The total payroll of Crane Company for the month of October, 2020 was $960000, of which $170000 represented amounts paid in excess of $119500 to certain employees. $604000 represented amounts paid to employees in excess of the $7400 maximum subject to unemployment taxes. $170000 of federal income taxes and $17200 of union dues were withheld. The state unemployment tax is 1%, the federal unemployment tax is .8%, and the current F.I.C.A. tax is 7.65% on an employee’s wages to $119500 and 1.45% in excess of $119500. What amount should Crane record as payroll tax expense?

The balance date for this company is 31^st March 2020. You are to record the effect of each transaction on the extended accounting equation using the table on the next page (page 5). Include all balance day adjustments where applicable. The first example illustrates how you would record the answers on the table.

1. Purchased inventory for $55,000. Paid half upon the receipt of the inventory and the remainder on credit.

1. Depreciate the equipment at balance date. Cost of equipment is $40,000 and the expected salvage value at the end of 5 years is $5,000. The equipment was purchased on 1^st September 2019. Use the straight line depreciation for this business.

2. Sold an old equipment for $12,000. The cost of the equipment was $50,000 and it has an accumulated depreciation to date of $42,000.

3. Paid the supplier promptly as a 10% discount was offered for an amount owing of $10,000.

4. Paid the annual insurance of $24,000 on 1^st Feb 2020.

5. Invested $20,000 with the bank on 1^st January 2020 with an interest rate of 3.5% per annum. The interest was shown in the business bank account on 2^nd April 2020.

6. Sold inventory on credit for $17,000 (cost is $9,000).

7. Weekly wages of $50,000 was paid on 3^rd April 2020. The wages was for the period 29^th March to 2^nd April 2020.

8. Repaid the bank loan: $50,000 principal and $4,000 interest.

1. Received from debtor the full amount owing of $17,000 less 3% discount for early repayment.

10. Received $5,000 deposit from a supplier on 1^st March 2020 for the sale of inventory to be delivered on 7^th April 2020.

11. Dividends paid to the owners of $2,000.

Extended Accounting Equation: Asset + Expenses = Liabilities + Equity + Revenue

The trial balance columns of the worksheet for Cullumber Company at June 30, 2020, are as follows.

Other data:

Complete the worksheet.

A California wine company is committed to selling €3,400,000 of inventory in December 2020 to a customer based in Amsterdam. The US Company wants to protect itself against a decline in profit that would result from foreign exchange. The current futures price is $1.1220, how would it hedge?

Sketch out the cash flows of the hedged position (in US$) assuming the following scenarios. A. St = F0 B. St = F0 - $0.12 C. St = F0 + $0.12

Scenario
It is 2020, and General Foryota Company opens a plant in which to build a new mass-produced hover-craft. This hover-craft will work using E-85 Ethanol, will travel up to 200 mph, and will reduce pollution worldwide at a rate of 10 percent per year. It is likely that when all automobiles in the industrial world have been changed over to hovercrafts, emission of greenhouse gasses may be so reduced that global warming may end and air quality will become completely refreshed.

However, the downside is that during the transition time, GFC's Hover-Vee (only available in red or black), will most likely put all transportation as we know it in major dissaray. Roadways will no longer be necessary, but new methods of controlling traffic will be required. Further, while the old version of cars are still being used, Hover-vee's will cause accidents, parking issues, and most likely class envy and warfare. The sticker price on the first two models will be about four times that of the average SUV (to about $200,000.) Even so, GFC's marketing futurists have let them know that they will be able to pre-sell their first three years of expected production, with a potential waiting list which will take between 15 and 20 years to fill.

The Chief Engineer (CE) of GFC commissions a study on potential liabilities for the Hover-vees. The preliminary result is that Hover-vees will likely kill or maim humans at an increased rate of double to triple over automobile travel because of collisions and crashes at high speeds -- projected annual death rates of 100,000 to 200,000. However, global warming will end, and the environment will flourish.

The U. S. Government gets wind of the plans. Congress begins to discuss the rules on who can own and operate Hover-vees. GFC's stock skyrockets. The Chief Engineer takes the results of the study to the Chief Legal Counsel (CLC), and together they agree to bury the study, going forward with the production plans. The Chief Project Manager (CPM), who has read the study and agreed to bury it, goes ahead and plans out the project for the company, with target dates and production deadlines.

Our class is a team of young lawyers, project managers, engineers, and congressional aides who are all part of the process of helping get this project off the ground. In fact, according to the first letter of your last name, you are the following team:

• A-G: Attorney on the GFC team
• H-N: Project Manager on the GFC team
• 0-S: Engineer on the GFC team
• T-Z: Congressional Aide

Somebody sent a secret copy of the report to you at your home address. It has no information in it at all, except for the report showing the proof of the increase in accidents and deaths. The report shows, on its face, that the CE, CLC, CPM, and your Congressional Representative have seen copies of this report. On the front there are these words typed in red: They knew — they buried this. Please save the world!

Each of you feel a very loyal tie to your boss and your company/country. You all have mortgages, and families to feed. It is likely if you blow the whistle on this report, you will lose your job and your livelihood. You're not even sure who wrote the study in your envelope or who actually sent it to you.

Upon studying the issue, you determine the source of the message that set you on the trail! The Source is Trace Velvet, a worker on the project that was fired for gross incompetence. As near as you can tell, the firing was deserved. This could be an act of revenge, or a demonstration of said incompetence. But you have no evidence that the information you have received was false. It may well point out a real problem. How does this change your responses?

Scenario
It is 2020, and General Foryota Company opens a plant in which to build a new mass-produced hover-craft. This hover-craft will work using E-85 Ethanol, will travel up to 200 mph, and will reduce pollution worldwide at a rate of 10 percent per year. It is likely that when all automobiles in the industrial world have been changed over to hovercrafts, emission of greenhouse gasses may be so reduced that global warming may end and air quality will become completely refreshed.

However, the downside is that during the transition time, GFC's Hover-Vee (only available in red or black), will most likely put all transportation as we know it in major dissaray. Roadways will no longer be necessary, but new methods of controlling traffic will be required. Further, while the old version of cars are still being used, Hover-vee's will cause accidents, parking issues, and most likely class envy and warfare. The sticker price on the first two models will be about four times that of the average SUV (to about $200,000.) Even so, GFC's marketing futurists have let them know that they will be able to pre-sell their first three years of expected production, with a potential waiting list which will take between 15 and 20 years to fill.

The Chief Engineer (CE) of GFC commissions a study on potential liabilities for the Hover-vees. The preliminary result is that Hover-vees will likely kill or maim humans at an increased rate of double to triple over automobile travel because of collisions and crashes at high speeds -- projected annual death rates of 100,000 to 200,000. However, global warming will end, and the environment will flourish.

The U. S. Government gets wind of the plans. Congress begins to discuss the rules on who can own and operate Hover-vees. GFC's stock skyrockets. The Chief Engineer takes the results of the study to the Chief Legal Counsel (CLC), and together they agree to bury the study, going forward with the production plans. The Chief Project Manager (CPM), who has read the study and agreed to bury it, goes ahead and plans out the project for the company, with target dates and production deadlines.

Our class is a team of young lawyers, project managers, engineers, and congressional aides who are all part of the process of helping get this project off the ground. In fact, according to the first letter of your last name, you are the following team:

• A-G: Attorney on the GFC team
• H-N: Project Manager on the GFC team
• 0-S: Engineer on the GFC team
• T-Z: Congressional Aide

Somebody sent a secret copy of the report to you at your home address. It has no information in it at all, except for the report showing the proof of the increase in accidents and deaths. The report shows, on its face, that the CE, CLC, CPM, and your Congressional Representative have seen copies of this report. On the front there are these words typed in red: They knew — they buried this. Please save the world!

Each of you feel a very loyal tie to your boss and your company/country. You all have mortgages, and families to feed. It is likely if you blow the whistle on this report, you will lose your job and your livelihood. You're not even sure who wrote the study in your envelope or who actually sent it to you.

Address all of the following:

• Utilizing your profession's code of ethics, what would be your first step?
• Who would you talk to first?
• Would you go to the press?
• Would you go to your boss?
• Should you do anything at all?

Identifying and Analyzing Financial Statement Effects of Share-Based Compensation
Weaver Industries implements a new share-based compensation plan in 2014. Under the plan, the company's CEO and CFO each will receive non-qualified stock options to purchase 100,000, no par shares. The options vest ratably (1/3 of the options each year) over three years, expire in 10 years, and have an exercise (strike) price of $27 per share. Weaver uses the Black-Scholes model to estimate a fair-value per option of $18.  

(a) Use the financial statement effects template to record the compensation expense related to these options for each year 2014 through 2016.

Use negative signs with answers, when appropriate.

(b) In 2017, the company's stock price is $24. If you were the Weaver Industries CEO, would you exercise your options? Explain.

Because the stock price is per share, the Weaver CEO should exercise the options because she can immediately sell them for that amount.

Because the stock price is per share, the Weaver CEO can immediately recognize a gain of $3 per share by exercising the options.

Because the stock price is per share, no gain or loss would be recognized if the Weaver CEO exercises her options and immediately sold her shares.

Because the stock price is per share, the options are under-water (out of the money) and the Weaver CEO should not exercise the options.

(c) In 2019, the company's stock price is $46 and the CEO exercises all of her options. Use the financial statement effects template to record the exercise.

Discuss the issues the SEC raised against Mark Frissora and his former employer Hertz Global Holdings Inc. in 2013 and how it related or contrasted with the three topics in your text for Chapter 5 regarding Earnings Quality, Earnings Management, and Fraudulent Financial Reporting.

Soccer Inc. had credit sales of $775,000 during 2020. At the end of 2020, the unadjusted ending balance in Soccer’s Allowance for Bad Debt account was $7,600, and the unadjusted balance in its gross accounts receivable account was $239,000. Soccer uses the percent of sales method to determine bad debt expense. Based on historical data, Soccer assumes that 1.163% of credit sales will prove to be uncollectible. Additionally, the company has a policy of writing-off any Account Receivable which is outstanding more than 75 days. As of 12/31/20, Soccer has Accounts Receivable balances totaling $2,000 outstanding over 75 days which need to be written off.

**You may round your answers to the nearest dollar.

(A) What journal entry would Soccer record to "Write-Off" Accounts Receivable?

(B) What journal entry would Soccer record to recognize 2020 Bad Debt Expense?

(C) What is the adjusted 12/31/2020 balance of Soccer's Gross Accounts Receivable? *(Show each calculation)

(D) What is the adjusted 12/31/2020 balance of Soccer's Allowance for Bad Debt? *(Show each calculation)

(E) What is the adjusted 12/31/2020 balance of Soccer's Net Accounts Receivable? *(Show each calculation)