Pirate Company purchased 60 percent ownership of Ship Corporation on January 1, 20X1, for $82,800. On that date, the noncontrolling interest had a fair value of $55,200 and Ship reported common stock outstanding of $100,000 and retained earnings of $20,000. The full amount of the differential is assigned to land to be used as a future building site. Pirate uses the fully adjusted equity method in accounting for its ownership of Ship. On December 31, 20X2, the trial balances of the two companies are as follows:

Page 289Ship sold inventory costing $25,500 to Pirate for $42,500 in 20X1. Pirate resold 80 percent of the purchase in 20X1 and the remainder in 20X2. Ship sold inventory costing $21,000 to Pirate in 20X2 for $35,000, and Pirate resold 70 percent of it prior to December 31, 20X2. In addition, Pirate sold inventory costing $14,000 to Ship for $28,000 in 20X2, and Ship resold all but $13,000 of its purchase prior to December 31, 20X2.

Assume both companies use straight-line depreciation and that no property, plant, and equipment has been purchased since the acquisition.

Use the data provided after the trial balance in the paragraph in the book. Complete the tables for each inventory transaction and the consolidation entries for the x7 and the x8 inventory transactions.

Martinez Company has the following two temporary differences between its income tax expense and income taxes payable.

The income tax rate for all years is 40%.

- Assuming there were no temporary differences prior to 2017, prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2017, 2018, and 2019.

- Indicate how deferred taxes will be reported on the 2019 balance sheet. Martinez’s product warranty is for 12 months.

- Prepare the income tax expense section of the income statement for 2019, beginning with the line “Pretax financial income."

1. Inventory Turnover and Days' Sales in Inventory

   Financial statement data for years ending December 31 for Salsa Company follow:

   	20Y7				20Y6
   Cost of merchandise sold	$2,912,700				$3,009,790
   Inventories:
   Beginning of year	489,000				481,900
   End of year	533,000				489,000

   a. Determine the inventory turnover for 20Y7 and 20Y6. Round to one decimal place.

   	Inventory Turnover
   20Y7	fill in the blank 1
   20Y6	fill in the blank 2

   b. Determine the days' sales in inventory for 20Y7 and 20Y6. Assume 365 days a year. Round interim calculations and final answers to one decimal place.

   	Days' Sales in Inventory
   20Y7	fill in the blank 3 days
   20Y6	fill in the blank 4 days

   c. Does the change in the inventory turnover and the days' sales in inventory from 20Y6 to 20Y7 indicate a favorable or an unfavorable trend?
   

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Periodic Inventory by Three Methods

The units of an item available for sale during the year were as follows:

There are 1,220 units of the item in the physical inventory at December 31. The periodic inventory system is used.

a. Determine the inventory cost by the first-in, first-out method.
$fill in the blank 1

b. Determine the inventory cost by the last-in, first-out method.
$fill in the blank 2

c. Determine the inventory cost by the weighted average cost method. Do not round intermediate calculation and round final answer to the nearest whole dollar.
$fill in the blank 3

ou are a new tax accountant. A potential client would like to meet with you to discuss your tax preparation and planning services

A young couple, both employed full time, have a child, age 8, and are considering purchasing a home. They would like to wisely save for retirement and their child’s educations

Before your meeting, prepare a list of tax opportunities or tax issues to highlight with your potential clients. Choose 3 items from your list of tax opportunities or tax issues and expand on them, preparing a short write up on each item that you will share with the potential client.

Discussion Question #1 Refer to the article “Rising Interest Rates Trigger Losses on Banks Massive Bond Holdings” in Wall Street Journal (December 7, 2016) What is the difference between realized and unrealized gains and losses on security holdings? What are the three categories of investments identified in authoritative accounting literature? Cite the authoritative guidance you are referencing. What is the difference in accounting treatment of unrealized gains and losses across these three categories of investments? Cite the authoritative guidance you are referencing. Why do unrealized losses affect a bank's book value but “don't immediately diminish a banks profits”? In your answer, define the “special bucket...called 'accumulated other comprehensive income.'”

Marvel Parts, Inc., manufactures auto accessories. One of the company’s products is a set of seat covers that can be adjusted to fit nearly any small car. The company has a standard cost system in use for all of its products. According to the standards that have been set for the seat covers, the factory should work 1,060 hours each month to produce 2,120 sets of covers. The standard costs associated with this level of production are:

During August, the factory worked only 500 direct labor-hours and produced 2,200 sets of covers. The following actual costs were recorded during the month:

At standard, each set of covers should require 2.5 yards of material. All of the materials purchased during the month were used in production.

Required:

1. Compute the materials price and quantity variances for August.

2. Compute the labor rate and efficiency variances for August.

3. Compute the variable overhead rate and efficiency variances for August.

(Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.)

Seventy-Two Inc., a developer of radiology equipment, has stock outstanding as follows: 81,300 shares of cumulative preferred 3% stock, $15 par, and 400,100 shares of $27 par common. During its first four years of operations, the following amounts were distributed as dividends: first year, $55,800 ; second year, $76,700 ; third year, $79,500 ; fourth year, $101,900 .

Calculate the dividends per share on each class of stock for each of the four years. Round all answers to two decimal places. If no dividends are paid in a given year, enter "0".

Variable Costing Income Statement On July 31, the end of the first month of operations, Rhys Company prepared the following income statement, based on the absorption costing concept: Sales (24,000 units) $1,224,000 Cost of goods sold: Cost of goods manufactured $971,500 Less ending inventory (5,000 units) 167,500 Cost of goods sold 804,000 Gross profit $420,000 Selling and administrative expenses 136,000 Income from operations $284,000 a. Prepare a variable costing income statement, assuming that the fixed manufacturing costs were $87,000 and the variable selling and administrative expenses were $62,000. In your computations, round unit costs to two decimal places and round final answers to the nearest dollar. Rhys Company Income Statement-Variable Costing For the Month Ended July 31 $ Variable cost of goods sold: $ $ $ Fixed costs: $ Income from operations $ b. Reconcile the absorption costing income from operations of $284,000 with the variable costing income from operations determined in (a). Reconciliation of Absorption and Variable Costing Income Absorption costing income from operations $ Variable costing income from operations Difference $ Check My Work PreviousNext

Silver Lake Resort opened for business on July 1 with eight air-conditioned units. Its trial balance before adjustment on December 31 in as follows.

Other data for the adjustments (assuming no monthly adjustments before the fiscal year end):

Prepare adjusting journal entries for the following items.

1. Prepaid insurance of $6,000 was recorded on Sep 1, 2014 and the Insurance expires at the rate of $500 per month

2. A count of supplies on December 31 shows $1,000 on hand.

3. Depreciation for the period is $4,500 on buildings and $2,400 on equipment.

4. Unearned rent revenue of $4,000 out of previous balance $7,400 was now earned for services performed prior to December 31.

5. Salaries of $1,000 were unpaid at December 31.

6. Rentals of $3,000 were due from tenants at December 31 (use Accounts Receivables) [not yet received].

Prepare the adjusted trial balance, income statement, statement of retained earnings, and balance sheet. (you may use a separate sheet)

Big Co. purchases shares of Little Co starting on 1/1/21. Little Co. has 100,000 shares of stock outstanding.

Relevant data shown below:

1/1/21: Purchased 5,000 shares at $18/share, plus $10 commission.

11/1/21: Little Co. paid common dividends totaling $10,000 12/31/21: Little Co. stock trading at $20/share

4/1/22: Purchased 6,000 shares at $21/share, plus $10 commission

11/1/22: Little Co. paid dividends totaling $10,000

12/31/22: Little Co stock trading at $19/share 3/1/23: Sold 1,000 shares of Little Co stock at $19.50/share, less $10 commission. Assume Big uses FIFO to account for their investment in these shares. Required: Prepare entries to record the preceding transactions, and answer the following questions.

Questions:

1. What is the total cost recorded as the "investment" on 1/1/21?

2. How much of an unrealized gain or loss is reported on the 2021 statement of comprehensive income ("xx,xxx gain" or "xx,xx loss")?

3. How much is received as dividends on 11/1/22?

4. What is the balance in the "investment in Little" account at 12/31/22?

5. What is our TOTAL unrealized gain or loss at 12/31/22? ("xx,xxx gain" or "xx,xxx loss")

6. How much of an unrealized gain or loss is reported on the 2022 statement of comprehensive income ("xx,xxx gain" or "xx,xxx loss")?

7. What was the gain or loss on sale of the shares on 3/1/23 ("xx,xxx gain" or "xx,xxx loss")?

Zhang incorporated her sole proprietorship by transferring inventory, a building, and land to the corporation in return for 100 percent of the corporation’s stock. The property transferred to the corporation had the following fair market value and adjusted basis. FMV Adjusted Basis Inventory $ 20,000 $ 11,000 Building 250,000 100,000 Land 530,000 300,000 Total $ 800,000 $ 411,000 The corporation also assumed a mortgage of $500,000 attached to the building and land. The fair market value of the corporation’s stock received in the exchange was $300,000. The transaction met the requirements to be tax-deferred under §351. What amount of gain or loss does Zhang recognize on the transfer of the property to her corporation? THE ANSWER IS NOT 0.

Brooks Corp. is a medium sized corporation specializing in quarrying stone for building construction. The company has long dominated the market, at one time achieving a 70% market penetration. During prosperous years, the company’s profits, coupled with conservative dividend policy, resulted in funds available for outside investment. Over the years, Brooks had a policy of investing idle cash in equity securities. In particular Brooks has made periodic investments in the company’s principal supplier, Norton Industries. Brooks does not have significant influence over the operations of Norton Industries.

            Cheryl Thomas has recently joined Brooks as assistant controller, and her first assignment is to prepare the 2014 year-end adjusting entries for the accounts that are valued by “Fair Value” rule for financial reporting purposes. Thomas has gathered the following information about Brooks’ accounts.

            1)    Brooks has trading securities related to Delaney Motors and Patrick Electric. During the fiscal year, Brooks purchased 100,000 shares of Delaney Motors for $1,400,000; These shares currently have a fair value of $1,600,000. Brooks’ investment in Patrick has not been profitable and the company is looking for ways to disinvest; The Company acquired 50,000 shares of Patrick in April 2014 at $20 per share, a purchase that has a value of $720,000.

            2) Prior to 2014, Brooks invested $22,500,000 in Norton Industries and has not changed its holdings this year. The investment in Norton was valued at $21,500,000 on  December 31, 2013. Brooks’s 13% ownership in Norton has a current fair value of 22,2500,000.

Required:

(a)  Prepare the appropriate adjusting entries for Brooks as of December 31, 2014 under the fair value method. (6 points)

(b) Prepare the entries for the Norton Investment, assuming that Brooks owns 25% of Norton’s shares. Norton reported income of $500,000 in 2014 and paid cash dividends of $100,000. ( 6 Points)

Question 1

1. The city of Charleston had the following sales of water for the selected months of 2017:

   Month	Sales
   February	$60,000
   March	45,000
   April	60,000
   May	42,500
   June	100,000
   July	120,000

   All sales are on credit. Historically, 60 percent is collected in the month of sale, 30 percent during the first month following the sale, and 10 percent in the second month following the sale.

   Water purchases by month are as follows:

   Month
   February	$60,000
   March	40,000
   April	45,000
   May	59,750
   June	52,500
   July	90,000

   Water is purchased in the month of sale. All purchases are paid during the month following the purchase.

   Operating costs are $18,000 and everything is paid in cash except for depreciation, which totals $8,000 a month.

   The city plans on purchasing some new equipment in May for $25,000 in exchange for a note payable.

   The April 1 cash balance is expected to be $5,000.

   The city must maintain a minimum cash balance of $10,500, and money can be borrowed from a local bank in increments of $1,000. The city borrows money at the beginning on the first day of the month and repays loans and interest on the last day of the month. The bank charges the city an annual interest rate of 15%.

   Required:

   Prepare a cash budget for April, May, June and in for the quarter, and based on your answer complete the following table:

   Round to the nearest dollar and DO NOT enter decimals, or commas and if a zero needs to be entered, enter "0".

1. Change in Accounting Principle. In keeping with a modernization of corporate statutes in its home state, in 2019 UMC Corporation discontinued accounting for reacquired shares as treasury stock. Instead, shares repurchased will be viewed as having been retired. To implement this change, existing treasury shares were reclassified as retired stock. At December 31, 2018, UMC’s balance sheet reported the following shareholders’ equity:

(In $Millions)

Common Stock ($1 par)                                            $80

Paid-in-capital; excess of par                                 1,120

Retained earnings                                                   1,425

Treasury Stock, at cost (6 million shares)             (150)

            Total Shareholders’ Equity                        $2,475

1. Prepare the journal entry to be recorded to adjust the equity accounts as of the beginning of 2019 to affect the reclassification of the treasury shares as retired shares.
2. What other steps should UMC take related to this change in accounting principle.