On December 31, 2019, Novak Inc. has taxable temporary differences of $2.21 million and a deferred tax liability of $618,800. These temporary differences are due to Novak having claimed CCA in excess of book depreciation in prior years. Novak’s year end is December 31. At the end of December 2020, Novak’s substantively enacted tax rate for 2020 and future years was changed to 30%. For the year ended December 31, 2020, Novak’s accounting loss before tax was $494,500. The following data are also available. 1. Pension expense was $87,600 while pension plan contributions were $111,000 for the year. (Only actual pension contributions are deductible for tax.) 2. Business meals and entertainment were $38,000. (They are one-half deductible for tax purposes.) 3. For the three years ended December 31, 2019, Novak had cumulative, total taxable income of $123,300 and total income current tax expense/income tax payable of $34,524. 4. During 2020, the company booked estimated warranty costs of $31,300 and these costs are not likely to be incurred until 2024. 5. In 2020, the company incurred $150,000 of development costs (only 50% of which are deductible for tax purposes). 6. Company management has determined that it is probable that only one half of any loss carryforward at the end of 2020 will be realized. 7. In 2020, the amount claimed for depreciation was equal to the amount claimed for CCA.

Prepare income tax reconciliation statement Prepare the journal entries to record income taxes for the year ended December 31, 2020, and the income tax reconciliation note.

Question One: Compare:

In a work interview for the position of Tax Accountant, the general manager of the company asked you to explain the difference between individual income tax and business income tax.

Required:

Compare briefly between the individual income tax and business income tax as it is shown in the table below.

You are investigating systems requirements for a shipping company. Assume that you have set up an interview with the manager of the shipping department. Your objective is to determine how shipping works and what the information requirements for the new system will be.

IN 300 WORDS Make a list of questions—three (3) open ended and three (3) closed ended— that you would use. Include four (4) questions or techniques you would use to ensure you find out about the exceptions.

From public records, individuals were identified as having been charged with drunken driving not less than 6 months or more than 12 months from the starting date of the study. Two random samples from this group were studied. In the first sample of 29 individuals, the respondents were asked in a face-to-face interview if they had been charged with drunken driving in the last 12 months. Of these 29 people interviewed face to face, 11 answered the question accurately. The second random sample consisted of 43 people who had been charged with drunken driving. During a telephone interview, 28 of these responded accurately to the question asking if they had been charged with drunken driving during the past 12 months. Assume the samples are representative of all people recently charged with drunken driving. Please show all steps in getting the answer.

(a) Categorize the problem below according to parameter being estimated, proportion p, mean μ, difference of means μ1 – μ2, or difference of proportions p1 – p2. Then solve the problem.

μ

μ1 – μ2

p

p1 – p2

(b) Let p1 represent the population proportion of all people with recent charges of drunken driving who respond accurately to a face-to-face interview asking if they have been charged with drunken driving during the past 12 months. Let p2 represent the population proportion of all people who respond accurately to the question when it is asked in a telephone interview. Find a 95% confidence interval for p1 – p2. (Use 3 decimal places.)

lower limit

upper limit

(c) Does the interval found in part (a) contain numbers that are all positive? all negative? mixed? Comment on the meaning of the confidence interval in the context of this problem. At the 95% level, do you detect any differences in the proportion of accurate responses to the question from face-to- face interviews as compared with the proportion of accurate responses from telephone interviews?

Because the interval contains only positive numbers, we can say that there is a higher proportion of accurate responses in face-to-face interviews.

Because the interval contains both positive and negative numbers, we can not say that there is a higher proportion of accurate responses in face-to-face interviews.

We can not make any conclusions using this confidence interval.

Because the interval contains only negative numbers, we can say that there is a higher proportion of accurate responses in telephone interviews.

Horizon Corporation manufactures personal computers. The company began operations in 2012 and reported profits for the years 2012 through 2019. Due primarily to increased competition and price slashing in the industry, 2020's income statement reported a loss of $20 million. Just before the end of the 2021 fiscal year, a memo from the company's chief financial office (CFO) to Jim Filed, the company controller, included the following comments.

If we don't do something about the large amount of unsold computers already manufactured, our auditors will require us to record a write-down. The resulting loss for 2021 will cause a violation of our debt covenants and force the company into bankruptcy. I suggest that you ship half of our inventory to J.B.Sales, Inc., in Oklahoma City. I know the company's president, and he will accept the inventory and acknowledge the shipment as a purchase. We can record the sale in 2021which will boost our loss to a profit. Then J.B. Sales will simply return the inventory in 2022 after the financial statements have been issued.

Answer the following questions (either with a video or written).

1. What is the effect of this transaction, requested by the CFO, on net income?

2. If Jim does not record the sales transaction requested by the CFO, what is the effect on total assets and net income of the inventory write-down?

3. Are investors and creditors potentially harmed by the CFO's suggestion?

4. should Jim follow the CFO's suggestion? Support your answer with accounting.

Horizon Corporation manufactures personal computers. The company began operations in 2012 and reported profits for the years 2012 through 2019. Due primarily to increased competition and price slashing in the industry, 2020’s income statement reported a loss of $20 million. Just before the end of the 2021 fiscal year, a memo from the company’s chief financial officer (CFO) to Jim Fielding, the company controller, included the following comments:

“If we don’t do something about the large amount of unsold computers already manufactured, our auditors will require us to record a write-down. The resulting loss for 2021 will cause a violation of our debt covenants and force the company into bankruptcy. I suggest that you ship half of our inventory to J.B. Sales, Inc., in Oklahoma City. I know the company’s president, and he will accept the inventory and acknowledge the shipment as a purchase. We can record the sale in 2021 which will boost our loss to a profit. Then J.B. Sales will simply return the inventory in 2022 after the financial statements have been issued.”

1. Understand the reporting effect: What is the effect on income before taxes of the sales transaction requested by the CFO?

2. Specify the options: If Jim does not record the sales transaction requested by the CFO, what is the effect on total assets and income before taxes of the inventory write-down?

3. Identify the impact: Are investors and creditors potentially harmed by the CFO’s suggestion?

4. Make a decision: Should Jim follow the CFO’s suggestion?

Part A: Explain how Net Present Value (NPV) is used in evaluating capital budgeting proposals. Part B: Imagine that you are given a $12,000 entrance scholarship to study at Brock University. Fortunately, over the years your parents have managed to save for your education through the purchase of an RESP. Therefore, you are able to invest the $12,000 for the next four years at an interest rate of 5%. How much money will you have after four years of investing the $12,000? In other words, what is the future value of $12, 000 invested over four years at a 5% interest rate? Be sure to show your calculations. In your response, be sure to incorporate properly the terms: Time Value of Money and Compounding. Lastly, using the Rule of 72, how many years will it take to double the initial investment? Part C: Now that the IOC has made the decision to postpone the Tokyo Summer 2020 Olympics until next year, one of the sponsoring organizations finds itself with Olympic merchandise that needs to be liquidated. When you heard about this opportunity you became quite excited because you are an avid collector of Olympic merchandise. In fact, when you graduate from Brock University, you plan on opening an Olympic memorabilia shop. The offer from this Olympic sponsor is such that you have the option to purchase the merchandise entirely upfront for $10,500 or to pay $2,750 per year for the next four years (with payments at the beginning of the year). Assuming a discount rate of 7%, is it advisable to pay the cost of the merchandise entirely upfront? Explain. Be sure to show your calculations.

Part A: Explain how Net Present Value (NPV) is used in evaluating capital budgeting proposals.

Part B: Imagine that you are given a $12,000 entrance scholarship to study at Brock University. Fortunately, over the years your parents have managed to save for your education through the purchase of an RESP. Therefore, you are able to invest the $12,000 for the next four years at an interest rate of 5%. How much money will you have after four years of investing the $12,000? In other words, what is the future value of $12, 000 invested over four years at a 5% interest rate? Be sure to show your calculations. In your response, be sure to incorporate properly the terms: Time Value of Money and Compounding. Lastly, using the Rule of 72, how many years will it take to double the initial investment?

Part C: Now that the IOC has made the decision to postpone the Tokyo Summer 2020 Olympics until next year, one of the sponsoring organizations finds itself with Olympic merchandise that needs to be liquidated. When you heard about this opportunity you became quite excited because you are an avid collector of Olympic merchandise. In fact, when you graduate from Brock University, you plan on opening an Olympic memorabilia shop. The offer from this Olympic sponsor is such that you have the option to purchase the merchandise entirely upfront for $10,500 or to pay $2,750 per year for the next four years (with payments at the beginning of the year). Assuming a discount rate of 7%, is it advisable to pay the cost of the merchandise entirely upfront? Explain. Be sure to show your calculations.

Question text

Michelle and Tracy are sales representatives for ABC Flooring. Michelle is on maternity leave and Tracy has been assigned to take her business calls while she is out. On the first day, one of Michelle's customers calls the office and asks a secretary for a price on some high end tile. The secretary, Flo wrote down the wrong customer phone number and she only took the customer's first name, John.
What is the problem?

Select one:

a. Michelle is going to miss out on a big sale.

b. The company is going to miss out on a big sale.

c. Michelle may lose a customer.

d. Tracy needs to call the customer back.

e. A and B

Question text

Michelle and Tracy are sales representatives for ABC Flooring. Michelle is on maternity leave and Tracy has been assigned to take her business calls while she is out. On the first day, one of Michelle's customers calls the office and asks a secretary for a price on some high end tile. The secretary, Flo wrote down the wrong customer phone number and she only took the customer's first name, John.
Who does the problem involve?

Select one:

a. Michelle, John, and Tracy

b. Michelle and Tracy

c. Tracy, Flo and John

d. Tracy, John, Michelle, and Flo

Question text

Nicky is the assistant to the HR manager. His best friend Jack is applying for a job with the company and Nicky agreed to be a reference for him. Jack asks for advice on preparing for the interview. Nicky has access to the interview questions that will be asked of all applicants. It would be great for his best friend to work at the same company. Nicky stops to think, what would be the consequences of his decision to share the questions? Choose all that apply.

Select one or more:

a. Nicky could lose his job.

b. If hired, Jack could lose his jobs.

c. Jack could get hired on and not be a good fit for the job.

d. Jack could get hired on and not be as capable of performing tasks as he implied in his interview.