In 2018, Tom and Amanda Jackson (married filing jointly) have $200,000 of taxable income before considering the following events: (Use the dividends and capital gains tax rates and tax rate schedules.)

1. On May 12, 2018, they sold a painting (art) for $110,000 that was inherited from Grandma on July 23, 2016. The fair market value on the date of Grandma’s death was $90,000 and Grandma’s adjusted basis of the painting was $25,000.
2. They applied a long-term capital loss carryover from 2017 of $10,000.
3. They recognized a $12,000 loss on the 11/1/2018 sale of bonds (acquired on 5/12/2008).
4. They recognized a $4,000 gain on the 12/12/2018 sale of IBM stock (acquired on 2/5/2018).
5. They recognized a $17,000 gain on the 10/17/2018 sale of rental property (the only §1231 transaction) of which $8,000 is reportable as gain subject to the 25 percent maximum rate and the remaining $9,000 is subject to the 0/15/20 percent maximum rates (the property was acquired on 8/2/2012).
6. They recognized a $12,000 loss on the 12/20/2018 sale of bonds (acquired on 1/18/2018).
7. They recognized a $7,000 gain on the 6/27/2018 sale of BH stock (acquired on 7/30/2009).
8. They recognized an $11,000 loss on the 6/13/2018 sale of QuikCo stock (acquired on 3/20/2011).
9. They received $500 of qualified dividends on 7/15/2018.
   
   After completing the required capital gains netting procedures, what will be the Jacksons’ 2018 tax liability?

In 2018, Tom and Amanda Jackson (married filing jointly) have $300,000 of taxable income before considering the following events: (Use the dividends and capital gains tax rates and tax rate schedules.)

1. On May 12, 2018, they sold a painting (art) for $122,500 that was inherited from Grandma on July 23, 2016. The fair market value on the date of Grandma’s death was $96,250 and Grandma’s adjusted basis of the painting was $27,500.
2. They applied a long-term capital loss carryover from 2017 of $11,250.
3. They recognized a $12,625 loss on the 11/1/2018 sale of bonds (acquired on 5/12/2008).
4. They recognized a $4,750 gain on the 12/12/2018 sale of IBM stock (acquired on 2/5/2018).
5. They recognized a $20,000 gain on the 10/17/2018 sale of rental property (the only §1231 transaction) of which $10,000 is reportable as gain subject to the 25 percent maximum rate and the remaining $10,000 is subject to the 0/15/20 percent maximum rates (the property was acquired on 8/2/2012).
6. They recognized a $13,250 loss on the 12/20/2018 sale of bonds (acquired on 1/18/2018).
7. They recognized a $7,625 gain on the 6/27/2018 sale of BH stock (acquired on 7/30/2009).
8. They recognized an $12,250 loss on the 6/13/2018 sale of QuikCo stock (acquired on 3/20/2011).
9. They received $1,000 of qualified dividends on 7/15/2018.
   
   After completing the required capital gains netting procedures, what will be the Jacksons’ 2018 tax liability? (Do not round intermediate calculations.)

Question 3 You are the accountant for FreeWheels Ltd, a tandem bicycle manufacturer that is located in Coffs Harbour and has customers in Australia and the USA. Their estimated current sales volume is 6,000 units per month and based on this level of production, the company has budgeted the following costs and prices per unit: Manufacturing Costs per unit (Based on production of 6,000 units per month) Direct Material Cost $75.00 Direct Labour Cost 35.00 Variable Factory Overhead 10.00 Fixed Factory Overhead 20.00 Total Manufacturing Cost 140.00 Selling & Administrative Costs Variable Selling and Administrative Cost 25.00 Fixed Selling and Administrative Cost 20.00 45.00 Total Cost Per Unit 185.00 Selling Price Per Unit $370.00 Cycle World Ltd is an overseas company that sells bicycles all over the world, with the majority of their market in China and India. They have approached FreeWheels about obtaining a quote for a special one-off order as they would like to purchase 25,000 bikes. As this will be a special order sale, there will be no costs incurred for variable selling and administrative costs and no additional fixed costs will be incurred. This order is because their existing supplier has suffered substantial earthquake damage to their premises, but the CEO of Cycle World Ltd also hinted to your CEO that if they are satisfied with the product, this might not be the last deal between the two businesses. Required: 1. Given this knowledge, what amount should FreeWheels Ltd. bid for this contract in each of the following circumstances: a) The FreeWheels’s annual factory capacity is 100,000 units. b) The FreeWheels’s annual factory capacity is 90,000 units. (To fulfil the order, you may have to pull the product from your regular production). 2. Assuming that the annual factory capacity is 100,000 units, prepare a report for your CEO explaining your justification for the bid price that you came up with in 1 a). Discuss the possible opportunities and potential disadvantages with accepting this contract with Cycle World. Give both quantitative and qualitative support to your discussion.

The following condensed income statements of the Jackson Holding Company are presented for the two years ended December 31, 2021 and 2020:

On October 15, 2021, Jackson entered into a tentative agreement to sell the assets of one of its divisions. The division qualifies as a component of an entity as defined by GAAP. The division was sold on December 31, 2021, for $5,480,000. Book value of the division’s assets was $4,720,000. The division’s contribution to Jackson’s operating income before-tax for each year was as follows:

Assume an income tax rate of 25%.

Required: (In each case, net any gain or loss on sale of division with annual income or loss from the division and show the tax effect on a separate line.)
1. Prepare revised income statements according to generally accepted accounting principles, beginning with income from continuing operations before income taxes. Ignore EPS disclosures.
2. Assume that by December 31, 2021, the division had not yet been sold but was considered held for sale. The fair value of the division’s assets on December 31 was $5,480,000. Prepare revised income statements according to generally accepted accounting principles, beginning with income from continuing operations before income taxes. Ignore EPS disclosures.
3. Assume that by December 31, 2021, the division had not yet been sold but was considered held for sale. The fair value of the division’s assets on December 31 was $4,060,000. Prepare revised income statements according to generally accepted accounting principles, beginning with income from continuing operations before income taxes. Ignore EPS disclosures.

Footnotes

Overview: CoffeeBrewers, Inc., the company that you work for, has developed an app it plans to release to customers to help promote its sales. Customers enter the type of pastry or sandwich they are going to have, and the app provides suggestions for the kind of coffee that is best suited to pair with their meal. In an email to the software development team, identify what type of research method is likely to produce the best results for testing the app: a survey, focus group, interview, observation, or field trial, explain how the research method can be applied in this matter and why it will be effective in yielding useful results.

1. X-bar is an unbiased estimator of µ because

a. standard error of X-bar equals sigma/ square root of n

b. expected value of X-bar equals µ

c. shape of distribution of X-bar is normal.

d. Expected value of X-bar is greater than 1.

2. Suppose professor finds that for 16 randomly selected students the time needed to complete an assignment had a sample mean of 65 minutes and a sample standard deviation of 40 minutes. The 98% confidence interval estimate for the population mean is:

3. The starting salaries of individuals with an MBA degree are normally distributed with a mean of $90,000 and a standard deviation of $20,000. Suppose we randomly select 16 of these individuals with an MBA degree. What is the probability that the average starting salary for these individuals is at least $85,800? 0.7995 0.9131 0.2005 -0.2611

4. The probability P(0 <= Z <= 1.63) is:

a. 0.4265

b. 0.9484

c. 0.5071

d. 0.4484

John starts his career at 21 years old and expects to retire 44 years later at the age of 65. His first annual salary is $72,000 that will increase at 1.5% per year until he finishes his part-time MBA at 28 years old. With his MBA, John expects salary to increase at 3% per year until retirement. At the end of each year, he deposits 10% of his annual salary into a retirement saving plan that pays 6% interest per year compounded monthly. On the first day of his retirement, John converts his whole retirement saving plan into a registered retirement income fund (RRIF) that earns 8% interest per year compounded quarterly. The RRIF will pay John $Y per quarter, the first payment being paid on the day he buys the RRIF, for 25 years. Find Y.  (Show your work without using MS Excel)

John starts his career at 21 years old and expects to retire 44 years later at the age of 65. His first annual salary is $72,000 that will increase at 1.5% per year until he finishes his part-time MBA at 28 years old. With his MBA, John expects salary to increase at 3% per year until retirement. At the end of each year, he deposits 10% of his annual salary into a retirement saving plan that pays 6% interest per year compounded monthly. On the first day of his retirement, John converts his whole retirement saving plan into a registered retirement income fund (RRIF) that earns 8% interest per year compounded quarterly. The RRIF will pay John $Y per quarter, the first payment being paid on the day he buys the RRIF, for 25 years. Find Y. (Show your work without using MS Excel)

On June 1, 2018, Metlock Company and Bonita Company merged to form Windsor Inc. A total of 876,000 shares were issued to complete the merger. The new corporation reports on a calendar-year basis.

On April 1, 2020, the company issued an additional 637,000 shares of stock for cash. All 1,513,000 shares were outstanding on December 31, 2020.

Windsor Inc. also issued $600,000 of 20-year, 8% convertible bonds at par on July 1, 2020. Each $1,000 bond converts to 44 shares of common at any interest date. None of the bonds have been converted to date.

Windsor Inc. is preparing its annual report for the fiscal year ending December 31, 2020. The annual report will show earnings per share figures based upon a reported after-tax net income of $1,491,000. (The tax rate is 20%.)

Determine the following for 2020.

(a) The number of shares to be used for calculating: (Round answers to 0 decimal places, e.g. $2,500.)

(b) The earnings figures to be used for calculating: (Round answers to 0 decimal places, e.g. $2,500.)

Sofie Company buys stock in Nut Corporation in cash on January 1, 2020, and reports the investment as having no significant influence.

The percentage of investment 15% Amount paid $6,000,000

On January 1, 2022, Sofie Company makes the following additional investment in Nut Corporation and changes to the equity method of reporting for this investment.

The additional percentage of investment 25% Additional amount paid $15,000,000

Fair value of the 15% investment is as follows: 12/31/2020 $6,200,000 12/31/2021 $6,450.000

Nut Corporation reported the following amounts for the years;

Net income 2020- $150,000 2021- $200,000 2022- $250,000

Cash dividend(paid at year-end) 2020- $50,000 2021- $80,000 2022- $100,000

Additional information: Nut Corporation reported no comprehensive income and any basis difference is attributed to goodwill.

A. Prepare all the journal entries that Sofie Company would records for the investment in Nut Corporation for 2020,.2021, and 2022. Journal entries should be set up in good form.

You need to provide dates, use appropriate account titles, and include an explanation below each journal entry.

B. Develop a table showing the calculation of what the amount Sofie Corporation will report on the balance sheet for the investment in Nut Corporation on December 31, 2022.