1. On 5 September 2018, Norris Corporation purchased a computer equipment for $100,000, paid $20,000 cash and signed a 6% two-year notes payable for the remaining balance. The equipment was expected to be used for 4 years with a residual value of $10,000. Straight-line depreciation method is used. Depreciation for fractional years is recorded to the nearest full month. The financial year-end date is 31 December.

On 25 February 2020, the company spent $25,000 to completely overhaul the equipment. The management believes the estimated useful life of the equipment will be extended for 3 years more with residual value of $6,000, with effect on 25 February 2020.

Required:

Calculate the depreciation expense of the computer equipment for the year of 2020. Show your workings. (Round ALL answers to 2 decimal places.)

2. Marvel Company purchased motor vehicle costing $1,200,000 on 15 September 2017. The motor vehicle has an estimated useful life of 5 years and residual value of $200,000. Straight-line depreciation method is used. Half-year convention is adopted. On 5 March 2020, the company sold the motor vehicle for $400,000 cash. The company adjusts its accounts annually with the year-end at 31 December.

Required:

1. (a) Prepare the journal entries to update the depreciation before disposal in 2020;

2. (b) Prepare the journal entries on 5 March 2020 regarding to the disposal.

The unadjusted inventory balance of Ultim Corp. is $100,000 on December 31, 2020, based on a physical inventory count. The following items must be considered before the inventory valuation is finalized.

a. On December 31, the physical inventory excluded $250 of merchandise inventory set aside for shipment to a customer, which has not yet shipped.

b. On December 31, the physical inventory excluded $1,000 of merchandise inventory out on consignment in the customers’ showrooms.

c. On December 31, the physical inventory excluded $800 of merchandise held on consignment.

d. $750 of in-transit merchandise was shipped f.o.b. destination to a customer and was excluded from the physical inventory count. The merchandise was turned over to a common carrier on December 28, 2020, and is expected to arrive at the customer on January 2, 2021.

e. Ultim Corp. ordered merchandise on December 26, 2020. The merchandise ($800) was shipped to Ultim Corp. f.o.b. shipping point, and was expected to arrive January 2, 2021. The merchandise was not included in the physical inventory count.

f. A return to a vendor of merchandise for $1,000 was in-transit on December 31, 2020, and was excluded from the physical inventory count. The merchandise was shipped f.o.b. shipping point on December 30, 2020.

Required

Considering items a through f, determine the adjusted inventory balance for Ultim Corp.

Free Cash Flows

Rhodes Corporation’s financial statements are shown below.

Rhodes Corporation: Income Statements for Year Ending December 31
(Millions of Dollars)

Rhodes Corporation: Balance Sheets as of December 31 (Millions of Dollars)

Suppose the federal-plus-state tax corporate tax is 25%. Answer the following questions.

1. What is the net operating profit after taxes (NOPAT) for 2020? Enter your answer in millions. For example, an answer of $1 million should be entered as 1, not 1,000,000. Round your answer to the nearest whole number.

   $ 765 million

2. What are the amounts of net operating working capital for both years? Enter your answers in millions. For example, an answer of $1 million should be entered as 1, not 1,000,000. Round your answers to the nearest whole number.

   2020: $ 3500 million

   2019: $ 3200 million

3. What are the amounts of total net operating capital for both years? Enter your answers in millions. For example, an answer of $1 million should be entered as 1, not 1,000,000. Round your answers to the nearest whole number.

   2020: $ 7250 million

   2019: $ 6700 million

4. What is the free cash flow for 2020? Enter your answer in millions. For example, an answer of $1 million should be entered as 1, not 1,000,000. Cash outflow, if any, should be indicated by a minus sign. Round your answer to the nearest whole number.

   $ ??? million

5. What is the ROIC for 2020? Round your answer to two decimal places.

   ??? %

Question 1

At 30 June 2019, Beta Ltd had the following deferred tax balances: Deferred tax liability $18,000 Deferred tax asset 15,000 Beta Ltd recorded a profit before tax of $80,000 for the year to 30 June 2020, which included the following items: Depreciation expense – plant $7,000 Doubtful debts expense 3,000 Long-service leave expense 4,000 For taxation purposes the following amounts are allowable deductions for the year to 30 June 2020: Tax depreciation – plant $8,000 Bad debts written off 2,000 Depreciation ratesfor taxation purposes are higher than for accounting purposes. A corporate tax rate of 30% applies.

Required:

a) Determine the taxable income and income tax payable for the year to 30 June 2020. (2.5 Marks)

b) Determine by what amount the balances of the deferred liability and deferred tax asset will increase or decrease for the year to 30 June 2020 because of depreciation, doubtful debts and long-service leave.

c) Prepare the necessary journal entries to account for income tax assuming recognition criteria are satisfied. (2.5 marks)

d) What are the balances of the deferred tax liability and deferred tax asset at 30 June 2020?

Condensed financial data of Concord Company for 2020 and 2019 are presented below.

ONCORD COMPANY
INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 2020

Sales revenue

$6,860

Cost of goods sold

4,710

Gross margin

2,150

Selling and administrative expenses

920

Income from operations

1,230

Other revenues and gains

   Gain on sale of investments

80

Income before tax

1,310

Income tax expense

530

Net income

780

Cash dividends

260

Income retained in business

$520

Additional information:

During the year, $70 of common stock was issued in exchange for plant assets. No plant assets were sold in 2020.

Prepare a statement of cash flows using the direct method.

Flint Inc. reports accounting income of $106,200 for 2020, its first year of operations. The following items cause taxable income to be different than income reported on the financial statements.

Assume that the company follows the taxes payable method of accounting for income taxes under ASPE. During the year, Flint Inc. made tax instalment payments of $46,910.

QUESTIONS:

A) Calculate the taxable income and income tax expense for the year ended December 31, 2020.

B) Prepare the journal entry to record income taxes at December 31, 2020.

C) Prepare the income statement for 2020, beginning with the line “Income before income tax.”

D) Provide the balance sheet presentation for any resulting income tax accounts at December 31, 2020.

QUESTION 2 The government of Ghana through the Minister of Finance presented the 2020 Budget statement to Parliament in November 2019.The Coronavirus Disease 2019 (COVID -19) pandemic that has hit the world has impacted on global economy including Ghana, thus affecting our macroeconomic targets in the budget statement presented in November 2019. The Minister of Finance presented a statement to Parliament on the economic impact of COVID – 19 pandemic on the economy of Ghana and the way forward at the end of March, 2020. Discuss five (5) key impact of the COVID-19 on the achievement of our fiscal policy targets for the year 2020 by comparing the original budget statement to the one presented after COVID- 19.

.The government of Kenya through the Minister of Finance presented the 2020 Budget statement to Parliament in November 2019.The Coronavirus Disease 2019 (COVID -19) pandemic that has hit the world has impacted on global economy including Kenya, thus affecting our macroeconomic targets in the budget statement presented in November 2019. The Minister of Finance presented a statement to Parliament on the economic impact of COVID – 19 pandemic on the economy of Kenya and the way forward at the end of March, 2020.

Discuss five (5) key impact of the COVID-19 on the achievement of our fiscal policy targets for the year 2020 by comparing the original budget statement to the one presented after COVID- 19.  

QUESTION 2
The government of Ghana through the Minister of Finance presented the 2020 Budget statement to Parliament in November 2019.The Coronavirus Disease 2019 (COVID -19) pandemic that has hit the world has impacted on global economy including Ghana, thus affecting our macroeconomic targets in the budget statement presented in November 2019. The Minister of Finance presented a statement to Parliament on the economic impact of COVID – 19 pandemic on the economy of Ghana and the way forward at the end of March, 2020.
Discuss five (5) key impact of the COVID-19 on the achievement of our fiscal policy targets for the year 2020 by comparing the original budget statement to the one presented after COVID- 19.