On April 1, 2024, Titan Corporation purchases office equipment for $50,000. For tax reporting, the company uses MACRS and classifies the equipment as 5-year personal property. In 2024, this type of equipment is eligible for 60% first-year bonus depreciation. For financial reporting, the company uses straight-line depreciation. Assume the equipment has no residual value.

Required:

1. Calculate annual depreciation for the five-year life of the equipment according to MACRS. The company uses the half-year convention for tax reporting purposes.
2. Calculate annual depreciation for the five-year life of the equipment according to straight-line depreciation. The company uses partial-year depreciation based on the number of months the asset is in service for financial reporting purposes.
3. In which year(s) is tax depreciation greater than financial reporting depreciation?

• Required 1
• Required 2
• Required 3

Calculate annual depreciation for the five-year life of the equipment according to MACRS. The company uses the half-year convention for tax reporting purposes. (Round "Depreciation Rate per MACRS" answers to 2 decimal places. Round your final answers to nearest whole dollars. Leave no cell blank. Ensure to enter zero wherever applicable.)

• Required 2
• Required 3

Calculate annual depreciation for the five-year life of the equipment according to straight-line depreciation. The company uses partial-year depreciation based on the number of months the asset is in service for financial reporting purposes.

In which year(s) is tax depreciation greater than financial reporting depreciation?

Answer both please.

1. The Weber Company purchased a mining site for $687,720 on July 1. The company expects to mine ore for the next 10 years and anticipates that a total of 83,228 tons will be recovered. During the first year the company extracted 4,678 tons of ore. The depletion expense is

a.$38,640.28

b.$53,292.00

c.$63,442.80

d.$35,659.32

2. Periodic inventory by three methods; cost of goods sold

The units of an item available for sale during the year were as follows:

There are 80 units of the item in the physical inventory at December 31. The periodic inventory system is used.

Determine the ending inventory cost and the cost of goods sold by three methods. Round interim calculations to one decimal and final answers to the nearest whole dollar.

The budgeted sales for the next four quarters are £192,000, £288,000, £288,000 and £336,000 respectively. It is estimated that sales will be paid for as follows:-75% of the total will be paid in the quarter that the sales were made. Of the balance 50% will be paid in the quarter after the sale was made. The remaining 50% will be paid in the quarter after this. The amount of cash received in the third quarter will be:

Donahue Company is preparing budgets for the third quarter ending Sept 30, 2019. Budgeted sales for the next five months are;

· July 20,681 units
· Aug 50,020 units
· Sept 30,150 units
· Oct 25,309 units
· Nov 15,000 units

The selling price is $15 per unit. All sales are on account. Donahue’s collection pattern is 60% collected in the month of sale and remaining amount in the month following sale.

The June 30 Accounts Receivable balance of $50,000 will be collected in full.

The management at Donahue Company wants ending Finished Goods Inventory to be equal to 25% of the following month’s budgeted sales in units.
At Donahue Company, five pounds of material are required per unit of product. Management wants materials on hand at the end of each month equal to 15% of the following month’s production. Material cost is $0.50 per pound.

30% of a month’s purchases is paid for in the month of purchase and the remainder is paid in the following month. The June 30 Accounts Payable balance is $20,000.

At Donahue, each unit of product requires 0.06 hours (3.6 minutes) of direct labor. The company has a “no layoff” policy and in exchange for the “no layoff” policy, workers agree to a wage rate of $15 per hour regardless of the hours worked (no overtime pay). For the next three months, the direct labor workforce will be paid for a minimum of 2,000 hours per month.

At Donahue, manufacturing overhead is applied to units of product on the basis of direct labor hours. The variable manufacturing overhead rate is $25 per direct labor hour. Fixed manufacturing overhead is $40,000 per month and includes $10,000 of non-cash costs.

At Donahue, the selling and administrative expenses budget is divided into variable and fixed
components. The variable selling and administrative expenses are $0.55 per unit sold. Fixed selling and administrative expenses are $60,000 per month. The fixed selling and administrative expenses include $15,000 in costs that are not cash outflows of the current month.

The company:

· Has a July 1 cash balance of $55,000
· Maintains a minimum cash balance of $35,000
· Borrows on the first day of the month and repays loans on the last day of the quarter
· Maintains a 12% open line of credit for $95,000
· Pays a cash dividend of $45,000 in Aug
· Cash purchases of equipment, $155,200 in July and $54,800 in Sept, respectively

Donahue reported the following account balances prior to preparing its budgeted financial statements:

· Land - $65,000
· Equipment - $180,000
· Ordinary shares - $195,000
· Retained earnings - $X*

*This Retained earnings figure will be the amount needed to balance off your balance sheet on June
30th i.e. the closing balances on June 30th before you step into the third quarter.

Required:

With the information provided, assist Donahue Company in setting up their ‘Master Budget’. To do this, you will need to prepare the following budgets for the third quarter of the year:

1. Sales Budget

2. Expected Cash Collections
3. Production Budget
4. Direct Materials Budget
5. Expected Cash Disbursements for Materials
6. Direct Labour Budget
7. Manufacturing Overhead Budget
8. Ending Finished Goods Inventory Budget
9. Selling & Administration Expenses Budget
10. Cash Budget
11. Budgeted Income Statement
12. Budgeted Balance Sheet*

*For the balance sheet as at Sept 30th, there will be a difference between the final totals. This is due to calculations based on rounded off units. To balance the totals, simply close off this difference to the Retained Earnings account.

The Jarrad Corporation's management team is getting ready to prepare its master budget for one its product lines for the year 2019. The company produces caramel lollipops which are basically cooked down sugar on a stick, a diabetics nightmare along with many other sweet treats,

Budgeted sales of the lollipops for each quarter of 2019 are as follows:

1st Quarter-12,500 cases

2nd Quarter-14,000 cases

3rd Quarter-25,500 cases

4th Quarter-34,900 cases

There are 100 lollipops in a case and each sells for $200. Jarrad is budgeting a 5% sales price increase effective July 1,2019

The 4th Quarter 2018 sales have been budgeted at 32,000 cases and Jarrad wants to have an ending inventory carried over into 2019 of 2,000 cases.

At the end of 2019 they desire an ending inventory of 2,250 cases. Each quarter an additional 10% of that quarter's sales is to be produced as an ending invenroy to be carried over into the following quarter.

Materials:

Sugar costs the company $3.20 per lb. (16 ounces) Each lolllipop is 2 ounces of sugar which is melted down into caramel. The caramel is coated in 2 ounces of Belgian chocolate which costs the company $.28 per ounce. Each lollipop stick costs $.03

Direct Labor and Mchine Hours:

The production of these lollipops is a highly automated one requring only 45 minutes to produce one case of lollipops. Of this 45 minutes, 30 minutes are automated and 15 minutes requires human interaction. The cost of running the machines during the year based on 4,500 hours is $8.75 per hour. Budget these hours evenly over the four quarters of 2019. The direct labor rate per hour is $11. The budgeted cost of operating the machinery is included in the manufacturing overhead budget for the year.

-What is the budgeted amount of sales revenues for 2019?

1st Quarter $.......................................

2nd Quarter $.....................................

3rd Quarter $......................................

4th Quarter $......................................

Total Budgeted Sales for 2019 $...............................................................

-How many cases of lollipops should be produced in 2019?

1st Quarter.......................................

2nd Quarter......................................

3rd Quarter......................................

4th Quarter......................................

Total Production of Lollipops in 2019?.............................................

-What is the budgeted cost of the sugar which is required to produce the total number of lollipops to be produced in 2019? Ignore any beginning inventory which is not given. $.......................................

Please summarize this article in a summary

Coronavirus Spending Pushes U.S. Budget Deficit to $3 Trillion for 12 Months Through June

WASHINGTON—The U.S. budget deficit reached $3 trillion in the 12 months through June as stimulus spending soared and tax revenue plunged, putting the federal government on pace to register the largest annual deficit as a share of the economy since World War II.

As a share of gross domestic product, the 12-month deficit came to 14% last month, compared with 10.1% in February 2010, when the U.S. was still recovering from the last recession. In June alone, the deficit widened to a monthly record of $864 billion, the Treasury Department said Monday—nearly as much as the gap for the entire previous fiscal year, which totaled $984 billion.

The Congressional Budget Office has projected the annual deficit could total $3.7 trillion in the fiscal year that ends Sept. 30. But the gap could widen even further if Congress and the White House agree later this month on another round of emergency spending, which economists argue is vital to keep households and businesses afloat until the economy begins to recover.

Congress has authorized $3.3 trillion in new spending since March to help combat the impact of coronavirus shutdowns, including stimulus checks to American households and emergency loans and grants to struggling businesses and state and local governments. The Trump administration has also delayed personal and corporate income-tax payments until July 15 in an effort to keep more cash in Americans’ wallets.

“The good news is this means we’re getting fiscal relief out the door fast,” said Maya MacGuineas, the president of the Committee for a Responsible Federal Budget, a deficit watchdog group. “The bad news is that we’re having to borrow record amounts on top of so much unpaid-for spending and tax cuts that lawmakers approved in the past few years.”

Widespread unemployment and business shutdowns have pushed down tax revenue while also boosting spending on safety net measures including unemployment insurance and nutrition assistance. A renewed surge of coronavirus cases across the South and West is forcing some states, including Texas, to reimpose social distancing measures, putting a quick economic recovery in doubt.

Federal deficits typically widen in times of recession and narrow when the economy grows. This time, the deficit was already rising in the final years of the decadelong expansion that ended in February following the Trump administration’s sponsored tax cuts of 2017.

Political support for taming deficits has faded in Washington in recent years, as persistent global demand for U.S. Treasury assets has kept borrowing costs near historic lows. Despite the surge in government borrowing, net interest costs fell 11% in the first nine months of the fiscal year, the Treasury said Monday.

The dramatic rise in red ink has rankled some Republicans and White House officials, who have argued against another sweeping economic relief package and called instead for aid that is more narrowly targeted at the hardest hit-industries, in part due to concerns about the deficit.

Democrats and many economists, however, have said policy makers must tackle the more pressing problem—controlling the virus and supporting American households and businesses—and worry about deficits later, especially when the cost to borrow is so low. The yield on the benchmark 10-year Treasury note was around 0.622% late Monday, down from more than 2% a year ago.

The CBO estimated last week that the jobless rate will end the year at 10.5%, compared with a 50-year low of about 3.5 percent before the recession. While the economy is expected to grow in the second half this year, output in the fourth quarter of 2020 will be 5.9% lower than a year earlier, the agency said.

The economy showed signs of reviving in May and June as parts of the country reopened. The number of Americans receiving unemployment benefits fell by nearly 700,000 to 18.1 million for the week ended June 27, the lowest reading since the week ended April 18. Employers added a combined 7.5 million jobs in May and June after shedding 21 million jobs in March and April.

Whether that recent rate of job creation and relatively lower pace of layoffs, can continue is in doubt because coronavirus infections are causing state authorities to reconsider reopening plans and creating renewed uncertainty for many businesses and consumers.

In June, spending soared to $1.1 trillion, compared with $342 billion in the same period a year earlier, the Treasury said Monday. Nearly half of that spending went to emergency small-business loans provided under the Paycheck Protection Program, aimed at helping small firms meet payroll and keep workers attached to their jobs.

Outlays for jobless benefits climbed from roughly $2 billion in June 2019 to $116 billion last month, about half of which was due to the extra $600 in weekly benefits that Congress authorized as part of the so-called Cares Act. Those enhanced payments are set to expire at the end of this month unless Congress chooses to extend them.

Meanwhile, federal revenue sank 28% to $241 billion, due in part to the administration’s decision to delay tax payment deadlines. The government typically receives an influx of revenue in June when corporations and individuals make quarterly estimated tax payments. Senior Treasury officials said Monday they expect to receive a large share of that revenue in July, though declining wages and reduced economic activity have also constrained federal receipts.

For the first nine months of the fiscal year, the budget gap totaled $2.7 trillion, the Treasury said, more than triple the deficit during the same period a year earlier. Receipts fell 13% from October through June compared with a year earlier, and spending rose 49%.

this is an accounting question

An organization is considered to be begin an income generating project to get a better financial position .The Board of Directors requested the accountant help in preparing an operating budget including a cash budget for the six months ending 31/12/2019. The Board of Directors has promised to secure $100,000 for this project if it proves to be profitable.

You gathered the following information:

• $100,000 is expected to be secured by the Board of Directors and the project will start on 1/7/2019.
• A building will be rented at an annual rent fee of $24,000. It is expected that the rent of the first three months will be paid in advance.
• It is expected that utilities will be $5,000 per quarter payable at the beginning of the following quarter.
• Furniture will be purchased for $4,080 in July 2019. The estimated useful life of this equipment is 2 years.

• Equipment will be purchased for $79,200. 50% will be paid at the time of purchase i.e. in July 2020 and 50% in October 2020. The estimated useful life of this equipment is 4 years.
• A vehicle will be purchased for $8,160 in July 2019. Annual insurance is $1,500 payable in July 2019. The estimated useful life of the vehicle is 4 years.
• It is estimated that raw materials usage will average $25,000 monthly. It is also estimated that purchases of raw materials will be $50,000 in July 2019, $60,000 in September 2019, and $60,000 in November 2019.
• It is expected that the payment of supplies will be made in the month following the purchase.
• Salaries are expected to be $2,000/month for the first quarter and $3,000 per month for the second quarter.  
• Market analysis showed the following sales estimates. Sales will be on credit with collections after 2 months of sales.
• Other operating expenses are estimated at $2,500 per month.

Required: Prepare in good form

a. A profit and loss budget for the 6 months ending 31/12/2019.

b. A balance sheet budget as at 31/12/2019

c. A cash flow budget for the 6 months ending 31/12/2019.

d. As a Board of Director Member would you approve to fund the project. Why?

Recent election cycles have brought new challenges for corporations and their boards of directors. For example, in the 2016 presidential election campaign, candidate Hillary Clinton unveiled a prescription drug plan to lower prescription prices following the Turing Pharmaceutical price gouging scandal. Yet ironically, the pharmaceutical industry was one of the most generous industry donators to her campaign, as well as those of the other candidates.In fact, the health industry overall (including health professionals, hospitals, HMOs, and pharmaceutical companies) donated over $10 million to the presidential candidates by spring of 2016.

In essence, the pharmaceutical companies and health-care professionals spent money to promote policies that went against their own financial interests. This happened in congressional elections as well. In 2010, the pharmaceutical industry’s trade group, PhRMA, donated funds to nonprofit groups that used those funds to help elect 23 representatives who subsequently voted to limit access to contraceptives.

Some of those funds came from firms like Pfizer, Bayer, and Merck —all manufacturers of contraceptives.Political spending is also an issue with individual companies. Target Corporation, a company that had positioned itself as an LGBT-friendly corporation, found itself the target of angry employees and customers when they learned about Target’s political spending. Target, a sponsor of the annual Twin Cities homosexual Pride Festival, donated money to a business group that supported an homosexual rights candidate for Minnesota governor. Angry employees and consumers conducted protests outside Target stores and threatened a boycott.

These examples show how political spending can have dramatic consequences for corporations. Politicians take positions on a range of policies and so the same politician may hold some positions that support and other positions that damage a corporation’s best interests. This problem was exacerbated when the U.S.Supreme Court’s Citizen United decision changed the political spending landscape for corporations. Before that decision, political spending was constrained to political action committees (PACs), and PAC political activity had to be disclosed to the FEC (Federal Election Commission). Now firms can make unlimited contributions directly to candidates or indirectly to 501c4 nonprofits and trade associations, who can then hide both the donors who provided the money and the way the money was spent. Firms are now freer to become politically involved but, as Target and the pharmaceutical companies found out, that freedom comes with risk.Shareholders and other stakeholders are asking firms to be transparent in their political spending. They want to judge those expenditures for themselves to avoid agency problems and other conflicts of interest.

Ira M. Millstein, founder of the Ira M. Millstein Center for Global Markets and Corporate Ownership at Columbia Law School, proposes a new policy for boards of directors to follow in this new landscape. He suggests that:

1.Companies should require trade associations of which they are members to report to them on their political spending,

2.Companies should require trade associations of which they are members to disclose the donors who provide the money for their political spending,and

3.Companies should then disclose the information they receive from their trade associations when they disclose their other spending to shareholders and other stakeholders.

DISCUSSIONQUESTIONS

1.How would you react to the problem of political spending?

2.As the Chief Executive Officer of a pharmaceutical company, what would you do? Would you retain your PhRMA membership? Would you attach any conditions to your membership?

3.How would you react to the Target situation? What would you do as the CEO?

4.What is your reaction to Ira Millstein’s suggestions? Should corporations demand that trade associations disclose this information before they join?

5.Should companies start disclosing the information they gather? If a trade association refuses to give up that information, should the company decline to join?

Recent election cycles have brought new challenges for corporations and their boards of directors. For example, in the 2016 presidential election campaign, candidate Hillary Clinton unveiled a prescription drug plan to lower prescription prices following the Turing Pharmaceutical price gouging scandal. Yet ironically, the pharmaceutical industry was one of the most generous industry donators to her campaign, as well as those of the other candidates. In fact, the health industry overall (including health professionals, hospitals, HMOs, and pharmaceutical companies) donated over $10 million to the presidential candidates by spring of 2016. In essence, the pharmaceutical companies and health-care professionals spent money to promote policies that went against their own financial interests. This happened in congressional elections as well. In 2010, the pharmaceutical industry’s trade group, PhRMA, donated funds to nonprofit groups that used those funds to help elect 23 representatives who subsequently voted to limit access to contraceptives. Some of those funds came from firms like Pfizer, Bayer, and Merck — all manufacturers of contraceptives. Political spending is also an issue with individual companies. Target Corporation, a company that had positioned itself as an LGBT-friendly corporation, found itself the target of angry employees and customers when they learned about Target’s political spending. Target, a sponsor of the annual Twin Cities G4y Pride Festival, donated money to a business group that supported an antig4y rights candidate for Minnesota governor. Angry employees and consumers conducted protests outside Target stores and threatened a boycott. These examples show how political spending can have dramatic consequences for corporations. Politicians take positions on a range of policies and so the same politician may hold some positions that support and other positions that damage a corporation’s best interests. This problem was exacerbated when the U.S. Supreme Court’s Citizen United decision changed the political spending landscape for corporations. Before that decision, political spending was constrained to political action committees (PACs), and PAC political activity had to be disclosed to the FEC (Federal Election Commission). Now firms can make unlimited contributions directly to candidates or indirectly to 501c4 nonprofits and trade associations, who can then hide both the donors who provided the money and the way the money was spent. Firms are now freer to become politically involved but, as Target and the pharmaceutical companies found out, that freedom comes with risk. Shareholders and other stakeholders are asking firms to be transparent in their political spending. They want to judge those expenditures for themselves to avoid agency problems and other conflicts of interest. Ira M. Millstein, founder of the Ira M. Millstein Center for Global Markets and Corporate Ownership at Columbia Law School, proposes a new policy for boards of directors to follow in this new landscape. He suggests that: 1. Companies should require trade associations of which they are members to report to them on their political spending, 2. Companies should require trade associations of which they are members to disclose the donors who provide the money for their political spending, and 3. Companies should then disclose the information they receive from their trade associations when they disclose their other spending to shareholders and other stakeholders.

1. How would you react to the problem of political spending?

2. As the Chief Executive Officer of a pharmaceutical company, what would you do? Would you retain your PhRMA membership? Would you attach any conditions to your membership?

3. How would you react to the Target situation? What would you do as the CEO?

4. What is your reaction to Ira Millstein’s suggestions? Should corporations demand that trade associations disclose this information before they join?

5. Should companies start disclosing the information they gather? If a trade association refuses to give up that information, should the company decline to join?