Andrea would like to organize SHO as either an LLC (taxed as a sole proprietorship) or a C corporation. In either form, the entity is expected to generate an 12 percent annual before-tax return on a $650,000 investment. Andrea’s marginal income tax rate is 35 percent and her tax rate on dividends and capital gains is 15 percent. Andrea will also pay a 3.8 percent net investment income tax on dividends and capital gains she recognizes. If Andrea organizes SHO as an LLC, Andrea will be required to pay an additional 2.9 percent for self-employment tax and an additional 0.9 percent for the additional Medicare tax. Further, she is eligible to claim the full deduction for qualified business income. Assume that SHO will pay out all of its after-tax earnings every year as a dividend if it is formed as a C corporation. (Round your intermediate computations to the nearest whole dollar amount.)

a. How much cash after taxes would Andrea receive from her investment in the first year if SHO is organized as either an LLC or a C corporation?

b. What is the overall tax rate on SHO’s income in the first year if SHO is organized as an LLC or as a C corporation? (Round your final answers to 2 decimal places.)

Sandra would like to organize BAL as either an LLC (taxed as a sole proprietorship) or a C corporation. In either form, the entity is expected to generate an 12 percent annual before-tax return on a $650,000 investment. Sandra’s marginal income tax rate is 37 percent and her tax rate on dividends and capital gains is 23.8 percent (including the 3.8 percent net investment income tax). If Sandra organizes BAL as an LLC, she will be required to pay an additional 2.9 percent for self-employment tax and an additional 0.9 percent for the additional Medicare tax. BAL’s income is not qualified business income (QBI) so Sandra is not allowed to claim the QBI deduction. Assume that BAL will distribute all of its after-tax earnings every year as a dividend if it is formed as a C corporation. (Round your intermediate computations to the nearest whole dollar amount.)

a. How much cash after taxes would Sandra receive from her investment in the first year if BAL is organized as either an LLC or a C corporation?

b. What is the overall tax rate on BAL’s income in the first year if BAL is organized as an LLC or as a C corporation? (Round your final answers to 2 decimal places.)

Consider the following time series data.

Excel File: data17-35.xls

b. Show the four-quarter and centered moving average values for this time series (to 3 decimals if necessary).

c. Compute seasonal indexes and adjusted seasonal indexes for the four quarters (to 3 decimals).

General Motors and Ford use the last-in, first-out (LIFO) method to value their inventories. Honda (of Japan) and Daimler-Benz (manufacturer of Mercedes-Benz of Germany) use the firstin, first-out (FIFO) method. Under LIFO, recent costs are expensed as cost of goods sold; under FIFO, older costs are expensed as cost of goods sold.

Required:  Given the income statement effects of LIFO versus FIFO, how will the balance sheet inventory amounts differ between General Motors and Ford versus Honda and DaimlerBenz? In other words, will inventory be reported amounts representing recent costs or older historical costs?  In your opinion, which balance sheet amounts would be more useful to financial statement users in making decisions to buy or sell shares of a company’s stock?

Oakville Corp. incurred the following costs during 2020 in connection with its research and development phase activities:

(a)

Calculate the amount to be reported as research and development expense by Oakville on its income statement for 2020. Assume the equipment is purchased at the beginning of the year. Assume the company follows IFRS for financial reporting purposes.

On January 1, 2018, Pine Company owns 40 percent (80,000 shares) of Seacrest, Inc., which it purchased several years ago for $448,000. Since the date of acquisition, the equity method has been properly applied, and the carrying amount of the investment account as of January 1, 2018, is $580,000. Excess patent cost amortization of $24,000 is still being recognized each year. During 2018, Seacrest reports net income of $582,000 and a $240,000 other comprehensive loss, both incurred uniformly throughout the year. No dividends were declared during the year. Pine sold 16,000 shares of Seacrest on August 1, 2018, for $168,759 in cash. However, Pine retains the ability to significantly influence the investee. During the last quarter of 2017, Pine sold $60,000 in inventory (which it had originally purchased for only $36,000) to Seacrest. At the end of that fiscal year, Seacrest's inventory retained $13,900 (at sales price) of this merchandise, which was subsequently sold in the first quarter of 2018. On Pine's financial statements for the year ended December 31, 2018, what income effects would be reported from its ownership in Seacrest?

Problem 3 (13 pts.)

     On November 1, 2019, Franco Corporation purchased equipment costing $20,000 by giving a 6%, 90-day note.

     Prepare general journal entries to record:

1. the acquisition of the equipment

      b) the year end accrual of interest at December 31

3. the payment of the note on January 31.

Problem 4 (7 pts.)

During the first quarter of 2020, Pouncey Products sold 40,000 units of its best-selling product. Pouncey expects

2% of these units to be returned for repair under warranty. The typical cost to repair items under warranty is $10.

The actual costs incurred to repair products under warranty ended up being $7,100.

Prepare the journal entries Pouncey would make to estimate its warranty expense for the quarter, and an entry to record the actual warranty costs incurred.

Problem 5 (9 pts.)

List 3 things that would be withheld from an employee’s paycheck and 3 payroll taxes levied against an employer.

Problem 6 (5 pts.)

Explain the difference between a capital lease and an operating lease and give an example of each.

Management of Mittel Rhein AG of Köln, Germany, would like to reduce the amount of time between when a customer places an order and when the order is shipped. For the first quarter of operations during the current year the following data were reported:

Inspection time 0.4 days Wait time (from order to start of production) 16.2 days Process time 3.4 days Move time 1.0 days Queue time 3.5 days

Required: 1. Compute the throughput time. (Round your answer to 1 decimal place.) 2. Compute the manufacturing cycle efficiency (MCE) for the quarter. (Round your percentage answer to nearest whole percent.) 3. What percentage of the throughput time was spent in non–value-added activities? (Round your percentage answer to nearest whole percent.) 4. Compute the delivery cycle time. (Round your intermediate calculations and final answer to 1 decimal place.) 5. If by using Lean Production all queue time during production is eliminated, what will be the new MCE? (Do not round intermediate calculations. Round your percentage answer to 1 decimal place.)

Problem#4

The stockholders equity section of Carey Co.'s balance sheet at December 31, 2014, was as follows:    

       Common stock--$10 par (authorized 1,000,000 shares, issued and outstanding 600,000 shares)                                      $6,000,000      

   Paid-in capital in excess of par                         $1,500,000       

   Retained earnings                                             $3,250,000                                                             

Total         $10,750,000

Instructions: Prepare journal entries (1, 2 and 4) and show proper disclosure (3) (stockholders equity section of b/s) to reflect the following treasury stock transactions showing how each is accounted for under the cost method. (show computations)

1. On January 4, 2015 having idle cash, Carey Co repurchased 25,000 shares of its out-standing stock for $500,000

2. On March 4, Carey sold 5,000 of these reqcquired shares at $24 per share.

3. Show the proper disclosures in the stockholders equity section of the balance sheet issued at the end of the firs quarter, March 31, 2015. Assume net income of $100,000 during the first quarter.

4. On June 30, 2015 the firm sold 10,000 of the reacquired shares for $17 per share.