On February 1, 2018, Fox Corporation issued 9% bonds dated February 1, 2018, with a face amount of $240,000. The bonds sold for $219,410 and mature in 20 years. The effective interest rate for these bonds was 10%. Interest is paid semiannually on July 31 and January 31. Fox's fiscal year is the calendar year. Fox uses the straight-line method of amortization.

Required:
1. Prepare the journal entry to record the bond issuance on February 1, 2018.
2. Prepare the entry to record interest on July 31, 2018.
3. Prepare the necessary journal entry on December 31, 2018.
4. Prepare the necessary journal entry on January 31, 2019.

Federal Semiconductors issued 13% bonds, dated January 1, with a face amount of $780 million on January 1, 2018. The bonds sold for $728,006,097 and mature on December 31, 2037 (20 years). For bonds of similar risk and maturity the market yield was 14%. Interest is paid semiannually on June 30 and December 31. Required: 1. to 3. Prepare the journal entry to record their issuance by Federal on January 1, 2018, interest on June 30, 2018 (at the effective rate) and interest on December 31, 2018 (at the effective rate). 4. At what amount will Federal report the bonds among its liabilities in the December 31, 2018, balance sheet?

General Therapeutics Co.’s Revenue in 2018 was $55,000 while its cost of goods sold was $42,000; the company paid $600 in interest while value for depreciation was $6,000.

Also, for 2018 net fixed assets were $25,000 while its current assets were $8,000 and current liabilities were $5,000.

These are the values for 2017: net fixed assets = $19,500, current assets = $6,800 and current liabilities = $4,500. The tax rate is 35%.

Required:

1. What is net income for 2018?  
2. What is the operating cash flow for 2018?
3. What is the cash flow from assets for 2018? How do you interpret this result?
4. What is the cash flow to shareholders?

Multiple Choice

• $-2,710,000

• $-5,140,000

• $-3,305,000

• $3,635,000

• $-3,950,000

Ramakrishnan, Inc. reported 2018 net income of $15 million and depreciation of $3,500,000. The top part of Ramakrishnan, Inc.’s 2018 and 2017 balance sheets is listed below (in millions of dollars).

Calculate the 2018 net cash flow from operating activities for Ramakrishnan, Inc. (Enter your answer in dollars not in millions.)

On February 1, 2018, Wolf Inc. issued 10% bonds dated February 1, 2018, with a face amount of $200,000. The bonds sold for $239,588 and mature in 20 years. The effective interest rate for these bonds was 8%. Interest is paid semiannually on July 31 and January 31. Wolf's fiscal year is the calendar year. Wolf uses the effective interest method of amortization.

Required:

1. Prepare the journal entry to record the bond issuance on February 1, 2018.

2. Prepare the entry to record interest on July 31, 2018.

3. Prepare the necessary journal entry on December 31, 2018.

4. Prepare the necessary journal entry on January 31, 2019.

On January 1, 2018, Nath-Langstrom Services, Inc., a computer software training firm, leased several computers under a two-year operating lease agreement from ComputerWorld Leasing, which routinely finances equipment for other firms at an annual interest rate of 4%. The contract calls for four rent payments of $14,500 each, payable semiannually on June 30 and December 31 each year. The computers were acquired by ComputerWorld at a cost of $99,000 and were expected to have a useful life of Five years with no residual value. Both firms record amortization and depreciation semi-annually. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.)

Required:
Prepare the appropriate entries for both the lessee and the lessor from the beginning of the lease through the end of 2018.

a. record the beginning of the lease for Nath-Langstrom Services (Jan 1, 2018)

b. record the lease payment and interest expense for Nath-Langstrom Services (Jun 30. 2018)

c. record the amortization expense for Nath-Langstrom Services. (Jun 30, 2018)

d. record the lease payment and interest expense for Nath-Langstrom Services.(Dec 31, 2018)

e. record the amortization expense for Nath-Langstrom Services. (Dec 31)

f. record the lease revenue received by ComputerWorld Leasing (Jun 30. 2018

g. record the Depreciation expense for ComputerWorld Leasing. (Jun 30, 2018)

h. record the lease revenue received by ComputerWorld Leasing. (dec 31, 2018)

i. record the Depreciation expense for ComputerWorld Leasing. (Dec 31, 2018)

Problem 2: The following information is available for the first four years of operations for Jones Company

   Year           Earnings Before Tax

   2018           $800,000

   2019              730,000

2. On January 2, 2018, heavy equipment costing $600,000 was purchases. The equipment had a life of 5 years and no salvage value. The straight-line method of depreciation is used for book purposes and the tax depreciation taken each year is listed below

Tax Depreciation

2018       2019           2020           2021           2022 Total

$198,000   270,000       90,000           42,000           0 600,000

3. The company sells its merchandise on an installment contract basis. In 2018, Jones Co. elected, for tax purposes, to report the gross profit from the sales in the year the receivables are collected. However, for financial statement purposes, the company recognized all the gross profit ($800,000) in 2018. these procedures created a $600,000 difference between book and taxable incomes. The future collections of the installment contracts receivables are expected to result in taxable amounts of $200,000 one acc of the next three years.

4. In 2018 Jones Co. recorded $70,000 accrual for litigation liability which will be paid in 2019.

5. The enacted tax rates are 40% for 2018, 34% for the years after

Instructions

Prepare a schedule comparing depreciation for finances reporting and tax purposes for all years

Prepare a reconciliation of Book Income to Taxable Income for 2018

Prepare a schedule of future taxable and (deductible) amounts at the end of 2018

Prepare a schedule of deferred tax (asset) and liability at the end of 2018

Prepare the journal entry to record income tax expense, deferred income taxes, and income tax payable

On October 1, 2018, the Allegheny Corporation purchased machinery for $314,000. The estimated service life of the machinery is 10 years and the estimated residual value is $6,000. The machine is expected to produce 550,000 units during its life.

Required:
Calculate depreciation for 2018 and 2019 using each of the following methods. Partial-year depreciation is calculated based on the number of months the asset is in service.

1. Straight line.
2. Sum-of-the-years’-digits.
3. Double-declining balance.
4. One hundred fifty percent declining balance.
5. Units of production (units produced in 2018, 28,000; units produced in 2019, 43,000).

Calculate depreciation for 2018 and 2019 using straight line method. Partial-year depreciation is calculated based on the number of months the asset is in service.

Calculate depreciation for 2018 and 2019 using sum-of-the-years’ digits. Partial-year depreciation is calculated based on the number of months the asset is in service.

Calculate depreciation for 2018 and 2019 using double-declining balance. Partial-year depreciation is calculated based on the number of months the asset is in service.