The following data are taken from the records of Alee Company.    December 31, 2020    December 31, 2019 Cash $ 15,000 $  8,000 Current assets other than cash   85,000   60,000 Long-term debt investments   10,000   53,000 Plant assets  335,000  215,000 $445,000 $336,000 Accumulated depreciation $ 20,000 $ 40,000 Current liabilities   40,000   22,000 Bonds payable   75,000 –0– Common stock  254,000  254,000 Retained earnings   56,000   20,000 $445,000 $336,000 Additional information: Held-to-maturity debt securities carried at a cost of $43,000 on December 31, 2019, were sold in 2020 for $34,000. The loss (not unusual) was incorrectly charged directly to Retained Earnings. Plant assets that cost $50,000 and were 80% depreciated were sold during 2020 for $8,000. The loss was incorrectly charged directly to Retained Earnings. Net income as reported on the income statement for the year was $57,000. Dividends paid amounted to $10,000. Depreciation charged for the year was $20,000. Instructions Prepare a statement of cash flows for the year 2020 using the indirect method.

John Deere is operated as a C corporation. The company received an order for a $12,000 tractor from a customer on June 30, 2020 and delivered the tractor to the customer on July 31, 2020. The company sent the customer a bill saying they had to pay for the tractor by no later than January 31, 2021. John Deere uses a calendar year tax period. Based on phone calls with the customer in December of 2020, the customer explained that it may have to file bankruptcy proceedings but was trying to work its way out of financial hardship before taking that option. The customer said that at worst it would be able to pay at least $9,000 of the bill. On January 15, 2021, John Deere received a check from the customer for $9,000 and was informed it would receive no additional payment based on the outcome of the bankruptcy case. In addition to the transaction above, the following occurred:

• A different customer paid for the same type of tractor (at $12,000) on November 1, 2020 and scheduled delivery for January 15, 2021. John Deere included the income in its 2020 financial accounting statements.
• The company both incurred and paid expenses for the following in 2020:
  • Wages:                                                                               $3,000
  • Rental costs for a warehouse:                                            $4,000
  • Repairs:                                                                              $2,000
• The company both incurred and paid expenses for the following in 2021:
  • Wages:                                                                               $4,000
  • Rental costs for a warehouse:                                            $4,000
  • Repairs:                                                                              $3,000

1. Assuming the local John Deere’s operates on a calendar year-end under the accrual method and prefers to defer income whenever possible, what amount of net profit (loss) for tax purposes in 2020?
   
2. Assuming the local John Deere’s operates on a calendar year-end under the accrual method and prefers to defer income whenever possible, what amount of net profit (loss) for tax purposes in 2021?
   
3. Assuming the local John Deere’s operates on a calendar year-end under the cash method and prefers to defer income whenever possible, what amount of net profit (loss) for tax purposes in 2020?
   

d. Assuming the local John Deere’s operates on a calendar year-end under the cash method and prefers to defer income whenever possible, what amount of net profit (loss) for tax purposes in 2021?

(Cash Flow Reporting)

Brockman Guitar Company is in the business of manufacturing top-quality, steel-string folk guitars. In recent years, the company has experienced working capital problems resulting from the procurement of factory equipment, the unanticipated buildup of receivables and inventories, and the payoff of a balloon mortgage on a new manufacturing facility. The founder and president of the company, Barbara Brockman, has attempted to raise cash from various financial institutions, but to no avail because of the company's poor performance in recent years. In particular, the company's lead bank, First Financial, is especially concerned about Brockman's inability to maintain a positive cash position. The commercial loan officer from First Financial told Barbara, “I can't even consider your request for capital financing unless I see that your company is able to generate positive cash flows from operations.”

Thinking about the banker's comment, Barbara came up with what she believes is a good plan: With a more attractive statement of cash flows, the bank might be willing to provide long-term financing. To “window dress” cash flows, the company can sell its accounts receivables to factors and liquidate its raw materials inventories. These rather costly transactions would generate lots of cash. As the chief accountant for Brockman Guitar, it is your job to tell Barbara what you think of her plan.

Instructions

Answer the following questions.

Cash Flow Reporting)

Brockman Guitar Company is in the business of manufacturing top-quality, steel-string folk guitars. In recent years, the company has experienced working capital problems resulting from the procurement of factory equipment, the unanticipated buildup of receivables and inventories, and the payoff of a balloon mortgage on a new manufacturing facility. The founder and president of the company, Barbara Brockman, has attempted to raise cash from various financial institutions, but to no avail because of the company's poor performance in recent years. In particular, the company's lead bank, First Financial, is especially concerned about Brockman's inability to maintain a positive cash position. The commercial loan officer from First Financial told Barbara, “I can't even consider your request for capital financing unless I see that your company is able to generate positive cash flows from operations.”

Thinking about the banker's comment, Barbara came up with what she believes is a good plan: With a more attractive statement of cash flows, the bank might be willing to provide long-term financing. To “window dress” cash flows, the company can sell its accounts receivables to factors and liquidate its raw materials inventories. These rather costly transactions would generate lots of cash. As the chief accountant for Brockman Guitar, it is your job to tell Barbara what you think of her plan.

Instructions

Answer the following questions.

(a)  

What are the ethical issues related to Barbara Brockman's idea?

(b)  

What would you tell Barbara Brockman?

Exercise 23-12

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

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.

Exercise 23-12

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

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.

(Accounts receivable and uncollectible accounts—aging of receivables method)

On December 31, 2019, Ajacks Company reported the following information in its financial statements:

During 2020, the company had the following transactions related to receivables:

a. Sales were $10,560,000, of which $8,448,000 were on account.

b. Collections of accounts receivable were $7,284,000.

c. Writeoffs of accounts receivable were $78,000.

d. Recoveries of accounts previously written off as uncollectible were $8,100. (Note that this amount is not included in the collections referred to in item b above.)

Required

1. Prepare the journal entries to record each of the four items above.
2. Set up T accounts for the Accounts Receivable and the Allowance for Doubtful Accounts and enter their January 1, 2020, balances. Post the entries from part “a” and calculate the new balances in these accounts.
3. Prepare the journal entry to record the bad debts expense for 2020. Ajacks Company uses the aging of accounts receivable method and has prepared an aging schedule, which indicates that the estimated value of the uncollectible accounts as at the end of 2020 is $93,000.
4. Show what would be presented on the statement of financial position as at December 31, 2020, related to accounts receivable.

The Bureau of Labor and Statistics (BLS) calculates the unemployment rate for the United States. For June of 2020, they published numbers that were close to the following:

Civilian noninstitutional Population = 260 million
Labor Force = 160 million
Employed = 142 million
Unemployed = 18 million
Retired = 60 million

A- Calculate the unemployment rate and the participation rate for June of 2020 in the US using two decimal places (3 points each).

B- The United States have gone into a recession starting in February of 2020. Before then, we were enjoying "full-employment". Thus, we can infer that the Coronavirus increased which type of unemployment? Explain your answer in 2 lines (4 points).

C- How many adults were NOT in the labor force? Who are these people?

wo equal partners pitch Kevin O'Leary a $100,000 investment for 10%. Kevin counters with an offer of $250,000 for 30%. Jim Treliving jumps in and offers $200,000 for 15% Which deal is likely to happen? Why? How much will each co-founder own if a deal gets done. (Show all calculations and pizza pie diagrams you use) A year after that deal, they accept an additional offer of $2,000,000 for 50%. What % does each founder own after this deal. How much is that equity now worth? (Show all calculations and pizza pie diagrams you use)