E11.24 (LO5) (Revaluation Accounting) Croatia Company purchased land in

2019 for $300,000. The land

'

s fair value at the end of 2019 is $320,000; at

the end of 2020, $280,000; and at the end of 2021, $305,000. Assume that

Croatia chooses to use revaluation accounting to account for its land.

Instructions

Prepare the journal entries to record the land using revaluation accounting for

2019

–

2021.

After reading the Hough, Green & Plumlee (2015) paper (from this week’s required readings),

Discuss how the company you work for (or if you are not currently employed, use a past employer) addresses ethical issues.

Does the company have a formal code of ethics?

Are employees assessed based on their ethical behavior?

How does trust impact the ethical environment in your firm?

Further, how does the firm handle violations in ethical behavior?

Hough, C., Green, K., & Plumlee, G. (2015). Impact of ethics environment and organizational trust on employee engagement. Journal of Legal, Ethical & Regulatory Issues, 18(3), 45-62.

Following is the condensed balance sheet of Martinez, O'Neill and Clemens, partners who share profits or losses in the ratio of 2 : 3 : 5.

Required

(a) Assume that the partnership’s assets and liabilities are fairly valued as shown. The partners wish to admit Jeter as a partner with a 40 percent interest in capital, profits, and losses. They require Jeter to invest an amount such that bonus or goodwill adjustments are not needed. How much should Jeter invest for the 40 percent share?
$Answer

(b) Assume instead that the existing partners, all of whom contemplate retirement relatively soon, decide to sell Jeter 40 percent of their respective partnership interests for a total payment of $480,000. This payment will be made proportionately to Martinez, O’Neill, and Clemens. The partners agree that implied goodwill is to be recorded prior to the transaction with Jeter. What are the capital balances of the four partners after the transaction with Jeter?

Balances After
AcquisitionMartinez$Answer

O'NeillAnswer

ClemensAnswer

JeterAnswer

Total$Answer

National Rodeo Association, a not-for-profit organization, is considering purchasing a new enterprise software system for $75,000. This investment is projected to have an seven-year useful life, and a salvage value of $10,000; the investment is projected to save the organization approximately $14,000 each year in operating costs. In addition to the cost of the software system, the association needs an increase of $6,000 in net working capital (other than cash) in the first year, which will not be released (that is, converted back to cash) until the end of seven years.

Required:

1. What is the payback period for this proposed investment? (Assume that the cash flows, other than salvage value, occur evenly throughout the year. Round your answer to 2 decimal places, e.g., 2.452 years = 2.45 years.)

2. If the Association has a required rate of return of 9 percent, what is the net present value (NPV) of the proposed investment? Round your calculation to whole dollars (i.e., zero decimal points).

Several years ago, Ann Dennis, Jill Edwards, Lee Lacy, and Sarah Ingram formed a partnership to operate the Deli Sisters Cafe. Rerouting of bus lines caused declines in patronage to the extent that the partners have agreed to dissolve the partnership and liquidate the assets. The November 2, 2020, balance sheet of the Deli Sisters Cafe and other data appear below. Partnership income and losses are shared in a 2:3:1:4 ratio.

Additonal information:

During November, sold half of the fixtures for $18,000. Sold equipment with a book value of $30,000 for $21,000.

During December, paid all outside creditors. A neighboring restaurant bought Deli Sisters Cafe's supplies at 80 percent of cost. Sold the remaining fixtures for $8,000.

During January, sold equipment with a book value of $40,000 for $25,000.

Required

Following the safe payment approach, specify how cash is to be distributed at the end of November, December, and January.

Thirty years ago, five mechanics formed a partnership and established an automobile repair shop. Two of the partners, Decker and Groth, are now retiring. The other three partners, Farmer, Wang, and Lux, are continuing the partnership. The original agreement called for an equal division of income. The remaining partners plan to continue this arrangement. The following balance sheet is prepared for the partnership as of the retirement date:

All partners agreed that Decker should receive $287,500 for his interest in the business and Groth should receive $187,500. Farmer proposed the bonus method for recording the retirements. Wang objects to this method and suggests the partial goodwill approach.

(a) Prepare the journal entry to record the retirements under the bonus method.

(b) Prepare the journal entry to record the retirements under the partial goodwill approach.

c) Why does Wang object to the bonus method of accounting?

Under the bonus method, Wang's capital balance is reduced to zero.

Under the bonus method, Wang must pay cash to the other remaining partners.

Under the bonus method, Wang pays more cash to the retired partners.

Under the bonus method, no goodwill is attributed to Wang.

(d) Regardless of the accounting method employed, what immediate problem for the business can you identify at the time of retirement?

The firm's total debts exceed the assets available to pay those debts.

The firm is insolvent.

The firm is not profitable.

The firm does not have sufficient cash to pay the retirees.

A1 Systems Inc. is a U.S.-based company that prepares its consolidated financial statements in accordance with U.S. GAAP. The company reported income of $8,000,000 in 2014 and stockholders’ equity of $30,000,000 as of December 31, 2014.

The CFO of A1 Systems has learned that the U.S. Securities and Exchange Commission (SEC) is considering requiring U.S. public firms to use IFRS in preparing consolidated financial statements. The company wishes to determine the impact that a switch to IFRS would have on its financial statements and has engaged your team to prepare a reconciliation of income and stockholders’ equity from U.S. GAAP to IFRS. Your team has identified the following five major areas in which accounting principles based on U.S. GAAP differ from those of IFRS.

Inventory

At year-end 2014, inventory had a historical cost of $5,000,000, a replacement cost of 4,750,000, a net realizable value of $4,800,000, and a normal profit margin of $900,000.

Property, plant, and equipment

The company acquired a building on 1/1/2012 at a cost of $10,000,000. The building has an estimated useful life of 30 years, an estimated residual value of $1,000,000, and is being depreciated on a straight-line basis. On 1/1/2013, the building was appraised and determined to have a fair value of $11,150,000. There is no change in estimated useful life or residual value. In a switch to IFRS, the company would use the revaluation model to determine the carrying value of PP&E subsequent to acquisition.

Impairment of Assets

The company purchased a piece of equipment on 1/1/2014 at a cost of $1,000,000. The equipment is expected to have a useful life of 10 years and no residual value. The straight-line method of depreciation is used. Technological innovations took place in the industry during 2014. At year-end 2014, the equipment is determined to have a selling price of $800,000 with zero-cost to sell. Expected future cash flows from continued use of the equipment are $950,000, and the present value of the expected future cash flows is $825,000.

1.) What is the total property tax bill for your house in Ohio with a market value of $125,000? Note the following and show your calculations in the space below:

 You are eligible for the $25,000 homestead exemption

 The city in which you live has a millage rate of 70.

 Don’t forget residential taxable value is 35% of assessed value in Ohio!

Assuming the exact same scenario as above;

2.) Research online to identify a proposed levy (present or past) that would impact property taxes. The levy can be in any state over the last 5 years BUT still assume the scenario in Q1 for the sake of simplicity/practice. Identify:

A. The source:

B. A summary of the issue (location, proponents, why pursuing), 100-250 words:

C. The proposed levy’s impact on property taxes:

D. How the levy would impact YOUR property taxes for the property in Q1:

During Heaton Company’s first two years of operations, it reported absorption costing net operating income as follows:

* $3 per unit variable; $249,000 fixed each year.

The company’s $30 unit product cost is computed as follows:

Forty percent of fixed manufacturing overhead consists of wages and salaries; the remainder consists of depreciation charges on production equipment and buildings.

Production and cost data for the first two years of operations are:

Required:

1. Using variable costing, what is the unit product cost for both years?

2. What is the variable costing net operating income in Year 1 and in Year 2?

3. Reconcile the absorption costing and the variable costing net operating income figures for each year.

A mail-order house uses 18,000 boxes a year. Carrying costs are 60 cents per box a year, and ordering cost are $96. the folling price schedule applies.

A. What is the maximum level of inventory the company would have to plan for?

B. what is the average level of inventory the company would have to plan for?

C. Calculate the days of inventory metric for this company (assume a 365 day work year).

Balt Company maintains a standard cost system; as such, all inventories, including materials, are carried on the books at standard cost. Last period, Balt used 6,000 pounds of Material H to produce 850 units of Product C8. The company has established a standard of 7 pounds of Material H per unit of C8, at a price of $7.25 per pound of material. During the period, Balt purchased 4,000 pounds of Material H. The company spent $27,000 during the period to purchase material H.

Required:

1. Calculate the direct materials purchase-price variance for the period, rounded to the nearest dollar. (U or F)
2. Calculate the direct materials usage variance for the period, rounded to the nearest whole dollar. (U or F)

The Pritzker Music Pavilion in downtown Chicago is a technologically sophisticated and uniquely designed performing arts venue that hosts live concerts attended by over half a million patrons a year. A group of local organizers, led by a prominent local businesswoman, would like to use the pavilion for a concert to benefit Ceres, a non-profit, national network of investors and environmental organizations working with companies and investors to address sustainability challenges such as global climate change. If the pavilion management agrees to host the concert, the organizers will donate all profits to Ceres (or absorb any losses).

Based on the following revenue and cost information, the organizers would like answers to several questions.

There are three sources of revenue for the concert:

Tickets will be sold for $16.00 each.

A large multinational corporation headquartered in Chicago will donate $2.00 per ticket sold.

Each concert attendee is expected to spend an average of $16.00 for parking, food, and merchandise.

On the expense side, there are also three components:

A popular national group has agreed to perform at the concert. Normally, the group demands a significant fixed fee to perform, but to reduce the risk for the organizers, the group has agreed to perform for $6.50 per ticket sold.

The organizers will pay several companies to operate the parking, food, and merchandise concessions. They will pay $24,000 plus 14% of all parking, food, and merchandise revenue.

The organizers will pay the pavilion $85,000 plus $6.00 per person attending to cover its operating expenses (production, maintenance, advertising, etc.).

REQUIRED [ROUND YOUR CM ANSWER TO THE NEAREST CENT; ROUND ALL OTHER ANSWERS TO THE NEAREST UNIT OR NEAREST DOLLAR.]

Part A
1. What is the estimated contribution margin per ticket sold for the benefit concert?    

2. What are the estimated total fixed costs for the benefit concert?    

Part B
3. What is the estimated profit from the benefit concert if 11,500 tickets are sold?    

4. How many tickets must be sold in order for concert profit to be $90,000?    

5. Assuming a tax rate of 31% on profits from the concert, what must dollar ticket sales be in order for after-tax concert profits to be $90,000?    

Part C
6. Assume that the organizers can negotiate the fixed portion of the pavilion's operating expenses. If the organizers expect to sell 11,500 tickets, how much operating fixed costs can they afford to pay and still earn a profit of $90,000 (ignore taxes)?

Promotion Industries manufacturers license plates for automobiles. The license plates sell for $10.50 each. During 2008, Miller sold 750,000 plates incurring total variable costs of $1,462,500 and fixed costs of $3,268,720.

          (a) Determine the contribution margin per unit.

          (b) Determine the breakeven point in units for 2008.

          (c) Determine the amount of profit earned in 2008.

          (d) Determine the breakeven point in units for 2009, assuming variable costs increase by 20% and fixed costs remain unchanged

12/31/17 Balance Sheet

Cash $17,000

                                    Accounts Receivable                           $12,000

                                    Prepaid Insurance                                $5,000

                                    Inventory                                             $15,000

Total $49,000

                                    Equipment                                           $100,000

                                    Accumulated Depreciation                  $(20,000)

Total $80,000

                                    Total Assets                                        $129,000

                                    Accounts Payable                                $9,000

                                    Income Taxes Payable $3,000

                                    Total Liabilities                                    $12,000

                                    Common Stock                                   $100,000

                                    Retained Earnings                               $17,000

                                    Total Equity                                         $117,000

                                    Total Liabilities & Equity                    $129,000

Additional Information:

Sales for 2018 are expected to be $200,000.

Accounts Receivable turnover is expected to be 12 times - 30 days of sales in accounts receivable out of a 360 day year (1/12 of annual sales). This would be used to get ending accounts receivable on the 2018 balance sheet – day’s sales in accounts receivable is ending accounts receivable divided by average sales (sales for 2018 divided by 360 days). We can “back into” ending accounts receivables once we have estimated sales. Note that the turnover ratio changes so the turnover ratio at the end of 2017 may have been different than that expected at the end of 2018.

Gross Margin ratio is expected to be 40 percent.

Inventory Turnover is expected to be 12 times - 30 days of cost of sales in ending inventory out of a 360 day year (based upon cost of goods sold and ending 2018 inventory). This would be used to get inventory on the 2018 balance sheet. See accounts receivable above for similar computations.

The cost of ending inventory is expected to be paid next month – ending accounts payable will be same as ending inventory.   Or, to state in another way, accounts payable turnover is same as the inventory turnover. The assumption is that only inventory purchases flow through accounts payable – the assumption actually used by most manufacturing/merchandising companies when prepared the statement of cash flows.

Equipment was purchased on 1/1/18 for $20,000. Equipment has a five year life, no salvage value, and is depreciated using the straight-line method. The old equipment is being depreciated on the same basis.

Salaries are expected to be $2,000 per month. It is expected that one-half month will be owed on 12/31/18 because of when payday falls.

$30,000 in cash was borrowed on 12/31/18 by issuing a Note Payable.

Insurance costing $18,000 was purchased on 6/1/18 (the same time in which the policy purchased in 2017 expired - the new policy was for 12 months).

The tax rate is 30 percent. Income taxes for the current year are payable during the first two months of the next year.

Dividends of $2,000 were paid during 2018.

I've started the income statement, just want to make sure I'm on the right track to keep on going.

I need an income statement, statement of retained earnings, balance sheet(12/31/17 & 12/31/18) and statement of cash flow (direct method)

Give and simply explain examples of corporate income and allowable deductions..based on latest "Train" Law