Alsup Consulting sometimes preforms services for which it receives payment at the conclusion the engagement, up to six months after service commence. Alsup recognizes service revenue for financial reporting purposes when the services are performed. For tax purposes, revenue is reported when fees are collected. Service revenue, collections, and pretax accounting income for 2020-2023 are as follows:

There are no  differences between accounting income and taxable income other than the temporary difference described above. The enacted tax rate for each year is 25%

Required:

1. Prepare the appropriate journal entry to record Alsup’s 2021 income taxes
2. Prepare the appropriate journal entry to record Alsups 2022 income taxes
3. Prepare the appropriate journal entry to record Alsups 2023 income taxes

(HINT: You will find it helpful to prepare a schedule that shoes the balances in service revenue receivable at December 31, 2020 – 2023)

Recording Notes Receivable: Issuance, Payment, and Default

Marydale Products permits its customers to defer payment by giving personal notes instead of cash. All the notes bear interest and require the customer to pay the entire note in a single payment 6 months after issuance. Consider the following transactions, which describe Marydale's experience with two such notes:

1. On October 31, 2019, Marydale accepts a 6-month, 9% note from Customer A in lieu of a $3,600 cash payment for services provided that day.
2. On February 28, 2020, Marydale accepts a 6-month, $2,400, 7% note from Customer B in lieu of a $2,400 cash payment for services provided on that day.
3. On April 30, 2020, Customer A pays the entire note plus interest in cash.
4. On August 31, 2020, Customer B pays the entire note plus interest in cash.

Required:

Prepare the necessary journal and adjusting entries required to record Transactions a through d in Marydale's records. For a compound transaction, if an amount box does not require an entry, leave it blank.

LG

Following is the seven-year forecast for LG: (all amounts in $000)

Beginning after year 2026 the annual growth in EBIT is expected to be 1.5%, a rate that is projected to be constant over LG remaining life as an enterprise.   Beginning in 2026 LG capital expenditures and depreciation are expected to offset each other (capex - depreciation = 0) and year to year changes in working capital are expected to be zero (working capital levels remain constant year over year). For discounting purposes consider 2020 as year 1.

Assume a tax rate is 21% and a cost of capital of 7.75%

Calculate the fair market value (NPV) for LG. Assume that the Net Present Value of LG free cash flow for the period 2020 - 2026 is $3000

For each of the following scenarios, explain how things are included or excluded from being counted in GDP:

1. You get a new XBOX-1 gaming system at Best Buy last year and sell it on Facebook marketplace this year
2. You buy a new digital textbook for your macroeconomics course
3. You and your realtor find a fully renovated historic home that you purchase
4. Newly produced leather that is used for automobile seats
5. Your friend buys a 2020 certified pre-owned Toyota
6. Your neighbor purchases a new snow plow for his 2010 pickup truck
7. A construction firm trades in a used bulldozer for a new one; the used bulldozer is sold to another firm.

2. GDP (also known as "Y") is made up of 4 components:

• G - Government spending
• I - Investment
• C- Consumption
• XN - Net exports

Which component are each of the following included in? Label each one.

1. A newly built condominium on Miami Beach
2. Specialty cheeses imported from Italy
3. Your new pumpkin spice Yankee candle
4. Your automobile registration renewal from the DMV

3.  Suppose C = 600, I = 250, G = 150, and X = 0

1. What is gross domestic product (GDP)?
2. Calculate each component’s share of GDP.
3. Suppose government spending increases to 200, but the other components of GDP do not change. What is government spending’s share of GDP now? What is the new non-government share?
4. Suppose that the level of potential GDP (Y*) is 1000 and is unaffected by the increase in government spending described previously. Without doing any calculations, explain in general terms what happens to C/Y*, X/Y*, and I/Y* after the government spending increase in (b).

Early in the 2020, Baladna Co. prepared an expansion plan. The plan requires an increase in in both property, plant and equipment and inventory by $190,000,000 and $10,000,000 respectively. The following three alternative financing plans have been suggested by the firm’s investment bankers:

Plan I: issue preferred stock at par.

Plan II: issue common stock at $10 per share.

Plan III: issue a 16% long-term bonds, due in 20 years, at par ($1,000).

1. For the year ended December 31, 2020, compute the following ratios under each financing plan (assuming the same statement balances, except for the increased assets and financing; do not adjust retained earnings for the 2020 profits).

Plan A:

1. Times interest earned

Plan B:

1. Times interest earned

Plan C:

1. Times interest earned

Salvatore Ltd is an existing company that previously issued 200,000 ordinary shares of $10 each. Balances in accounts as at 30 June 2019 are: retained earnings $150,000, general reserve of $10,000 and tax payable $105,000.

On 1 July 2019 Salvatore Ltd decided to raise additional capital of 40,000 shares of $11 each. A total of 40,000 ordinary shares are to be offered at $10 each and the remainder in one call when required.

Applications for 44,000 shares were received by the closing date of 31^st August, 2019.

On 15^th September 2019 shares were issued and money paid to those unsuccessful applicants.

On 20^th February 2020, the remaining call on the shares was made, and all cash was received on the call by 31st March, except for the holder of 6,000 shares.

Directors announced on 30^th June 2020 a profit before tax of $500,000, of which $150,000 related to income tax.

On 5th July 2020, the board of directors during the Annual General Meeting announced that the company will pay ordinary dividends of 4.6 cents per fully paid equivalent share from retained earnings and $100,000 was transferred from retained earnings to the general reserve.

REQUIRED:

1. Prepare properly formatted general journal entries to record the above transactions. Narrations are NOT required.                                      

Trillium Ltd, a small and growing innovative start-up technology company traded on the Toronto Stock Exchange, leased machinery on January 1, 2020 for a term of 10 years. The Company considered purchasing the machinery but instead opted to lease. The machinery is widely known to have a general life span of about 20 years.

At the date of signing the lease contract, the leased machinery and associated lease obligation were correctly recorded at $42,000. The first lease payment of $6,000 was made on December 31, 2020 and the interest rate inherent in the lease contract is 7%.

At the start of the year, the Company had a cash and retained earnings balance of $100,000. Assume the above was the only transaction in the year.

The Company has a December 31 year-end.

Required:

1. For the year-ended December 1, 2020, prepare the relevant parts of the following financial statements:

1. Statement of Financial Position
2. Statement of Profit or Loss

2. Explain, with support, two of the most likely reasons why this specific Company opted to lease the machinery rather than purchase it.

3. Explain how the lease will affect Earnings-before-Interest-Taxes-Depreciation (EBITDA).

4. Explain how the debt-to-equity ratio would be affected if the Company choose to borrow funds from a bank to purchase the machinery rather than leasing it. Be specific.

Exercise 9-12

Kirkland Company combines its operating expenses for budget purposes in a selling and administrative expense budget. For the first 6 months of 2020, the following data are available.

Prepare a selling and administrative expense budget by quarters for the first 6 months of 2020. (List variable expenses before fixed expense.)

KIRKLAND COMPANY
Selling and Administrative Expense Budget

reported the following balances on December 31, 2020.
14% nonparticipating, noncumulative preference share capital, par value of P75, 50,000 shares P3,750,000

8%, fully participating, cumulative preference share capital, par value of P50, 80,000 shares P4,000,000
Ordinary share capital, par value of P60, 65,000 shares P3,900,000
The entity plan
s to declare share dividends. It has not paid any stock or cash dividends before. Also, there hasn’t been any change it the capital balances since the entity started operation 5 years ago.

The entity reported the following net income and loss for the previous years:

2016 P1,500,000
2017 (P750,000)
2018 (P250,000)
2019 P1,500,000
2020 P1,900,000
If the maximum amount available for dividend on December 31, 2020 is paid, what amount should be distributed to:

1. 14% Preference shareholders?
2. 8% Preference shareholders?
3. Ordinary shareholders?

What is the book value per share of:

4. Ordinary shares?
5. 14% Preference Shares?
6. 8% Preference share?

What is the total balance of the following shares:
7. Ordinary shares
8. 14% Preference Shares
9. 8% Preference Shares
10. What is the amount of the total dividends declared?

Benito Company reported the following information for the financial year ended 30/06/2020:

Required:

l. What is the net cash inflow (outflow) from operating activities?   

ll. What is the net cash inflow (outflow) from investing activities?

lll. What is the net cash inflow (outflow) from financing activities?

IV. Determine the cash & cash equivalents as of 30/06/2020.

V. Determine the total cash flow from operations as of the end of the year. Opening Balance of Cash at the start of the year is $100,000.