during year

  Classified as a facility-level cost

Easton can currently purchase the scooters it makes from another company. If the company purchases the scooters, Easton would still continue to use its own logo, sales staff, and advertising programs. Which of the following costs would be classified ..

  Identify the amounts as relate to the bond issue face amount

Identify the amounts as they relate to the bond issue face amount, market or effective rate of interest, contract rate of interest

  Explain the difference between these two bases of valuation

What could explain the difference between these two bases of valuation for the business? Please describe your solutions.

  What amount would be charged to profit for the impairment

Riley acquired, What amount would be charged to profit or loss for the impairment of this asset for the year ended 31 December 2024?

  How much of the total materials handling cost should be

If the materials handling cost is allocated on the basis of material moves, how much of the total materials handling cost should be allocated to the specialty

  At illustrate what price was the bond issued

The bond has a stated interest rate of 6 percent. On January 1, 2011, when the bond was issued, the market rate was 8 percent. The bond pays interest twice per year, on June 30 and December 31. At illustrate what price was the bond issued?

  Calculate the amount of the firm cash outflows

Calculate the amount of the firm's cash outflows. Beginning cash balance ($5,000). Minimum cash balance $3,000. Ending cash balance $9,000

  What is amount of rent expense that would be recognized

Ignoring all other future events, what is the amount of rent expense that would be recognized in Year 2? (Do not round intermediate calculations.)

  Calculate times interest earned ratio while income tax rate

Alhamra Associates has 20,000 outstanding shares of common stock and paid a dividend. Calculate times interest earned ratio while income tax rate is 34%.

  Total labor variance and labor price variance

Hartley Company’s standard labor cost per unit of output is $29.43 (2.7 hours x $10.90 per hour). During August, the company incurs 3,300 hours of direct labor at an hourly cost of $11.23 per hour in making 1,200 units of finished product. Compute th..

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd