Bramble Corporation purchased a new machine for its assembly process on August 1, 2020. The cost of this machine was $150,900. The company estimated that the machine would have a salvage value of $15,900 at the end of its service life. Its life is estimated at 5 years, and its working hours are estimated at 22,500 hours. Year-end is December 31.

Compute the depreciation expense under the following methods. Each of the following should be considered unrelated. (Round depreciation rate per hour to 2 decimal places, e.g. 5.35 for computational purposes. Round your answers to 0 decimal places, e.g. 45,892.)

The spot price for gas today (March 19, 2020) is $1.661 MMBtu.  The futures price today for gas to be delivered in June 2021 is $2.245.  Your company is a gas purchaser/user and is interested in the hedging process.

1. You are a speculator and believe the price of gas will increase.  You have a chance to buy a June 2021 futures contract at $2.245.  Would you go short or go long on a June 2021 futures contract for 10,000 MMBtus?  

2. It is now December 31, 2020 On this day, the spot price for natural gas is $2.450 per MMBtu and the June 2021 futures price is $2.310 per MMBtu.  What is the amount of gain or loss related to your contract as of December 31, 2020?

3. As a speculator the last thing you want to do is either take delivery of or actually sell natural gas.  Explain how you would get out of the contract you purchased in part e. prior to the June 2021 delivery date.

Required     

(a) Calculate the depreciation expense using the straight-line method for 2019 and 2020.
(b) Calculate the depreciation expense using the diminishing-balance method and a depreciation rate of 25% for 2019 and 2020.
(c) Calculate the depreciation expense using the units-of-production method for 2019, assuming the machine usage was 1,820 hours
(d) On 31 December 2020 the company discarded a delivery truck that was purchased on 1 January 2016 for $23,980 cash (including
GST of 10%) and was depreciated on a straight line basis with a useful life of 6 years and a residual value of $2180 (excluding GST).
What was the profit or loss on the scrapping of the truck?

Use the following information to answer MCQ21 to MCQ23

On January 1st, 2018, Crane Construction Corporation signed a contract to construct a building with a contract price of $18,000,000. The company expects to get this contract completed by 2020. Crane uses the percentage of completion method Information relating to the costs, billings, and collections for this contract is as follows:

                                                                             2018                   2019                  2020   

Total costs incurred to date                            $4,500,000            $7,920,000          $13,800,000

Estimated costs to complete                            7,500,000              5,280,000                     -0-

Customer billings to date                                  6,600,000            12,000,000            16,800,000

Collections to date                                            6,000,000            10,500,000            16,500,000

What is the percentage of completion for the year 2019?

Select one:

a. 0.26

b. 0.375

c. 0.66

d. 0.60

What is the gross profit that Crane Cor to recognize in 2020?

Select one:

a. $4,200,000

b. $2,250,000

c. $6,000,000

d. $1,320,000

How much the cost incurred in the year 2019 only:

Select one:

a. $7,920,000

b. $13,200,000

c. $3,420,000

d. $5,280,000

On July 1, 2018 a full year’s insurance premium of $2,400, covering the period July 1, 2018,to June 30, 2019 was paid and debited to insurance expense. Assume the following:



The company has a calendar fiscal year.



January 1, 2018, retained earnings balance is $20,000.



2018 reported net income (assuming the error is not discovered)is $22,800.



2019 net income (assuming the error is not discovered) is $30,000.



2020 net income is $40,000. Ignore taxes

REQUIRED:

a.

List the effects of the error on affected accounts and on net income in 2018 and 2019,assuming no adjusting entry is made on December 31, 2018.

b.

Prepare the entry to record the error if discovered in 2018.

c.

Prepare the entry to record the error if discovered in 2019, and the 2018 and 2019 retained earnings sections of the statement of stockholders’ equity.

d.

Prepare the entry (if needed) to record the error if discovered in 2020, and the 2019 and 2020 retained earnings sections of the statement of stockholders’ equity.

On February 1, 2020 Britney contacts Fancy Weddings, Inc. about being the event management company to coordinate her wedding in June 2020. They discuss what Britney is interested in for the wedding and agree to perform all the wedding services at a cost of $10,000. Fancy sends a written contract to Britney outlining everything both parties had agreed to and Britney calls Fancy back and advises she received the letter and is an accurate description of their agreement, but Britney never signs the contract. On March 1, 2020 Britney calls back Fancy and tells them the deal is off because she thinks she can do a better job by herself. Fancy sues Britney and Britney argues a lack of consideration as a defense.

A. Will this defense be successful? Please explain.

B. Under the same facts as above Britney argues that the contract is not binding because of the Statute of Frauds. Will this defense be successful? Please explain.

Calculate the total depreciation for these various assets - All assets are business use. Joe purchased a 5 year asset for $1,190,000 on 6/13/2020. Joe wants to take the maximum amount of Sec 179 depreciation as possible. Taxable income for 2020 was $1,125,000. Calculate the depreciation expense for 2020. Joe sold the asset in 2021. Additional first year depreciation was not taken in 2020. Calculate the depreciation for 2021. 2020: 2021:

The profit before tax, as reported in the statement of profit and loss for Aileen Ltd for the year ended 30 June 2020, amounted to $150,000, including the following revenue and expense items:

Revenues

Sales revenue $600,000

Interest revenue 60,000

Government grant 40,000

Expenses

Cost of goods sold 300,000

Bad debts expense 8,000

Depreciation expense – equipment 6,000

Depreciation expense – plant 25,000

Research and development expense 51,000

Wages expense 120,000

Long service leave expense 40,000

The draft statement of financial position of Aileen Ltd at 30 June 2020 and the statement from last year showed the following assets and liabilities:

2019 2020

Assets

Cash $30,000 $30,000

Inventory 100,000 150,000

Accounts receivable 50,000 70,000

Allowance for doubtful debts (5,000) (10,000)

Interest receivable 25,000 20,000

Equipment—cost 30,000 30,000

Accumulated depreciation-equipment (12,000) (18,000)

Plant—cost 500,000 500,000

Accumulated depreciation-plant (50,000) (75,000)

Goodwill 15,000 15,000

Deferred tax asset 33,000, ?

Liabilities

Accounts payable 60,000 40,000

Wages payable 50,000 80,000

Revenue received in advance - , 40,000

Loan payable 200,000 100,000

Provision for long-service leave 40,000 30,000

Deferred tax liability 18,730, ?

Additional information:

In the year ended 30 June 2019, Aileen Ltd had a tax loss of $70,000 that it carried over in the deferred tax asset. In June 2020, the company received an amended assessment for the year ended 30 June 2020 from the ATO, indicating that an amount of $10,000 claimed as a deduction has been disallowed. Aileen Ltd has not yet adjusted its accounts to reflect the amendment. The remaining losses can be used to offset taxable incomes in future periods.

Amounts received from sales, including those on credit terms, are taxed at the time the sale is made. All other general taxation rules apply.

The depreciation regimes for the financial reports and the company income tax return respectively, are listed below.

Depreciation Regimes Equipment Plant Depreciation rate:

All research and development expenses were paid in cash during the year ended 30 June 2020. A tax deduction for development costs of 120% of the $51,000 spent during the year is available

All movements of deferred tax accounts during the year are not yet recongised.

The company tax rate applicable is 30%.

REQUIRED: (a) Determine the taxable profit for the year ended 30 June 2020. Start from the accounting profit before tax and show the adjustments for differences between taxation and accounting rules.

(b) Complete the worksheet on the additional page provided to determine the movements in the deferred tax accounts for the year ended 30 June 2020.

(c) Prepare the journal entries to recognise the current tax liability and the final deferred tax adjustments for the year ended 30 June 2020 including the movement during the year due to carry-forward tax loss. Note Aileen Ltd does not set off the deferred tax accounts against each other.

2. On December 1, 20X1, Rone Imports, a U.S. company, purchased clocks from Switzerland for 15,000 francs (SFr) to be paid on January 15, 20X2. Rone’s fiscal year ends on December 31, and its reporting currency is the U.S. dollar. The exchange rates are

December 1, 20X1                              1 SFr   =    $ 0.70      

December 31, 20X1                            1 SFr   =        0.66      

January 15, 20X2                                1 SFr   =        0.68      

Required:

1). Prepare journal entries for Rone to record the purchase, assuming the fiscal year ends on December 31, through January 15, 20X2. (10 points)

Journal entries

12/01/20X1:  

12/31/20X1:  

01/15/20X2:

An American multinational company is now considering two mutually exclusive alternatives for the environmental protection equipment at its manufacturing plant in the United Kingdom. One of these alternatives must be selected. The estimated cash flows for each alternative are listed in the below table.

Assume that the equipment will be needed indefinitely and the firm’s MARR relative to British pound (GBP) is 20% per year.

Assuming British pound is devalued against the U.S. dollar by 2% per year. What is the equivalent MARR (in percentage) relative to the U.S. dollar?