Longhorn Gate Limited (LGL) Bonds Trading Assignment
Order ID 53563633773 Type Essay Writer Level Masters Style APA Sources/References 4 Perfect Number of Pages to Order 5-10 Pages Description/Paper Instructions
Longhorn Gate Limited (LGL) Bonds Trading Assignment
Question Description
Longhorn Gate Limited (LGL), a privately held, December 31 year end, company with bonds trading publicly on the open market, has the following independent situations. Reply to the required of each situation. The following matters pertain to the financial year ended December 31, 2020.
[Round all calculations to the nearest dollar; no cents]
Situation #1
LGL has bonds payable that are due in 2021 for $5,000,000. This amount is being reported as a current liability in the company’s preliminary classified balance sheet at December 31, 2020. On December 15, 2020, management entered into an agreement with the bondholders to refinance into a long-term secured loan, ¾ of the $5,000,000 upon falling due in 2021. LGL expects to settle the remaining amount when the bonds mature, from current working capital.
Required: How should the bonds be reported on the finalized classified balance sheet as at December 31, 2020? Why?
Situation #2:
LGL acquired and installed a tank farm on the site of its main manufacturing facility to purify brown water created by its manufacturing processes. This is in compliance with BC environmental regulations. The tank farm became fully operational on January 1, 2020 and will have an expected useful life of 20 years. LGL’s depreciation is straight line basis over an asset estimated useful life.
The following data is provided relative to the tank farm installation.
The prime contractor’s base price, excluding taxes, for the
installation of an integrated 8 tank water purification system
including land excavation, foundations, electrical and safety
devices, invoice rendered January 3, 2020…………$6,750,000 +GST+PST
Early payment incentive; cash discount, net 10, EOM……………… 1.5%
LGL applies a discount lost account, as appropriate.
Tax rates, no exemptions or relief ………………………….………..GST:5%; PST:7%
Insurance premiums during installation, not covered
by the contract………………………………………………………………$25,000 +GST only
Storage costs for tanks during installation caused by LGL
not having access routes ready for which it was
responsible……………………………………………………………………….$8,000 + GST only
No significant recoverable costs are estimated at the end of the tank farm’s estimated useful life.
LGL will be required to restore the site of the tank farm to environmental standards at the end of its useful life. Based on current regulatory requirements and technologies, the estimated future cost to restore at the end of the farm’s useful life is $1,000,000.
Of this $1,000,000, 25% is attributable to the normal deterioration of the tank farm if it were rendered idle and 75% of the future cost would be caused by the annual and even environmental degradation caused through normal operation wear and tear.
The appropriate discount rate applied is 3%
Required #2-1:
Calculate (show calculations) the total value to be assigned to the capital asset, Tank Farm when it became operational in early January, 2020. Accounting entries are not required.
Cost components of Tank Farm:
Required #2-2:
Calculate, no entry required, the balance of the Asset Retirement Obligation at January 1, 2020.
Required #2-3:
Provide all related entries, annualized, relative to both the Tank Farm and the Asset Retirement Obligation for the year ended December 31, 2020. Note, as per above, any initial entries on January 1, 2020 are not required.
Required #2-4:
Calculate the balance in the Asset Retirement Obligation at December 31, 2020.
Situation #3:
LGL provides the following list of a representation of its financial liabilities.
Fin/Non-Fin Royalties payable to BC government 45,000 Estimated warranty liability 75,000 Trade accounts payable $1,250,000 Dividends payable 600,000 Unearned revenue from advance customer deposits 100,000 Long term debt, current and non-current 5,000,000 Income taxes payable 40,000 GST payable 120,000 Asset Retirement Obligation 163,957 Required: Is this list a representation of financial liabilities? Indicate, in the right column; Fin = financial liability; Non-Fin = Non-financial liability
Situation #4:
In November, 2020, to secure supply of raw material vital to its manufacturing process, the Vice-President, Manufacturing was anxious to lock into a purchase commitment with the raw material supplier to cover all of its 2021 production. The contract would be for 800,000kg. with deliveries in 2021 to be coordinated with the production schedule.
The contract cost to secure this long-term supply is $26.50/kg. On January 20, 2021, while the financial statements for the year ended December 31, 2020 were still under audit, a new global supplier of the raw material caused a permanent drop (not a short-term market supply and demand) in the price to $23.50/kg.
LGL has yet to take any deliveries of the raw material in 2021.
Required: Ignoring taxes, how will this event be handled/reported, if at all, in the financial statements for the year ended December 31, 2020? Be specific and provide any adjusting entries should they be required.
RUBRIC
QUALITY OF RESPONSE NO RESPONSE POOR / UNSATISFACTORY SATISFACTORY GOOD EXCELLENT Content (worth a maximum of 50% of the total points) Zero points: Student failed to submit the final paper. 20 points out of 50: The essay illustrates poor understanding of the relevant material by failing to address or incorrectly addressing the relevant content; failing to identify or inaccurately explaining/defining key concepts/ideas; ignoring or incorrectly explaining key points/claims and the reasoning behind them; and/or incorrectly or inappropriately using terminology; and elements of the response are lacking. 30 points out of 50: The essay illustrates a rudimentary understanding of the relevant material by mentioning but not full explaining the relevant content; identifying some of the key concepts/ideas though failing to fully or accurately explain many of them; using terminology, though sometimes inaccurately or inappropriately; and/or incorporating some key claims/points but failing to explain the reasoning behind them or doing so inaccurately. 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