An American Company borrowed 1million Canadian dollars to finance the construction of an office building when the Canadian dollar was worth $1 US. At 10% interest, the American Company expected to pay back 1.1 million Canadian dollars which would cost $1.1 million US dollars. However, based on changes in the value of the Canadian dollar, the American Company must pay $1,030,000 million US dollars to satisfy this debt. How will this $70,000 US dollar difference be shown on the American Company’s financial statements under GAAP? How would this have been shown if the American Company used IFRS? Which gives us more relevant information? Explain
In: Accounting
A taxi driver in Manhattan is sitting in his car passing time
until someone needs a ride. Unbeknownst to the taxi driver, a man
in a nearby alley is robbing two people. After the robber has
completed the crime, he runs around the corner and jumps into the
taxi. The robber tells the driver to floor it, and to emphasize his
point, he puts a gun to the taxi driver's head. The driver puts the
car in gear and takes off. Meanwhile, one of the robbery victims
has followed the robber to the taxi and is running next to it to
try to get in the cab. He is yelling something to the effect of,
"Stop thief!" The taxi driver looks in the mirror and notices that
the robber is looking at the victim chasing the taxi and figures it
is his chance to hightail it!. The driver slams on the brakes and
jumps out of the cab. When he slammed on the brakes, the robber in
the car was injured; however, the taxi, without the driver,
continued forward. The driverless taxi ran off the street and up
onto the sidewalk where it struck a poor woman and her three
children, injuring all three. The woman sued the taxi driver for
their injuries resulting from the driver jumping out of a moving
vehicle.
Please discuss the results of the action by the woman and her
children against the taxi driver.
In: Accounting
Freedom Corporation acquired a fixed asset for $170,000. Its estimated life at time of purchase was 4 years, with no estimated salvage value. Assume a discount rate of 11% and an income tax rate of 40%. (Use Exhibit 12.4,Appendix C, TABLE 1 and Appendix C, TABLE 2.)
Required:
1. What is the incremental present value of the tax benefits resulting from calculating depreciation using the sum-of-the-years’-digits (SYD) method rather than the straight-line (SLN) method on this asset? Use the SYD and SLN functions in Excel to calculate depreciation charges.
2. What is the incremental present value of the tax benefits resulting from calculating depreciation using the double-declining-balance (DDB) method rather than the straight-line (SLN) method on this asset? Use the SLN and DDB functions in Excel to calculate depreciation charges.
3. What is the incremental present value of the tax benefits resulting from using MACRS rather than straight-line (SLN) depreciation? The asset qualifies as a 3-year asset. Use the half-year convention.
In: Accounting
Hyper Company had a beginning inventory on January 1 of 160 units of Product 4-18-19 at a cost of $20 per unit. During the year, the following purchases were made. Mar. 15 400 units at $23 Sept. 4 330 units at $26 July 20 250 units at $24 Dec. 2 100 units at $29 1,000 units were sold. Hyper Company uses a periodic inventory system.
Instructions
(a) Determine the cost of goods available for sale.
(b) Determine (1) the ending inventory, and (2) the cost of goods sold under each of the assumed cost flow methods (FIFO, LIFO, and average-cost).
(c) Which cost flow method results in (1) the highest inventory amount for the balance sheet, and (2) the highest cost of goods sold for the income statement?
In: Accounting
Last year Drone Corporation was formed on January 1st. An S election was filed by March 15th of the same year. When the S election was filed it was missing a consent from one of the shareholders. The missing consent was filed on August 5th. Which of he following statements is correct?
A- The S election is valid for last year, if the shareholder was out of the country until August 1st.
B- The S election will be vaild beginning January 1st of the next year, if there was no reasonable cause for the late consent filing.
C- The S election is valid for last year, if the consent was late because the CPA thought that the client filed it and the client thought the CPA filed it.
D- Late consent is acceptable if there is reasonable cause for the delay and the interest of the government is not jeopardized.
E- All of the above are correct.
In: Accounting
What other suggestions do you have related to avoiding audit failure?
In: Accounting
Vertical Analysis of Income Statement The following comparative income statement (in thousands of dollars) for the two recent fiscal years was adapted from the annual report of Calvin Motorsports, Inc., owner and operator of several major motor speedways, such as the Atlanta, Texas, and Las Vegas Motor Speedways. Current Year Previous Year Revenues: Admissions $94,400 $107,580 Event-related revenue 138,768 147,189 NASCAR broadcasting revenue 169,448 160,881 Other operating revenue 69,384 73,350 Total revenue $472,000 $489,000 Expenses and other: Direct expense of events $93,928 $94,377 NASCAR purse and sanction fees 118,000 126,162 Other direct expenses 27,848 23,961 General and administrative 178,416 218,583 Total expenses and other $418,192 $463,083 Income from continuing operations $53,808 $25,917 a. Prepare a comparative income statement for these two years in vertical form, stating each item as a percent of revenues. Round to one decimal place. Enter all amounts as positive numbers. Calvin Motorsports, Inc. Comparative Income Statement (in thousands of dollars) For the Years Ended December 31 Current Year Amount Current Year Percent Prior Year Amount Prior Year Percent Revenues: Admissions $94,400 % $107,580 % Event-related revenue 138,768 % 147,189 % NASCAR broadcasting revenue 169,448 % 160,881 % Other operating revenue 69,384 % 73,350 % Total revenue $472,000 % $489,000 % Expenses and other: Direct expense of events $93,928 % $94,377 % NASCAR purse and sanction fees 118,000 % 126,162 % Other direct expenses 27,848 % 23,961 % General and administrative 178,416 % 218,583 % Total expenses and other $418,192 % $463,083 % Income from continuing operations $53,808 % $25,917 % b. While overall revenue some between the two years, the overall mix of revenue sources did change somewhat. The NASCAR broadcasting revenue as a percent of total revenue by 3 percentage points, while the percent of admissions revenue to total revenue by 2 percentage points. Overall, it appears that income from continuing operations has significantly improved because of .
In: Accounting
Investment Reporting
O’Brien Industries Inc. is a book publisher.
Note 1. Investments are classified as available for sale. The investments at cost and fair value on December 31, Year 1, are as follows:
No. of Shares | Cost per Share | Total Cost | Total Fair Value | |||||
Bernard Co. stock | 1,900 | $10 | $19,000 | $17,300 | ||||
Chadwick Co. stock | 1,000 | 45 | 45,000 | 42,100 | ||||
$64,000 | $59,400 |
Note 2. The investment in Jolly Roger Co. stock is an equity method investment representing 32% of the outstanding shares of Jolly Roger Co.
The following selected investment transactions occurred during Year 2:
May 5. | Purchased 2,200 shares of Gozar Inc. at $18 per share including brokerage commission. Gozar Inc. is classified as an available-for-sale security. |
Oct. 1. | Purchased $39,000 of Nightline Co. 5%, 10-year bonds at 100. The bonds are classified as available for sale. The bonds pay interest on October 1 and April 1. |
Oct. 9. | Dividends of $10,700 are received on the Jolly Roger Co. investment. |
Dec. 31. | Jolly Roger Co. reported a total net income of $92,000 for Year 2. O’Brien Industries Inc. recorded equity earnings for its share of Jolly Roger Co. net income. |
31. | Accrued three months of interest on the Nightline bonds. |
31. | Adjusted the available-for-sale investment portfolio to fair value, using the following fair value per-share amounts: |
Available-for-Sale Investments | Fair Value |
Bernard Co. stock | $9 per share |
Chadwick Co. stock | $40 per share |
Gozar Inc. stock | $19 per share |
Nightline Co. bonds | $98 per $100 of face amount |
Dec. 31. | Closed the O’Brien Industries Inc. net income of $136,600. O’Brien Industries Inc. paid no dividends during the year. |
Required:
The comparative unclassified balance sheets for December 31, Year 2 and Year 1 are provided below. Determine the missing amounts in the unclassified balance sheet. Do not round interim calculations. Round final answers to nearest dollar. Use minus sign to indicate the negative amounts.
O’Brien Industries Inc. | ||
Balance Sheet | ||
December 31, Year 2 and Year 1 | ||
Dec. 31, Year 2 | Dec. 31, Year 1 | |
Cash | $216,372 | $174,700 |
Accounts Receivable (Net) | 123,700 | 114,500 |
Available-for-Sale Investments (at Cost) - Note 1 | 64,000 | |
Less Valuation Allowance for Available-for-Sale Investments | 4,600 | |
Available-for-Sale Investments (Fair Value) | $ | $59,400 |
Interest Receivable | $ | |
Investment in Jolly Roger Co. Stock - Note 2 | $ 62,400 | |
Office Equipment (Net) | 103,800 | 109,300 |
Total Assets | $ | $520,300 |
Accounts Payable | $ 66,400 | $ 59,800 |
Common Stock | 57,200 | 57,200 |
Excess of Issue Price Over Par | 182,100 | 182,100 |
Retained Earnings | 225,800 | |
Unrealized Gain (Loss) on Available-for-Sale Investments | (4,600) | |
Total Liabilities and Stockholders' Equity | $ | $520,300 |
In: Accounting
Paul Swanson has an opportunity to acquire a franchise from The
Yogurt Place, Inc., to dispense frozen yogurt products under The
Yogurt Place name. Mr. Swanson has assembled the following
information relating to the franchise: a. A suitable location in a
large shopping mall can be rented for $4,800 per month. b.
Remodeling and necessary equipment would cost $396,000. The
equipment would have a 10-year life and an $39,600 salvage value.
Straight-line depreciation would be used, and the salvage value
would be considered in computing depreciation. c. Based on similar
outlets elsewhere, Mr. Swanson estimates that sales would total
$510,000 per year. Ingredients would cost 20% of sales. d.
Operating costs would include $91,000 per year for salaries, $5,600
per year for insurance, and $48,000 per year for utilities. In
addition, Mr. Swanson would have to pay a commission to The Yogurt
Place, Inc., of 14.5% of sales.
Compute the payback period on the outlet
In: Accounting
In: Accounting
Alexa owns a condominium near Cocoa Beach in Florida. This year,
she incurs the following expenses in connection with her
condo:
Insurance | $ | 3,350 |
Mortgage interest | 6,650 | |
Property taxes | 2,800 | |
Repairs & maintenance | 860 | |
Utilities | 2,600 | |
Depreciation | 23,800 | |
During the year, Alexa rented out the condo for 134 days. Alexa’s
AGI from all sources other than the rental property is $200,000.
Unless otherwise specified, Alexa has no sources of passive income.
Assume there are 365 days in the year.
Assume that in addition to renting the condo for 134 days, Alexa uses the condo for 8 days of personal use. Also assume that Alexa receives $49,750 of gross rental receipts. Answer the following questions: (Do not round intermediate calculations. Round your final answers to the nearest whole dollar amount.)
a. What is the total amount of for AGI deductions relating to the condo that Alexa may deduct in the current year? Assume she uses the IRS method of allocating expenses between rental and personal days. (Amounts to be deducted should be indicated with a minus sign.)
Alexa owns a condominium near Cocoa Beach in Florida. This year,
she incurs the following expenses in connection with her
condo:
Insurance | $ | 3,350 |
Mortgage interest | 6,650 | |
Property taxes | 2,800 | |
Repairs & maintenance | 860 | |
Utilities | 2,600 | |
Depreciation | 23,800 | |
During the year, Alexa rented out the condo for 134 days. Alexa’s
AGI from all sources other than the rental property is $200,000.
Unless otherwise specified, Alexa has no sources of passive income.
Assume there are 365 days in the year.
Assume that in addition to renting the condo for 134 days, Alexa uses the condo for 8 days of personal use. Also assume that Alexa receives $49,750 of gross rental receipts. Answer the following questions: (Do not round intermediate calculations. Round your final answers to the nearest whole dollar amount.)
a. What is the total amount of for AGI deductions relating to the condo that Alexa may deduct in the current year? Assume she uses the IRS method of allocating expenses between rental and personal days. (Amounts to be deducted should be indicated with a minus sign.)
In: Accounting
Explain the difference between committed fixed costs and discretionary fixed costs and give an example of each.
Why are more and more organizations in both manufacturing and nonmanufacturing industries adopting activity-based costing systems?
In: Accounting
Analyze the major benefits and major weaknesses of traditional Activity-Based Costing (ABC) in determining accurate overhead costs over an ABC system.Provide a rationale for your response. Suggest the manner in which a business can achieve a competitive advantage in the marketplace through the use of ABC. Provide two (2) reasons to convince senior management that they should implement an ABC system.
In: Accounting
Hillyard Company, an office supplies specialty store, prepares its master budget on a quarterly basis. The following data have been assembled to assist in preparing the master budget for the first quarter:
As of December 31 (the end of the prior quarter), the company’s general ledger showed the following account balances:
Hillyard Company, an office supplies specialty store, prepares its master budget on a quarterly basis. The following data have been assembled to assist in preparing the master budget for the first quarter:
Required: Using the data above, complete the following statements and schedules for the first quarter: 1. Schedule of expected cash collections: 2-a. Merchandise purchases budget: 2-b. Schedule of expected cash disbursements for merchandise purchases: 3. Cash budget: 4. Prepare an absorption costing income statement for the quarter ending March 31. 5. Prepare a balance sheet as of March 31. |
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In: Accounting
Winthrop Company has an opportunity to manufacture and sell a new product for a five-year period. To pursue this opportunity, the company would need to purchase a piece of equipment for $125,000. The equipment would have a useful life of five years and zero salvage value. It would be depreciated for financial reporting and tax purposes using the straight-line method. After careful study, Winthrop estimated the following annual costs and revenues for the new product:
Annual revenues and costs: | |||
Sales revenues | $ | 320,000 | |
Variable expenses | $ | 180,000 | |
Fixed out-of-pocket operating costs | $ | 82,000 | |
The company’s tax rate is 30% and its after-tax cost of capital is 16%.
Calculate the net present value of this investment opportunity.
In: Accounting