ABC Corp, a public limited company, operates in the energy and power sector. The company has experienced significant growth in recent years and has expanded its operation internationally by the acquisition of overseas subsidiaries. Group policy is to translate the financial statements of these subsidiaries using the closing rate method with goodwill calculated at the rate of exchange ruling at the date of acquisition.
One of these subsidiaries, XYZ, is incorporated in a country that is suffering from a very high inflation (120% over the last 3 years) as a result of political and economic problems. Additionally, it is difficult to repatriate funds from the country. ABC Corp owned 91% of the shares of XYZ, with the foreign government owning the balance. Most of the products produced by XYZ are sold locally, but approximately 10 % of the product sold at cost to ABC. Because of a dispute XYZ has created a provision for doubtful debt against an intercompany amount owing from ABC. As a part of its risk management policies, ABC hedges the profit made by XYZ and denominates XYZ’s Financial Statements in US $ rather than the local currency. XYZ non-current assets are carried at a US dollar valuation, which is prepared by the chief accountant.

Discuss and Comment the treatment by ABC Corp based on IAS 29

a. Three-fourths of the work related to $13,000 cash received in advance is performed this period.
b. Wages of $11,000 are earned by workers but not paid as of December 31, 2016.
c. Depreciation on the company’s equipment for 2016 is $10,600.
d. The Office Supplies account had a $480 debit balance on December 31, 2015. During 2016, $5,596 of office supplies are purchased. A physical count of supplies at December 31, 2016, shows $610 of supplies available.
e. The Prepaid Insurance account had a $5,000 balance on December 31, 2015. An analysis of insurance policies shows that $2,200 of unexpired insurance benefits remain at December 31, 2016.
f. The company has earned (but not recorded) $650 of interest from investments in CDs for the year ended December 31, 2016. The interest revenue will be received on January 10, 2017.
f. The company has a bank loan and has incurred (but not recorded) interest expense of $2,500 for the year ended December 31, 2016. The company must pay the interest on January 2, 2017.

Required: For each of the above separate cases, prepare adjusting entries required for financial statements for the year ended (date of) December 31, 2016. (Assume that prepaid expenses are initially recorded in asset accounts and that fees collected in advance of work are initially recorded as liabilities.)

For the year ended Dec 31, 2020, King Inc. reported pretax accounting income of $800,000.

Select information is listed below:

1) In 2019, the company purchased a piece of equipment with a cost of $500,000. For financial reporting purposes, the company used the straight-line method over a 5-year service life with no residual value expected. For tax purposes, the equipment was scheduled to be depreciated by $160,000, $140,000, $120,000, $50,000 and $30,000 in years 2019 through 2023, respectively.

2) During 2020 loss contingency accrued for financial reporting purpose was $45,000. The loss contingency was due to the pending patent lawsuit brought by its long-time competitor, Queen Inc. The payment for the lawsuit is expected to be paid in 2022.

3) In 2020, the company earned $10,000 interest income from municipal bonds. The interest earned on municipal bonds are exempted for tax purposes. King Inc.’s income tax rate is 30%. At January 1, 2020, the deferred tax asset balance was $0 and the deferred tax liability was $12,000.

Required:

What is taxable income for 2020?

What is the ending balance of DTA on 12/31/2020?

What is the ending balance of DTL on 12/31/2020?

Prepare journal entry to record income taxes for year 2020.

7. You are a member of the senior executive group at your company. The company has a reputation of compensating its executives at a very high level. In fact your own compensation appears to be at least 50% above that of your peers in like companies. Due to pressure from the founder who has a controlling interest in the company and now lives in another state the company is considering developing an incentive system for all employees who other than the executives are paid significantly below the levels of peer companies. You have been able to achieve this pay structure due to the limited other job opportunities in the immediate area. In addition to concentrating compensation at the top of the org chart most decisions are also made at the highest levels and little or no planning or financial information is shared outside this group. You recently received input from a group of investors who are very vocal and have accumulated a significant amout of stock in your company. They feel that overall employee pay, the salary and benefits line on the income statement, in total is excessive and they are demanding this issue be addressed. You have been considering stock options, profit sharing and cash bonuses as alternatives for an employee incentive system. 1) Given these facts and the culture in your company and the pressure from investors and the founder discuss these two alternatives for an incentive system.

2) Which would you recommend and how would you fund the program?

The owner of a restaurant that serves Continental-style entrées has the business objective of learning more about the patterns of patron demand during the Friday-to-Sunday weekend time period. She decided to study the i.) demand for dessert during this time period, ii.) the gender of the individual, and iii.) whether or not a beef entrée was ordered. Data were collected from 630 customers and organized in the following contingency tables:

gender

beef entree

1. At the ? = 0.05 level of significance, is there evidence of a difference between males and females in the proportion who order dessert?

2. At the ? = 0.05 level of significance, is there evidence of a difference in the proportion who order dessert based on whether a beef entrée was ordered?

The owner of a restaurant that serves Continental-style entrées has the business objective of learning more about the patterns of patron demand during the Friday-to-Sunday weekend time period. She decided to study the i.) demand for dessert during this time period, ii.) the gender of the individual, and iii.) whether or not a beef entrée was ordered. Data were collected from 630 customers and organized in the following contingency tables:

gender

beef entree

1. At the ? = 0.05 level of significance, is there evidence of a difference between males and females in the proportion who order dessert?

2. At the ? = 0.05 level of significance, is there evidence of a difference in the proportion who order dessert based on whether a beef entrée was ordered?

The owner of a restaurant that serves Continental-style entrées has the business objective of learning more about the patterns of patron demand during the Friday-to-Sunday weekend time period. She decided to study the i.) demand for dessert during this time period, ii.) the gender of the individual, and iii.) whether or not a beef entrée was ordered. Data were collected from 630 customers and organized in the following contingency tables:

Gender

Beef Entree

1. At the a = 0.05 level of significance, is there evidence of a difference between males and females in the proportion who order dessert?

2. At the a = 0.05 level of significance, is there evidence of a difference in the proportion who order dessert based on whether a beef entrée was ordered?

Cerner Corporation announced a first-come, first-serve stock repurchase offer to its shareholders – the company agreed to repurchase 2,653,780 shares of its common stock in exchange for total consideration of $173,434,000. Cerner had 329,641,500 total shares outstanding before the redemption.

You acquired 16,482,075 shares of Cerner's stock two years ago for $20/share. You were the only shareholder to participate in the repurchase offer and Cerner agreed to redeem the total number of shares directly from you.

Using the applicable tax rates provided below, compute your after-tax savings if the redemption is treated as an exchange as opposed to a dividend distribution. Any dividend income amounts should be considered ordinary income in character.

For purposes of the after-tax savings calculation, you should assume you are liable for the net investment income tax on both capital gains and dividend income.

Applicable tax rates:

Individual - ordinary income - 34%

Individual - long-term capital gains - 20%

Individual - net investment income - 3.8%

Cerner Corporation announced a first-come, first-serve stock repurchase offer to its shareholders – the company agreed to repurchase 2,653,780 shares of its common stock in exchange for total consideration of $173,434,000. Cerner had 329,641,500 total shares outstanding before the redemption. You acquired 16,482,075 shares of Cerner's stock two years ago for $20/share. You were the only shareholder to participate in the repurchase offer and Cerner agreed to redeem the total number of shares directly from you. Using the applicable tax rates provided below, compute your after-tax savings if the redemption is treated as an exchange as opposed to a dividend distribution. Any dividend income amounts should be considered ordinary income in character. For purposes of the after-tax savings calculation, you should assume you are liable for the net investment income tax on both capital gains and dividend income. Applicable tax rates: Individual - ordinary income - 34% Individual - long-term capital gains - 20% Individual - net investment income - 3.8%