Reference no: EM132468554

Question 1 - Record estimated liability for cash rebate program.

Metropolis Books sold 50,000 copies of a best-selling novel in July for $8 each. Included in each book was a $2 mail-in rebate toward a future book purchase if the customer sends in proof of purchase with a completed rebate form. Metropolis estimates that 10% of the purchasers will claim the rebate. (a) Calculate the sales revenue and the unearned revenue related to the loyalty program that Metropolis earned in July on this book. (b) Prepare the journal entry to record the sale and the unearned revenue Metropolis Books should record.

Question 2 - Record gift cards issued and redeemed.

Rikard's Menswear sells $4,750 of gift cards for cash in December 2017. Rikard's has a December 31 fiscal year end and uses a perpetual inventory system. In January 2018, $2,425 of the gift cards are redeemed for merchandise with a cost of $1,070. Prepare journal entries for Rikard's for December 2017 and January 2018 assuming all gift card balances will be redeemed.

Question 3 - Account for contingencies.

For each of the following independent situations, indicate whether it should be (1) recorded, (2) disclosed, or (3) neither recorded nor disclosed. Explain your reasoning and indicate if the accounting treatment would be the same or different under IFRS and ASPE.

(a) A customer has sued a company for $1 million. Currently the company is unable to determine if it will win or lose the lawsuit.

(b) A customer has sued a company for $1 million. The company will likely lose the lawsuit.

(c) A competitor has sued a company for $2 million. The lawyers have advised that there is a 55% chance that the company will lose the lawsuit.

Question 4 -Discuss contingency.

Athabasca Toil & Oil Company, a public company, is a defendant in a lawsuit for improper discharge of pollutants and waste into the Athabasca River. Athabasca's lawyers have advised that it is probable the company will lose this lawsuit and that it could settle out of court for $50,000. Should Athabasca record anything with regard to this lawsuit? Or should it disclose it in the notes to the financial statements? Explain.

Question 5 - Calculate gross and net pay, and employer costs.

Becky Sherrick's regular hourly wage rate is $12.50, and she is paid time and a half for work over 40 hours per week. In the pay period ended March 16, Becky worked 46 hours. Becky's CPP deductions total $26.99, EI deductions total $11.21, and her income tax withholdings are $94.56. (a) Calculate Becky's gross and net pay for the pay period. (b) What are Becky's employer's costs for CPP, EI, and income tax?

Question 6 - Record payroll.

Bri Company's gross pay for the week ended August 22 totalled $70,000, from which $3,330 was deducted for CPP, $1,281 for EI, and $19,360 for income tax. Prepare the entry to record the employer payroll costs, assuming these will not be paid until September.