Questions
Nutrition Corporation manufactures and sells healthy foods products online to consumers and delivers the products ordered...
Nutrition Corporation manufactures and sells healthy foods
products online to consumers and delivers the products ordered
online by shipping the goods directly to customers in all 50
states. Nutrition does not have a brick-and-mortar store presence
in any state, but does operate distribution centers in various
states across the country, including Virginia. Consistent with its
practice in all 50 states, Nutrition does not collect or remit
sales tax to Virginia. In recent court rulings, the state of
Virginia has taken the position that operating a distribution
center within a state constitutes nexus and this would subject that
company to collect and remit sales tax on all sales within that
state.
As of December 31, 2019, Nutrition has operated its distribution
center in Virginia for five years and has never collected or
remitted sales tax to Virginia. Although the company considers the
risk of detection to not be probable, Nutrition has estimated the
total amount of sales tax payable to the state for the past five
years to be $50 million plus $6 million in interest and $4 million
in penalties. On March 15, 2020, Governor Janson, the governor of
Virginia, established a tax amnesty program. The program provides
that any unregistered taxpayer who voluntarily registers to collect
sales tax on a prospective basis will be forgiven (1) 50 percent of
all unpaid sales tax and (2) all interest and penalties on unpaid
taxes. Nutrition management decides to take advantage of this
program.
On June 15, 2020, Nutrition completes the necessary paperwork and
other actions to participate in the program and pays Virginia $25
million to settle its obligation through December 31, 2019.
Required:
You are a staff accountant working on the audit of Nutrition Corp.
You have been asked by the audit partner to write a memo on the
appropriate accounting treatment for Virginia sales tax.
Your analysis should include (1) the accounting treatment for the
unpaid sales tax included in the financial statements for the
year-ended December 31, 2019 (assume the 2019 financial statements
were issued on February 28, 2020), (2) the accounting treatment for
Nutrition’s decision to participate in the tax amnesty program
announced on March 15, 2020, and (3) the accounting treatment for
the $25 million payment made on June 15, 2020.
When discussing any of the accounting treatments, you should
reference the appropriate FASB guidance which dictates the
treatment (see case instructions). Journal entries can be included
to assist with your description of the appropriate treatment.
In: Accounting
Problem 23-01 The following are Flounder Corp.’s comparative balance sheet accounts at December 31, 2020 and...
Problem 23-01
The following are Flounder Corp.’s comparative balance sheet accounts at December 31, 2020 and 2019, with a column showing the increase (decrease) from 2019 to 2020.
|
COMPARATIVE BALANCE SHEETS |
|||||||||
|---|---|---|---|---|---|---|---|---|---|
|
2020 |
2019 |
Increase |
|||||||
|
Cash |
$812,400 |
$700,100 |
$112,300 |
||||||
|
Accounts receivable |
1,135,500 |
1,158,500 |
(23,000 |
) |
|||||
|
Inventory |
1,844,800 |
1,713,900 |
130,900 |
||||||
|
Property, plant, and equipment |
3,316,600 |
2,964,200 |
352,400 |
||||||
|
Accumulated depreciation |
(1,160,900 |
) |
(1,040,300 |
) |
(120,600 |
) |
|||
|
Investment in Myers Co. |
309,500 |
274,000 |
35,500 |
||||||
|
Loan receivable |
250,500 |
— |
250,500 |
||||||
|
Total assets |
$6,508,400 |
$5,770,400 |
$738,000 |
||||||
|
Accounts payable |
$1,015,400 |
$955,000 |
$60,400 |
||||||
|
Income taxes payable |
29,900 |
50,300 |
(20,400 |
) |
|||||
|
Dividends payable |
79,600 |
100,500 |
(20,900 |
) |
|||||
|
Lease liabililty |
412,000 |
— |
412,000 |
||||||
|
Common stock, $1 par |
500,000 |
500,000 |
— |
||||||
|
Paid-in capital in excess of par—common stock |
1,511,500 |
1,511,500 |
— |
||||||
|
Retained earnings |
2,960,000 |
2,653,100 |
306,900 |
||||||
|
Total liabilities and stockholders’ equity |
$6,508,400 |
$5,770,400 |
$738,000 |
||||||
Additional information:
| 1. | On December 31, 2019, Flounder acquired 25% of Myers Co.’s common stock for $274,000. On that date, the carrying value of Myers’s assets and liabilities, which approximated their fair values, was $1,096,000. Myers reported income of $142,000 for the year ended December 31, 2020. No dividend was paid on Myers’s common stock during the year. | |
| 2. | During 2020, Flounder loaned $312,200 to TLC Co., an unrelated company. TLC made the first semiannual principal repayment of $61,700, plus interest at 10%, on December 31, 2020. | |
| 3. | On January 2, 2020, Flounder sold equipment costing $59,600, with a carrying amount of $37,700, for $40,200 cash. | |
| 4. | On December 31, 2020, Flounder entered into a capital lease for an office building. The present value of the annual rental payments is $412,000, which equals the fair value of the building. Flounder made the first rental payment of $59,700 when due on January 2, 2021. | |
| 5. | Net income for 2020 was $386,500. | |
| 6. | Flounder declared and paid the following cash dividends for 2020 and 2019. |
|
2020 |
2019 |
|||
|---|---|---|---|---|
|
Declared |
December 15, 2020 | December 15, 2019 | ||
|
Paid |
February 28, 2021 | February 28, 2020 | ||
|
Amount |
$79,600 | $100,500 |
Prepare a statement of cash flows for Flounder Corp. for the year
ended December 31, 2020, using the indirect method.
(Show amounts that decrease cash flow with either a -
sign e.g. -15,000 or in parenthesis e.g.
(15,000).)
In: Accounting
Problem 23-01 The following are Kingbird Corp.’s comparative balance sheet accounts at December 31, 2020 and...
Problem 23-01
The following are Kingbird Corp.’s comparative balance sheet accounts at December 31, 2020 and 2019, with a column showing the increase (decrease) from 2019 to 2020.
|
COMPARATIVE BALANCE SHEETS |
|||||||||
|---|---|---|---|---|---|---|---|---|---|
|
2020 |
2019 |
Increase |
|||||||
|
Cash |
$821,300 |
$694,000 |
$127,300 |
||||||
|
Accounts receivable |
1,124,400 |
1,158,200 |
(33,800 |
) |
|||||
|
Inventory |
1,852,600 |
1,702,600 |
150,000 |
||||||
|
Property, plant, and equipment |
3,300,400 |
2,951,400 |
349,000 |
||||||
|
Accumulated depreciation |
(1,174,500 |
) |
(1,048,100 |
) |
(126,400 |
) |
|||
|
Investment in Myers Co. |
312,300 |
273,800 |
38,500 |
||||||
|
Loan receivable |
250,100 |
— |
250,100 |
||||||
|
Total assets |
$6,486,600 |
$5,731,900 |
$754,700 |
||||||
|
Accounts payable |
$1,019,600 |
$959,800 |
$59,800 |
||||||
|
Income taxes payable |
29,800 |
50,100 |
(20,300 |
) |
|||||
|
Dividends payable |
79,400 |
99,100 |
(19,700 |
) |
|||||
|
Lease liabililty |
408,500 |
— |
408,500 |
||||||
|
Common stock, $1 par |
500,000 |
500,000 |
— |
||||||
|
Paid-in capital in excess of par—common stock |
1,504,000 |
1,504,000 |
— |
||||||
|
Retained earnings |
2,945,300 |
2,618,900 |
326,400 |
||||||
|
Total liabilities and stockholders’ equity |
$6,486,600 |
$5,731,900 |
$754,700 |
||||||
Additional information:
| 1. | On December 31, 2019, Kingbird acquired 25% of Myers Co.’s common stock for $273,800. On that date, the carrying value of Myers’s assets and liabilities, which approximated their fair values, was $1,095,200. Myers reported income of $154,000 for the year ended December 31, 2020. No dividend was paid on Myers’s common stock during the year. | |
| 2. | During 2020, Kingbird loaned $309,100 to TLC Co., an unrelated company. TLC made the first semiannual principal repayment of $59,000, plus interest at 10%, on December 31, 2020. | |
| 3. | On January 2, 2020, Kingbird sold equipment costing $59,500, with a carrying amount of $38,400, for $39,900 cash. | |
| 4. | On December 31, 2020, Kingbird entered into a capital lease for an office building. The present value of the annual rental payments is $408,500, which equals the fair value of the building. Kingbird made the first rental payment of $59,800 when due on January 2, 2021. | |
| 5. | Net income for 2020 was $405,800. | |
| 6. | Kingbird declared and paid the following cash dividends for 2020 and 2019. |
|
2020 |
2019 |
|||
|---|---|---|---|---|
|
Declared |
December 15, 2020 | December 15, 2019 | ||
|
Paid |
February 28, 2021 | February 28, 2020 | ||
|
Amount |
$79,400 | $99,100 |
Prepare a statement of cash flows for Kingbird Corp. for the year
ended December 31, 2020, using the indirect method.
(Show amounts that decrease cash flow with either a -
sign e.g. -15,000 or in parenthesis e.g.
(15,000).)
In: Accounting
Problem 23-01 Your answer is partially correct. Try again. The following are Marigold Corp.’s comparative balance...
|
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In: Accounting
The following are Flounder Corp.’s comparative balance sheet accounts at December 31, 2020 and 2019, with...
The following are Flounder Corp.’s comparative balance sheet
accounts at December 31, 2020 and 2019, with a column showing the
increase (decrease) from 2019 to 2020.
|
COMPARATIVE BALANCE SHEETS |
|||||||||
|---|---|---|---|---|---|---|---|---|---|
|
2020 |
2019 |
Increase |
|||||||
|
Cash |
$822,600 |
$700,100 |
$122,500 |
||||||
|
Accounts receivable |
1,139,300 |
1,157,900 |
(18,600 |
) |
|||||
|
Inventory |
1,835,600 |
1,726,700 |
108,900 |
||||||
|
Property, plant, and equipment |
3,276,300 |
2,980,900 |
295,400 |
||||||
|
Accumulated depreciation |
(1,165,600 |
) |
(1,047,400 |
) |
(118,200 |
) |
|||
|
Investment in Myers Co. |
312,200 |
272,500 |
39,700 |
||||||
|
Loan receivable |
251,900 |
— |
251,900 |
||||||
|
Total assets |
$6,472,300 |
$5,790,700 |
$681,600 |
||||||
|
Accounts payable |
$1,016,000 |
$949,400 |
$66,600 |
||||||
|
Income taxes payable |
30,200 |
49,700 |
(19,500 |
) |
|||||
|
Dividends payable |
79,200 |
99,100 |
(19,900 |
) |
|||||
|
Lease liabililty |
355,000 |
— |
355,000 |
||||||
|
Common stock, $1 par |
500,000 |
500,000 |
— |
||||||
|
Paid-in capital in excess of par—common stock |
1,501,300 |
1,501,300 |
— |
||||||
|
Retained earnings |
2,990,600 |
2,691,200 |
299,400 |
||||||
|
Total liabilities and stockholders’ equity |
$6,472,300 |
$5,790,700 |
$681,600 |
||||||
Additional information:
| 1. | On December 31, 2019, Flounder acquired 25% of Myers Co.’s common stock for $272,500. On that date, the carrying value of Myers’s assets and liabilities, which approximated their fair values, was $1,090,000. Myers reported income of $158,800 for the year ended December 31, 2020. No dividend was paid on Myers’s common stock during the year. | |
| 2. | During 2020, Flounder loaned $255,500 to TLC Co., an unrelated company. TLC made the first semiannual principal repayment of $3,600, plus interest at 10%, on December 31, 2020. | |
| 3. | On January 2, 2020, Flounder sold equipment costing $59,600, with a carrying amount of $37,800, for $39,900 cash. | |
| 4. | On December 31, 2020, Flounder entered into a capital lease for an office building. The present value of the annual rental payments is $355,000, which equals the fair value of the building. Flounder made the first rental payment of $60,100 when due on January 2, 2021. | |
| 5. | Net income for 2020 was $378,600. | |
| 6. | Flounder declared and paid the following cash dividends for 2020 and 2019. |
|
2020 |
2019 |
|||
|---|---|---|---|---|
|
Declared |
December 15, 2020 | December 15, 2019 | ||
|
Paid |
February 28, 2021 | February 28, 2020 | ||
|
Amount |
$79,200 | $99,100 |
Prepare a statement of cash flows for Flounder Corp. for the year
ended December 31, 2020, using the indirect method.
(Show amounts that decrease cash flow with either a -
sign e.g. -15,000 or in parenthesis e.g.
(15,000).)
In: Accounting
The following are Waterway Corp.’s comparative balance sheet accounts at December 31, 2020 and 2019, with...
The following are Waterway Corp.’s comparative balance sheet
accounts at December 31, 2020 and 2019, with a column showing the
increase (decrease) from 2019 to 2020.
|
COMPARATIVE BALANCE SHEETS |
|||||||||
|---|---|---|---|---|---|---|---|---|---|
|
2020 |
2019 |
Increase |
|||||||
|
Cash |
$807,900 |
$696,100 |
$111,800 |
||||||
|
Accounts receivable |
1,130,100 |
1,166,300 |
(36,200 |
) |
|||||
|
Inventory |
1,850,400 |
1,707,300 |
143,100 |
||||||
|
Property, plant, and equipment |
3,324,100 |
2,995,100 |
329,000 |
||||||
|
Accumulated depreciation |
(1,163,100 |
) |
(1,032,700 |
) |
(130,400 |
) |
|||
|
Investment in Myers Co. |
308,700 |
277,600 |
31,100 |
||||||
|
Loan receivable |
250,800 |
— |
250,800 |
||||||
|
Total assets |
$6,508,900 |
$5,809,700 |
$699,200 |
||||||
|
Accounts payable |
$1,019,400 |
$949,200 |
$70,200 |
||||||
|
Income taxes payable |
30,100 |
50,300 |
(20,200 |
) |
|||||
|
Dividends payable |
79,800 |
99,100 |
(19,300 |
) |
|||||
|
Lease liabililty |
389,500 |
— |
389,500 |
||||||
|
Common stock, $1 par |
500,000 |
500,000 |
— |
||||||
|
Paid-in capital in excess of par—common stock |
1,499,000 |
1,499,000 |
— |
||||||
|
Retained earnings |
2,991,100 |
2,712,100 |
279,000 |
||||||
|
Total liabilities and stockholders’ equity |
$6,508,900 |
$5,809,700 |
$699,200 |
||||||
Additional information:
| 1. | On December 31, 2019, Waterway acquired 25% of Myers Co.’s common stock for $277,600. On that date, the carrying value of Myers’s assets and liabilities, which approximated their fair values, was $1,110,400. Myers reported income of $124,400 for the year ended December 31, 2020. No dividend was paid on Myers’s common stock during the year. | |
| 2. | During 2020, Waterway loaned $289,200 to TLC Co., an unrelated company. TLC made the first semiannual principal repayment of $38,400, plus interest at 10%, on December 31, 2020. | |
| 3. | On January 2, 2020, Waterway sold equipment costing $60,500, with a carrying amount of $38,400, for $39,800 cash. | |
| 4. | On December 31, 2020, Waterway entered into a capital lease for an office building. The present value of the annual rental payments is $389,500, which equals the fair value of the building. Waterway made the first rental payment of $60,100 when due on January 2, 2021. | |
| 5. | Net income for 2020 was $358,800. | |
| 6. | Waterway declared and paid the following cash dividends for 2020 and 2019. |
|
2020 |
2019 |
|||
|---|---|---|---|---|
|
Declared |
December 15, 2020 | December 15, 2019 | ||
|
Paid |
February 28, 2021 | February 28, 2020 | ||
|
Amount |
$79,800 | $99,100 |
Prepare a statement of cash flows for Waterway Corp. for the year
ended December 31, 2020, using the indirect method.
(Show amounts that decrease cash flow with either a -
sign e.g. -15,000 or in parenthesis e.g.
(15,000).)
|
WATERWAY CORP. |
|---|
In: Accounting
The following diagram represents the money market in the United States, which is currently in equilibrium, as indicated by the grey star.
The effect of changes in the money supply
The following diagram represents the money market in the United States, which is currently in equilibrium, as indicated by the grey star.
Suppose the Federal Reserve (the Fed) announces that it is raising its target interest rate by 50 basis points, or 0.50%. It would achieve this by
_______ the _______ . Use the green line (triangle symbols) on the preceding graph to illustrate the effects of this policy. Place the black point (plus symbol) on the graph to indicate the new equilibrium interest rate and quantity of money.
The sequence of events that results in a new equilibrium interest rate, after the Fed makes the change you selected, may be described as follows:
Because there is _______ money in the financial system, there is an excess _______ money at the initial equilibrium interest rate.
Individuals and businesses adjust their asset portfolios by _______ bonds. As a result, the price of bonds _______ , and the interest rate _______ . This process continues until the new equilibrium interest rate is achieved.
In: Economics
Red Canyon T-shirt Company operates a chain of T-shirt shops in the southwestern United States. The...
Red Canyon T-shirt Company operates a chain of T-shirt shops in the southwestern United States. The sales manager has provided a sales forecast for the coming year, along with the following information:
| Quarter 1 | Quarter 2 | Quarter 3 | Quarter 4 | |
| Budgeted Unit Sales | 32,000 | 52,000 | 26,000 | 52,000 |
Each T-shirt is expected to sell for $20.
The purchasing manager buys the T-shirts for $8 each.
The company needs to have enough T-shirts on hand at the end of each quarter to fill 30 percent of the next quarter’s sales demand.
Selling and administrative expenses are budgeted at $64,000 per quarter plus 16 percent of total sales revenue.
Required:
.1. Determine budgeted sales revenue for each quarter.
2. Determine budgeted cost of merchandise purchased for each quarter.
3. Determine budgeted cost of good sold for each quarter.
4. Determine selling and administrative expenses for each quarter.
5. Complete the budgeted income statement for each quarter.
In: Accounting
Red Canyon T-shirt Company operates a chain of T-shirt shops in the southwestern United States. The...
| Red Canyon T-shirt Company operates a chain of T-shirt shops in the southwestern United States. The sales manager has provided a sales forecast for the coming year, along with the following information: |
| Quarter 1 | Quarter 2 | Quarter 3 | Quarter 4 | ||||
| Budgeted Unit Sales | 40,000 | 60,000 | 30,000 | 60,000 | |||
| • | Each T-shirt is expected to sell for $15. |
| • | The purchasing manager buys the T-shirts for $6 each. |
| • | The company needs to have enough T-shirts on hand at the end of each quarter to fill 25 percent of the next quarter’s sales demand. |
| • | Selling and administrative expenses are budgeted at $80,000 per quarter plus 10 percent of total sales revenue. |
| Required: | |
| 1. | Determine budgeted sales revenue for each quarter. |
| 2. | Determine budgeted cost of merchandise purchased for each quarter. |
| 3. | Determine budgeted cost of good sold for each quarter. |
| 4. | Determine selling and administrative expenses for each quarter. |
| 5. | Complete the budgeted income statement for each quarter. |
In: Accounting
The following diagram represents the money market in the United States, which is currently in equilibrium, as indicated by the grey star.
2. Equilibrium and disequilibrium in the money market
The following diagram represents the money market in the United States, which is currently in equilibrium, as indicated by the grey star.
Suppose the Federal Reserve (the Fed) announces that it is lowering its target interest rate by 50 basis points, or 0.50%. It would achieve this by _______ the _______ . Use the green line (triangle symbols) on the preceding graph to illustrate the effects of this policy. Place the
black point (plus symbol) on the graph to indicate the new equilibrium interest rate and quantity of money.
The sequence of events that results in a new equilibrium interest rate, after the Fed makes the change you selected, may be described as follows: Because there is _______ money in the financial system, the quantity of interest-bearing financial assets (such as bonds) demanded _______ , which means that bond issuers _______ sell bonds. This process continues until the new equilibrium interest rate is achieved.
Answers in the bank:
1st blank: Increasing, Decreasing
2nd: Money Supply, Money Demand
3rd: Less, More
4th: Decreases, Increases
5th:Must raise the interest they pay to, can issue bonds at lower interest rates and still
In: Economics