On April 1, 2020, Republic Company sold equipment to its wholly owned subsidiary, Barre Corporation, for $40,000. At the time of the transfer, the asset had an original cost (to Republic) of $60,000 and accumulated depreciation of $25,000. The equipment has a five year estimated remaining life.

Barre reported net income of $250,000, $270,000 and $310,000 in 2020, 2021, and 2022, respectively. Republic received dividends from Barre of $90,000, $105,000 and $120,000 for 2020, 2021, and 2022, respectively.

What was the amount of the gain or loss on the sale of equipment reported by Republic on its pre-consolidation income statement in 2020?

a. $-0-

b. $ 5,000 gain

c. $20,000 loss

d. $35,000 gain

Major Communications Ltd., a publicly traded company that specializes in data capture, has been in operation for several years. On October 1, 2019, it had 10 million common shares authorized and 1,570,000 shares issued at an average value of $27 per share. As well, there were 1 million preferred shares authorized, with 220,000 of them issued at $14 per share. During the fiscal year ended September 30, 2020, the company generated net income after taxes of $25,380,000 and other comprehensive loss of $4,550,000. On October 1, 2019, the balance in Retained Earnings was $19,760,000 and the balance in Accumulated Other Comprehensive Income was $940,000. The preferred shares pay an annual dividend of $1.30. During the fiscal year 2020, the following transactions affected shareholders’ equity:

1. On November 1, 2019, 390,000 new common shares were issued at $29 per share.

2. On March 15, 2020, a 5% common stock dividend on the outstanding shares was declared and distributed when the market price was $42 per share.

3. On September 1, 2020, a dividend of $5.35 per common share was declared. The date of record was September 15, 2020, with the date of payment being October 5, 2020.

4. The preferred dividend for the year was declared and paid.

Prepare the statement of changes in shareholders’ equity as at September 30, 2020. (If an amount reduces the account balance then enter with negative sign, e.g. -15,000 or in parenthesis, e.g. (15,000).)

Prepare the shareholders’ equity section of the statement of financial position as at September 30, 2020. (Enter negative answers using either a negative sign preceding the number e.g. -5,125 or parentheses e.g. (5,125).)

Exercise 22-23

Sandhill Corp. was a 30% owner of Teal Company, holding 216,000 shares of Teal’s common stock on December 31, 2019. The investment account had the following entries.

On January 2, 2020, Sandhill sold 108,000 shares of Teal for $3,360,000, thereby losing its significant influence. During the year 2020, Teal experienced the following results of operations and paid the following dividends to Sandhill.

At December 31, 2020, the fair value of Teal shares held by Sandhill is $1,820,000. This is the first reporting date since the January 2 sale.

(b) Compute the carrying amount of the investment in Teal as of December 31, 2020 (prior to any fair value adjustment).

(c) Prepare the adjusting entry on December 31, 2020, applying the fair value method to Sandhill’s long-term investment in Teal Company securities. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Show comparative net income for 2019 and 2020. Income before depreciation expense was $310,000 in 2020, and was $340,000 in 2019. (Ignore taxes.)

In a meeting, the CEO tried to convince every senior executive to do their very best to “maximize the company’s overall profit”. As a CFO, comment on what the CEO said above and illustrate your point with an example.

Chapter 11, #4

Depreciation methods and useful lives:
Buildings—150% declining balance; 25 years.
Equipment—Straight line; 10 years.
Automobiles and trucks—200% declining balance; 5 years, all acquired after 2017.
Leasehold improvements—Straight line.
Land improvements—Straight line.

Depreciation is computed to the nearest month and residual values are immaterial. Transactions during 2021 and other information:

1. On January 6, 2021, a plant facility consisting of land and building was acquired from King Corp. in exchange for 19,000 shares of Cord's common stock. On this date, Cord's stock had a fair value of $60 a share. Current assessed values of land and building for property tax purposes are $207,000 and $483,000, respectively.
2. On March 25, 2021, new parking lots, streets, and sidewalks at the acquired plant facility were completed at a total cost of $156,000. These expenditures had an estimated useful life of 12 years.
3. The leasehold improvements were completed on December 31, 2017, and had an estimated useful life of eight years. The related lease, which would terminate on December 31, 2023, was renewable for an additional four-year term. On April 30, 2021, Cord exercised the renewal option.
4. On July 1, 2021, equipment was purchased at a total invoice cost of $319,000. Additional costs of $11,000 for delivery and $44,000 for installation were incurred.
5. On September 30, 2021, Cord purchased a new automobile for $11,900.
6. On September 30, 2021, a truck with a cost of $23,400 and a book value of $8,000 on date of sale was sold for $10,900. Depreciation for the nine months ended September 30, 2021, was $1,800.
7. On December 20, 2021, equipment with a cost of $14,000 and a book value of $2,825 at date of disposition was scrapped without cash recovery.

Required:

1. Prepare a schedule analyzing the changes in each of the plant asset accounts during 2021. Do not analyze changes in accumulated depreciation and amortization.

2. For each asset category, prepare a schedule showing depreciation or amortization expense for the year ended December 31, 2021. (Do not round intermediate calculations. Round your final answers to nearest whole dollar.)

In 2015, Forbes magazine listed Bill Gates, the founder of Microsoft, as the richest person in the United States. His personal wealth was estimated to be $76 billion. Given that there were about 322 million people living in the United States that year, how much could each person have received if Gates’s wealth had been divided equally among the population of the United States? (Hint: A billion is a 1 followed by 9 zeros while a million is a 1 followed by six zeros.)

Which group in each of the following pairs has the higher poverty rate: (a) children or people age 65 or over? (b) African Americans or foreign-born noncitizens? (c) Asians or Hispanics?

Glenn Grimes is the founder and president of Heartland Construction, a real estate development venture. The business transactions during February while the company was being organized are listed as follows.

Required:

a. Prepare journal entries to record the above transactions. Select the appropriate account titles from the following chart of accounts.

b. Indicate the effects of each transaction on the company's assets, liabilities, and owners' equity for the month of February. The Feb. 1 transaction is provided for you.

Feb. 1 = Cash $500,000 (assets)

Chapter 1 and 2 "The Revolt of Engineers": Layton describes the approaches of the four founder societies of engineering professionals--ASCE, AIME, ASME, and AIEE. In 3-4 sentences, state which of these organizations would be most appealing to you to join based on its membership criteria, stances on professional behavior, and relationship to business, and why. In 1-2 sentences, state which would be least appealing and why?