Sherrod, Inc., reported pretax accounting income of $76 million for 2021. The following information relates to differences between pretax accounting income and taxable income:

1. Income from installment sales of properties included in pretax accounting income in 2021 exceeded that reported for tax purposes by $3 million. The installment receivable account at year-end 2021 had a balance of $7 million (representing portions of 2020 and 2021 installment sales), expected to be collected equally in 2022 and 2023.
2. Sherrod was assessed a penalty of $2 million by the Environmental Protection Agency for violation of a federal law in 2021. The fine is to be paid in equal amounts in 2021 and 2022.
3. Sherrod rents its operating facilities but owns one asset acquired in 2020 at a cost of $80 million. Depreciation is reported by the straight-line method, assuming a four-year useful life. On the tax return, deductions for depreciation will be more than straight-line depreciation the first two years but less than straight-line depreciation the next two years ($ in millions):

4. For tax purposes, warranty expense is deducted when costs are incurred. The balance of the warranty liability was $2 million at the end of 2020. Warranty expense of $4 million is recognized in the income statement in 2021. $3 million of cost is incurred in 2021, and another $3 million of cost anticipated in 2022. At December 31, 2021, the warranty liability is $3 million (after adjusting entries).
5. In 2021, Sherrod accrued an expense and related liability for estimated paid future absences of $7 million relating to the company’s new paid vacation program. Future compensation will be deductible on the tax return when actually paid during the next two years ($4 million in 2022; $3 million in 2023).
6. During 2020, accounting income included an estimated loss of $2 million from having accrued a loss contingency. The loss is paid in 2021, at which time it is tax deductible.

Balances in the deferred tax asset and deferred tax liability accounts at January 1, 2021, were $1 million and $2.5 million, respectively. The enacted tax rate is 25% each year.

Required:
1. Determine the amounts necessary to record income taxes for 2021, and prepare the appropriate journal entry.
2. What is the 2021 net income?
3. Show how any deferred tax amounts should be classified and reported in the 2021 balance sheet.
  

Sherrod, Inc., reported pretax accounting income of $86 million for 2021. The following information relates to differences between pretax accounting income and taxable income:

1. Income from installment sales of properties included in pretax accounting income in 2021 exceeded that reported for tax purposes by $5 million. The installment receivable account at year-end 2021 had a balance of $6 million (representing portions of 2020 and 2021 installment sales), expected to be collected equally in 2022 and 2023.
2. Sherrod was assessed a penalty of $2 million by the Environmental Protection Agency for violation of a federal law in 2021. The fine is to be paid in equal amounts in 2021 and 2022.
3. Sherrod rents its operating facilities but owns one asset acquired in 2020 at a cost of $92 million. Depreciation is reported by the straight-line method, assuming a four-year useful life. On the tax return, deductions for depreciation will be more than straight-line depreciation the first two years but less than straight-line depreciation the next two years ($ in millions):

4. For tax purposes, warranty expense is deducted when costs are incurred. The balance of the warranty liability was $1 million at the end of 2020. Warranty expense of $5 million is recognized in the income statement in 2021. $3 million of cost is incurred in 2021, and another $3 million of cost anticipated in 2022. At December 31, 2021, the warranty liability is $3 million (after adjusting entries).
5. In 2021, Sherrod accrued an expense and related liability for estimated paid future absences of $12 million relating to the company’s new paid vacation program. Future compensation will be deductible on the tax return when actually paid during the next two years ($10 million in 2022; $2 million in 2023).
6. During 2020, accounting income included an estimated loss of $6 million from having accrued a loss contingency. The loss is paid in 2021, at which time it is tax deductible.

Balances in the deferred tax asset and deferred tax liability accounts at January 1, 2021, were $1.8 million and $2.0 million, respectively. The enacted tax rate is 25% each year.

Required:
1. Determine the amounts necessary to record income taxes for 2021, and prepare the appropriate journal entry.
2. What is the 2021 net income?
3. Show how any deferred tax amounts should be classified and reported in the 2021 balance sheet.

Sherrod, Inc., reported pretax accounting income of $86 million for 2021. The following information relates to differences between pretax accounting income and taxable income:

1. Income from installment sales of properties included in pretax accounting income in 2021 exceeded that reported for tax purposes by $5 million. The installment receivable account at year-end 2021 had a balance of $6 million (representing portions of 2020 and 2021 installment sales), expected to be collected equally in 2022 and 2023.
2. Sherrod was assessed a penalty of $2 million by the Environmental Protection Agency for violation of a federal law in 2021. The fine is to be paid in equal amounts in 2021 and 2022.
3. Sherrod rents its operating facilities but owns one asset acquired in 2020 at a cost of $92 million. Depreciation is reported by the straight-line method, assuming a four-year useful life. On the tax return, deductions for depreciation will be more than straight-line depreciation the first two years but less than straight-line depreciation the next two years ($ in millions):

4. For tax purposes, warranty expense is deducted when costs are incurred. The balance of the warranty liability was $1 million at the end of 2020. Warranty expense of $5 million is recognized in the income statement in 2021. $3 million of cost is incurred in 2021, and another $3 million of cost anticipated in 2022. At December 31, 2021, the warranty liability is $3 million (after adjusting entries).
5. In 2021, Sherrod accrued an expense and related liability for estimated paid future absences of $12 million relating to the company’s new paid vacation program. Future compensation will be deductible on the tax return when actually paid during the next two years ($10 million in 2022; $2 million in 2023).
6. During 2020, accounting income included an estimated loss of $6 million from having accrued a loss contingency. The loss is paid in 2021, at which time it is tax deductible.

Balances in the deferred tax asset and deferred tax liability accounts at January 1, 2021, were $1.8 million and $2.0 million, respectively. The enacted tax rate is 25% each year.

Required:
1. Determine the amounts necessary to record income taxes for 2021, and prepare the appropriate journal entry.
2. What is the 2021 net income?
3. Show how any deferred tax amounts should be classified and reported in the 2021 balance sheet.

Sherrod, Inc., reported pretax accounting income of $78 million for 2021. The following information relates to differences between pretax accounting income and taxable income:

1. Income from installment sales of properties included in pretax accounting income in 2021 exceeded that reported for tax purposes by $3 million. The installment receivable account at year-end 2021 had a balance of $4 million (representing portions of 2020 and 2021 installment sales), expected to be collected equally in 2022 and 2023.
2. Sherrod was assessed a penalty of $4 million by the Environmental Protection Agency for violation of a federal law in 2021. The fine is to be paid in equal amounts in 2021 and 2022.
3. Sherrod rents its operating facilities but owns one asset acquired in 2020 at a cost of $72 million. Depreciation is reported by the straight-line method, assuming a four-year useful life. On the tax return, deductions for depreciation will be more than straight-line depreciation the first two years but less than straight-line depreciation the next two years ($ in millions):

4. For tax purposes, warranty expense is deducted when costs are incurred. The balance of the warranty liability was $2 million at the end of 2020. Warranty expense of $4 million is recognized in the income statement in 2021. $3 million of cost is incurred in 2021, and another $3 million of cost anticipated in 2022. At December 31, 2021, the warranty liability is $3 million (after adjusting entries).
5. In 2021, Sherrod accrued an expense and related liability for estimated paid future absences of $8 million relating to the company’s new paid vacation program. Future compensation will be deductible on the tax return when actually paid during the next two years ($5 million in 2022; $3 million in 2023).
6. During 2020, accounting income included an estimated loss of $4 million from having accrued a loss contingency. The loss is paid in 2021, at which time it is tax deductible.

Balances in the deferred tax asset and deferred tax liability accounts at January 1, 2021, were $1.5 million and $1.5 million, respectively. The enacted tax rate is 25% each year.

Required:
1. Determine the amounts necessary to record income taxes for 2021, and prepare the appropriate journal entry.
2. What is the 2021 net income?
3. Show how any deferred tax amounts should be classified and reported in the 2021 balance sheet.

Multiple Choice. Choose the best answer.

Colleges and universities look to which standard-setting body for GAAP?

The GASB.

The FASB.

The NACUBO.

It depends on whether the entity is public, private, or for-profit.

Which of the following statements is prepared by both a private and public college or university?

Statement of net assets.

Statement of cash flows.

Statement of activities.

Statement of net position.

Which of the following is a true statement about tuition revenue in a college or university?

Scholarships should always be reported as expenses.

Tuition receivables estimated to be uncollectible should be reported as an operating expense.

Refunds should be reported as deductions from gross revenue.

All of these statements are true.

A university expended $2,475,000 on a new parking facility. The transaction was reported as an investing activity on its direct method statement of cash flows. What type of university prepared the statement of cash flows?

A public university.

A for-profit university.

A private university.

Either b or c.

Last year Zelnick College showed a positive revenue over expenses number for the first time in several years. The college is funded with contributions, grants, two government appropriations (state and local), and tuition and fees. Zelnick College is most likely what type of college?

A private for-profit college.

A private not-for-profit college.

A public university engaged primarily in governmental activities

A public university engaged primarily in business-type activities.

Gresham College is a local private college. When reviewing the college's financial reports, you would expect to see which of the following categories on its statement of assets and liabilities?

Unrestricted net assets, temporarily restricted net assets, and permanently restricted net assets.

Unrestricted net position, temporarily restricted net position, and permanently restricted net position.

Unrestricted net position, restricted net position, and net investment in capital assets.

Unrestricted net assets, restricted net assets, and net investment in capital assets.

How would a university account for funds received from an external donor that are to be retained and invested, with the related earnings restricted to the purchase of library books?

Temporarily restricted net assets in a private university.

Permanently restricted net position in a private university.

Unrestricted net assets/position in either a private or public university.

Nonspendable, endowment in a public university.

Which of the following statements is incorrect concerning the financial reports of colleges and universities?

The NACUBO account titles are frequently used for reporting revenues and expenses by both private and public entities.

State appropriations are reported as nonoperating revenues by public entities.

Intangible assets are reported as a classification within capital assets by private entities.

Conditional contributions are not recognized by public or private entities.

Many endowment management policies establish a spending rate for the college or university's endowment funds. A spending rate is best defined as:

The portion of the total return that can currently be used to carry out the endowment purpose.

The average rate of return earned on the endowment investments for the current fiscal year.

The moving average rate of return earned on endowment investments over a set period of time, such as a five-year moving average.

The percentage of the endowment corpus that can be used to carry out the endowment purpose.

Which of the following is a performance measure of an outcome?

Farley College students complete an undergraduate degree in an average of 4.3 years.

A state survey of employers showed that 70 percent of employers ranked Beasley State University's graduates as “very well prepared” to enter the workforce.

Within six months of graduation, 75 percent of undergraduate students at Gravette College have a job in their field.

Faculty members at Ballard University published an average of two peer-reviewed papers each year.

On January 1, 20X4, Pony Company acquired 25% of Stallion Company's common stock at underlying book value of $200,000. Stallion has 80,000 shares of $10 par value, 6 percent cumulative preferred stock outstanding. No dividends are in arrears. Stallion reported net income of $270,000 for 20X4 and paid total dividends of $140,000. Pony uses the equity method to account for this investment.

Based on the preceding information, what amount of investment income will Pony company report from its investment in Stallion for the year?

A) $140,000

B) $67,500

C) $55,500

D) $35,000

The answer is C) $55,500. Please explain how to get this answer!

Teal Mountain Industries has the following patents on its December 31, 2016, balance sheet.

Patent Item      Initial Cost      Date Acquired      Useful Life at Date Acquired

Patent A             $44,880               3/1/13                              17 years

Patent B             $17,400               7/1/14                              10 years

Patent C             $24,000               9/1/15                                4 years

The following events occurred during the year ended December 31, 2017.

1. Research and development costs of $250,000 were incurred during the year.

2. Patent D was purchased on July 1 for $46,284. This patent has a useful life of 91/2 years.

3. As a result of reduced demands for certain products protected by Patent B, a possible impairment of Patent B’s value may have occurred at December 31, 2017.The controller for Teal Mountain estimates the expected future cash flows from Patent B will be as follows.

Year                    Expected Future Cash Flows

2018                                      $1,900

2019                                      $1,900

2020                                      $1,900

The proper discount rate to be used for these flows is 8%. (Assume that the cash flows occur at the end of the year.)

Compute the total carrying amount of Teal Mountain’ patents on its December 31, 2016, balance sheet. (Round answer to 0 decimal places, e.g. 8,564.) Total carrying amount $ Compute the total carrying amount of Teal Mountain' patents on its December 31, 2017, balance sheet. (Round answer to 0 decimal places, e.g. 8,564.) Total carrying amount $

Question B4
The following data are extracted from the financial statements of Lala Company:

Additional Information:

1. (1) Made a loan of $30,000 to the ABC Company.

2. (2) Repaid a 3-year loan of $100,000 to Hang Seng Bank.

3. (3) Sold the old machine at cash of $122,500 (the cost of the machine is $175,500 and the accumulated depreciation at disposal was $55,000).

4. (4) Purchased a new machine for cash at $300,000.

5. (5) Paid cash dividend of $0.15 per share for the 220,000 ordinary shares issued and outstanding.

Required:

1. (a) Prepare the statement of cash flows for the year ended 30 June 2020 using the indirect method for LaLa Company.

2. (b) In preparing the statement of cash flows under indirect method, state how to deal with a gain on sale of property, plant and equipment? Give one reason to support your answer.

3. (c) Which section of business activities in the statement of cash flow is least likely to show positive net cash flows in a successful and growing business? (1 mark)

Sunland Inc. has 1.10 million common shares outstanding as at January 1, 2020. On June 30, 2020, 4% convertible bonds were converted into 95,000 additional shares. Up to that point, the bonds had paid interest of $225,000 after tax. Net income for the year was $1,298,572. During the year, the company issued the following:

On February 1, Sunland also purchased in the open market 13,260 call options on its own shares, allowing it to purchase its own shares for $31. Assume the average market price for the shares during the year was $39.

Calculate the required EPS numbers under IFRS. For simplicity, ignore the impact that would result from the convertible debt being a hybrid security. (Round answers to 2 decimal places, e.g. 15.25.)

eTextbook and Media

Show the required presentations on the face of the income statement. (Round answers to 2 decimal places, e.g. 15.25.)