ABC Energy Corp. (the “Company”), an SEC registrant, operates three manufacturing facilities in the United States. The Company manufactures various household cleaning products at each facility, which are sold to retail customers. The U.S. government granted the Company emission allowances (EAs) of varying useable years (i.e., the years in which the allowance may be used) to be used between 2015 and 2030. Upon receipt of the EAs, the Company recorded the EAs as intangible assets with a cost basis of zero, in accordance with the Federal Energy Regulatory Commission (FERC) accounting guidance for EAs. The Company has a fiscal year end of December 31.
As background, in an effort to control or reduce the emission of pollutants and greenhouse gases, governing bodies typically issue rights or EAs to entities to emit a specified level of pollutants. Each individual EA has a useable year designation. EAs with the same useable year designation are fungible and can be used by any party to satisfy pollution control obligations. Entities can choose to buy EAs from, and sell EAs to, other entities. Such transactions are typically initiated through a broker. At the end of a compliance period, participating entities are required to either (1) deliver to the governing bodies EAs sufficient to offset the entity's actual emissions or (2) pay a fine. The Company currently emits a significant amount of greenhouse gases because of its antiquated manufacturing facilities. The Company plans to upgrade its facilities in 2024, which will decrease greenhouse gas emissions to a very low level. On the basis of the timing of the upgrade, the Company currently anticipates a need for additional EAs in fiscal years 2020–2024.
However, upon completion of the upgrade, the Company believes it will have excess EAs in fiscal years subsequent to 2024 because of reduced emissions as a result of the upgrade. The Company currently has forecasted the updates to its facilities will cost approximately $15 million. As the Company operates in a capital intensive industry, analysts and investors focus on a number of important ratios and measures, including working capital, capital expenditures, cash flows from operations, and free cash flow. As a result, the board of directors and management provide forward-looking guidance on these ratios and measures and expend great effort managing these results in light of the Company’s operational needs. The Company entered into the following two separate transactions in fiscal year 2020, which will impact the Company’s results as presented in the statement of cash flows, which the Company prepares under the indirect method.
1. To meet its need for additional EAs in fiscal years 2020–2024, on April 2, 2020, the Company spent $6.5 million to purchase EAs with a useable year of 2023 from XYZ Manufacturing Corp.
2. In an effort to offset the costs of the April 2, 2019, purchase of 2023 EAs, the Company sold EAs with a useable year of 2026 to DEF Chemical Corp. for $5 million.
Required:
1. What is the appropriate classification in the statement of cash flows in the Company’s December 31, 2020, financial statements for its purchase of 2023 EAs from XYZ Manufacturing Corp.?
2. What is the appropriate classification in the statement of cash flows in the Company’s December 31, 2020, financial statements for its sale of 2026 EAs to DEF Chemical Corp.?
3. Should these cash flows be reported at gross amounts or net amounts in the 2020 statement of cash flows?
Be sure to cite appropriate authoritative support for your answer from the Accounting Standards Codification.
In: Accounting
A company with fixed manufacturing costs of $500,000 produces 100,000 units in 2020 and 125,000 units in 2021. The company sells 90,000 units each in both years. Other costs and selling price are unchanged for 2020 and 2021. Assume that there was no beginning inventory in 2020. Which of the following is true? Variable costing income will be greater in 2020 than in 2021. The dollar amount of ending inventory will be greater in 2020 than in 2021. Variable costing income will be the same in 2021 and 2020.
In: Accounting
Assume that on September 1 Office Depot had an inventory that
included a variety of calculators. The company uses a perpetual
inventory system. During September these transactions
occurred.
Sept. 6 Purchased calculators from Green Box Co. at a total cost of
$1,620, terms n/30.
9 Paid freight of $50 on calculators purchased from Green Box
Co.
10 Returned calculators to Green Box Co. for $38 credit because
they did not meet specifications.
12 Sold calculators costing $520 for $780 to University Book Store,
terms n/30.
14 Granted credit of $45 to University Book Store for the return of
one calculator that was not ordered. The calculator cost $28.
20 Sold calculators costing $570 for $900 to Campus Card Shop,
terms n/30.
Journalize the Septemper transactions? be clear and write every number from where it comes
In: Accounting
Current practice requires that the assets acquired in a business combination be measured at fair value as defined by SFAS No. 157 (see FASB ASC 820-10).
Side 1: Argue that the acquiring company should measure the acquired company's plant assets that it plans to use in int operations in accordance with the requirements of SFAS No. 141 before its revisions.
Side 2: Argue that the acquiring company should measure the acquired company's plant assets that it plans to use in its operations in accordance with the SFAS No. 141 revision. Choose one side and present an argument.
In: Accounting
Ashley Company began operations in 2020. Ashley’s pretax financial income for 2020 was $450,000. The tax law in 2020 says that the tax rate in 2020 is 25%, but it will be 20% in 2021 and in future years. Ashley’s pretax financial income for 2020 contained the following items that are treated differently for financial purposes than they are for tax purposes: Differences Amount included in Pretax Financial Income Amount included in Taxable Income Difference1 1. Interest earned on State of Ohio Bonds. (Note: Interest on these bonds is exempt from Federal Income Tax.) $ 9,000 $ 0 $ 9,000 2. Gross profit on installment sales. 300,000 200,000 100,000 3. Warranty expense. 19,600 13,600 6,000 4. Depreciation on machinery. 20,000 200,000 180,000
1 Note: Each difference shown above is shown as an absolute value. Therefore, that number contains no information about whether that difference should be added or subtracted in preparing the reconciliation of pretax financial income to taxable income. You are responsible for deciding how each difference should be treated.
Instructions:
A. Prepare a reconciliation of pretax financial income to taxable income for Ashley Company for 2020.
B. Compute Ashley’s Income Tax Payable as of the end of 2020.
C Compute the year-end balances in any deferred income tax asset and/or deferred income tax liability accounts that exist as of the end of 2020.
D. Compute Ashley’s Income Tax Expense for 2020.
In: Accounting
MBA - Managerial Economics
Discuss briefly the supply schedule and the various factors affecting the supply in the market.
Thanks
In: Economics
What are the most important preparations needed by yourself before attending a job interview and how could you enhance the chance of you being selected as the ideal candidate during the said interview
In: Operations Management
On January 1st 2020 The Deloit and Acme Companies had the following balance sheets:
| Deloit | Acme | ||
| cash | 2,000,000 | 50,000 | |
| accounts receivable | 1,000,000 | 80,000 | |
| inventory | 1,000,000 | 50,000 | |
| equipment | 1,000,000 | 100,000 | |
| accumulated depreciation | 500,000 | 50000 | |
| land | 1,000,000 | 100,000 | |
| total assets | 5,500,000 | 330,000 | |
| accounts payable | 1,000,000 | 40,000 | |
| common stock $1 par | 2,000,000 | 100,000 | |
| common stock | 1,000,000 | 100,000 | |
| retained earnings | 1,500,000 | 90,000 |
On January 2nd Deloit acquired of 90% the outstanding stock of Acme Company for 500,000 shares of common stock. On January 2nd Deloit stock was selling for $2 per share.
On January 1st the fair market value of Acme's land was $125,000; the fair market value of their inventory was $130,000; the fair market value of the equipment was $30,000; other assets and liabilities had a fair market value equal to book value.
A) Make the journal entry Deloit makes when it acquires the Acme stock
B) Make the journal entry Acme makes when its stock is acquired by Deloit
C) Prepare a consolidated balance sheet on Jan 2nd
D) Make the necessary worksheet entries needed to prepare the consolidated balance sheet
In: Accounting
On January 1st 2020 The Skywalker and Vadar Companies had the following balance sheets:
| Skywalker | Vadar | |||
| cash | 2,000,000 | 50,000 | ||
| accounts receivable | 1,000,000 | 80,000 | ||
| inventory |
|
50,000 | ||
| equipment | 1,000,000 | 100,000 | ||
| accumulated depreciation | 500,000 | 50,000 | ||
| land | 1,000,000 | 100,000 | ||
| total assets | 5,500,000 | 330,000 | ||
| accounts payable | 1,000,000 | 40,000 | ||
| jcommon stock $1 par | 2,000,000 | 100,000 | ||
| apic common stock | 1,000,000 | 100,000 | ||
| retained earnings | 1,500,000 | 90,000 |
On January 2nd Skywalker acquired all of the outstanding stock of Vadar Company for 500,000 shares of common stock. On January 2nd Skywalker stock was selling for $2 per share.
On January 1st the fair market value of Vadar's land was $125,000; the fair market value of their inventory was $130,000; the fair market value of the equipment was $30,000; other assets and liabilities had a fair market value equal to book value
REQUIRED:
In: Accounting
Bottlenecks and the founder effect are two different types of genetic drift. How do they differ? Provide an example of each
In: Biology