Alsup Consulting sometimes performs services for which it receives payment at the conclusion of the engagement, up to six months after services commence. Alsup recognizes service revenue for financial reporting purposes when the services are performed. For tax purposes, revenue is reported when fees are collected. Service revenue, collections, and pretax accounting income for 2020–2023 are as follows:

There are no differences between accounting income and taxable income other than the temporary difference described above. The enacted tax rate for each year is 25%.

Prepare the appropriate journal entries to record Alsup's 2021 income taxes, 2022 income taxes and 2023 income taxes. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in thousands.)

Exercise 18-23

At the end of 2016, Concord Corporation reported a deferred tax liability of $43,000. At the end of 2017, the company had $245,000 of temporary differences related to property, plant, and equipment. Depreciation expense on this property, plant, and equipment has been lower than the CCA claimed on Concord’s income tax returns. The resulting future taxable amounts are as follows:

The tax rates enacted as of the beginning of 2016 are as follows: 32% for 2016 and 2017; 31% for 2018 and 2019; and 26% for 2020 and later. Taxable income is expected in all future years.

Calculate the deferred tax account balance at December 31, 2017.

Prepare the journal entry for Concord to record deferred taxes for 2017.

Early in 2018, after the 2017 financial statements were released, new tax rates were enacted as follows: 30% for 2018 and 28% for 2019 and later.
Prepare the journal entry for Concord to recognize the change in tax rates.

5. On December 1, 2018, Folks Wagon Company adopted a stock-option plan that granted options

to key executives to purchase 50,000 shares of the company’s $10 par value common stock. The

options were granted on January 1, 2019, and were exercisable 3 years after the date of grant if the

grantee was still an employee of the company. The options expired 5 years from the date of grant.

The option price was set at $35, and the fair value option-pricing model determines the total

compensation expense to be $450,000.

All of the options were exercised during the year 2022: 20,000 on February 23 when the market

price was $46, and 30,000 on August 8 when the market price was $85 a share.

a. Prepare the journal entries relating to the stock option plan for the years 2019, 2020, and 2021.

Assume that the employee performs services equally in 2019, 2020, and 2021.

b. Prepare the journal entries that record the two events of exercising the options in 2022.

On December 1, 2018, Folks Wagon Company adopted a stock-option plan that granted options to key executives to purchase 50,000 shares of the company’s $10 par value common stock. The options were granted on January 1, 2019, and were exercisable 3 years after the date of grant if the grantee was still an employee of the company. The options expired 5 years from the date of grant. The option price was set at $35, and the fair value option-pricing model determines the total compensation expense to be $450,000.

All of the options were exercised during the year 2022: 20,000 on February 23 when the market price was $46, and 30,000 on August 8 when the market price was $85 a share.

a. Prepare the journal entries relating to the stock option plan for the years 2019, 2020, and 2021. Assume that the employee performs services equally in 2019, 2020, and 2021.

b. Prepare the journal entries that record the two events of exercising the options in 2022.

QUESTION THREE                                                                                                              

Joe Soap owns a general dealer business situated in Umzinto. The following information was provided for Joe’s General Dealers for the financial year ended 28 February 2020.

Joe’s General Dealers

Additional information

1. Physical stock-take on 28 February 2020 revealed the following Inventories on hand;

• Trading inventory                                                 R228 250, and
• Consumable inventory: packing material            R3 600

2. A new tenant rented a portion of the premises from 1 March 2019. According to the rental agreement the rent for the period 1 March 2019 to 31 March 2020 was R1 500 per month. Rent is usually received in advance ie. rent is received in the month before it is due. For example; the April 2019 rent was received during March 2019.
3. Commission income of R10 800, earned in February 2020, has not yet been received nor recorded.
4. Electricity and water of R1 600 for February 2020 has not been paid and is not yet included in the above records.
5. The long term loan from People’s Bank was obtained on 1 September 2016 at an interest rate of 11,5% per year. The loan was payable in four (4) equal annual instalments. The first instalment was paid on 31 August 2019. The second instalment is payable on 31 August 2020. Interest is paid during March each year.
6. A debtor who owes Joe’s General Dealers R12 680 cannot be traced. His account must be written-off as irrecoverable.
7. The insurance account balance of R25 725 covers the period 1 March 2019 to 30 April 2020. The monthly insurance premium remained unchanged during this period.
8. Provide for depreciation for the year as follows:

• Vehicles – at 10% per year on straight line method, and
• Equipment – at 14% on the diminishing balance method.

      There were no purchases or sales of the above items during the current financial year.

Required:

Use the above information to prepare the statement of profit and loss and other comprehensive income for Joe’s General Dealers for the year ended 28 February 2020.         

Your answer must comply with International Financial Reporting Standards that are appropriate to this type of business.

Round off all amounts to the nearest rand.

All calculations must be shown

Complete the Table by Choosing one of the following options to analyse each Transaction of Ben Bicycle Traders for February 2020

Yes – Debit entry

Yes- Credit Entry

No Entry

A comparison of the Bank Statement of Bicycle Traders for February 2020 with the Bank reconciliation Statement at 31 January 2020, and the Cash Reports for February 2020, revealed the following:

1. The Bank account at 31 January 2020 had an unfavourable balance of R11 000
2. The cash Reports of Feb 2020 reflected the following amounts:
   1. Total Cash Receipts of R45390
   2. Total Cash payments of R39650
3. The Bank Reconciliation statement at 31 January 2020 reflected the outstanding Deposit of 2 Debtors, Z. Bently for R4300 and A. Roggers for R3500 . The bank credited the deposit From Z Bently on 1 Feb 2020
4. On 5 Feb 2020 , it was discovered that the A.Roggers a Debtor , provided a Fictitious proof of payment on 31 January 2020 to the accountant of Bicycle Traders . The amount of R3500 was not deposited into the bank account .
5. An amount paid for telephone was entered incorrectly as R2509 in the cash payments report , but shown correctly as R2905 on the bank statement .
6. The following amount appeared on the bank statement but wasn’t recorded by the accountant in the cash reports
   1. Interest on a Fixed Deposit R895
   2. Stop Order for insurance R1245
7. On 29 Feb 2020, a tenant of Ben Bicycle, D Donald, paid R2000 of his total rental of R6500 in cash and the balance via EFT. The cash received and the EFT were correctly recorded by the entity. The accountant however only deposited the cash on 1 March 2020, the EFT immediately reflected in the Bank account
8. The bank statement reflected an unfavourable balance of R11506 on 29 Feb 2020

Presented here are summarized data from the balance sheets and income statements of Wiper Inc.:

Required:

1. Calculate return on investment, based on net income and average total assets, for 2020 and 2019.
2. Calculate return on equity for 2020 and 2019.
3. Calculate working capital and the current ratio for each of the past three years.
4. Calculate earnings per share for 2020 and 2019.
5. If Wiper's stock had a price/earnings ratio of 13 at the end of 2020, what was the market price of the stock?
6. Calculate the cash dividend per share for 2020 and the dividend yield based on the market price calculated in part e.
7. Calculate the dividend payout ratio for 2020.
8. Assume that accounts receivable at December 31, 2020, totaled $317 million. Calculate the number of days' sales in receivables at that date.
9. Calculate Wiper's debt ratio and debt/equity ratio at December 31, 2020 and 2019.
10. Calculate the times interest earned ratio for 2020 and 2019.

In 2013, Apple Inc. sold $17 billion of bonds in the biggest corporate offering on record as the iPhone maker seeks to help finance a $100 billion capital reward for shareholders. This financial policy changed Apple’s capital structure significantly. The leverage ratio of Apple increased after the buyback of common stocks and the issuance of long-term bonds. Repurchase is a way to give it back to shareholders. It is especially the case for Apple as the company has been piling up cash and now shows signs of a slowdown in innovation and growth.

There are several ways a firm could give back to loyal shareholders. Companies could reward shareholders by paying dividends, using existing cash to buy back shares, granting preferred stocks to existing shareholders, or issuing bonds to buy back shares.

Discuss:

1. What is the potential impact of the policy on Apple’s capital structure? Discuss Apple’s financial positions, profitability and risk by analyzing the commitment of cash payment, the tax liabilities, the risk of financial distress, and the growth opportunities.
2. Do you think issuing bonds and using the cash to buy back shares is Apple’s best financial strategy? What would you recommend?

35. Which of the following is TRUE about the threat of substitutes?

36. When a firm needs to raise money via a bond issue, one of the quickest ways is through a ________. This activity involves the purchase of a large block of securities by a large institutional investor such as a pension fund, an endowment fund, or an insurance company.

37

Which of the following is NOT a disadvantage of a sole proprietorship as a form of business organization compared to the corporate form of business organization?

43 To estimate the after-tax cost of preferred stock you must:

analyze and review the essential components of a Value -Based Benefit Design (VBBD). Compare and contrast it with CDHD. Use any company as an example to illustrate your points. Your paper should include:

• Review of financing approaches to healthcare programs.
• Analyze Value Based Benefits Design (VBBD) as a cost-sharing innovation
• Compare and contrast VBBD with CDHD.
• At least 5 suggestions and action plans to modify the plan. Explain your logic and reasoning.