Malco Enterprises issued $14,000 of common stock when the company was started. In addition, Malco borrowed $44,000 from a local bank on July 1, 2018. The note had a 6 percent annual interest rate and a one-year term to maturity. Malco Enterprises recognized $76,500 of revenue on account in 2018 and $90,000 of revenue on account in 2019. Cash collections of accounts receivable were $62,900 in 2018 and $73,100 in 2019. Malco paid $43,000 of other operating expenses in 2018 and $49,000 of other operating expenses in 2019. Malco repaid the loan and interest at the maturity date. Required a. Organize the information in accounts under an accounting equation. b. What amount of net cash flow from operating activities would be reported on the 2018 cash flow statement? c. What amount of interest expense would be reported on the 2018 income statement? d. What amount of total liabilities would be reported on the December 31, 2018, balance sheet? e. What amount of retained earnings would be reported on the December 31, 2018, balance sheet? f. What amount of cash flow from financing activities would be reported on the 2018 statement of cash flows? g. What amount of interest expense would be reported on the 2019 income statement? h. What amount of cash flows from operating activities would be reported on the 2019 cash flow statement? i. What amount of assets would be reported on the December 31, 2019, balance sheet?

Problem 16-2 Concord Inc. issued $3,120,000 of convertible 10-year bonds on July 1, 2017. The bonds provide for 12% interest payable semiannually on January 1 and July 1. The discount in connection with the issue was $49,200, which is being amortized monthly on a straight-line basis. The bonds are convertible after one year into 8 shares of Concord Inc.’s $100 par value common stock for each $1,000 of bonds. On August 1, 2018, $312,000 of bonds were turned in for conversion into common stock. Interest has been accrued monthly and paid as due. At the time of conversion, any accrued interest on bonds being converted is paid in cash. Prepare the journal entries to record the conversion, amortization, and interest in connection with the bonds as of the following dates. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) (a) August 1, 2018. (Assume the book value method is used.) (b) August 31, 2018. (c) December 31, 2018, including closing entries for end-of-year. No. Date Account Titles and Explanation Debit Credit (a) Aug. 1, 2018 (To record the issuance of shares of common stock and the write-off of the discount on bonds payable.) Aug. 1, 2018 (To record payment in cash of interest accrued on bonds.) (b) Aug. 31, 2018 (To record amortization of discount on bonds.) Aug. 31, 2018 (To record accrual of interest on bonds.) (c) Dec. 31, 2018

On January 1, 2018, NRC Credit Corporation leased equipment to Brand Services under a finance/sales-type lease designed to earn NRC a 13% rate of return for providing long-term financing. The lease agreement specified:

Ten annual payments of $68,000 beginning January 1, 2018, the beginning of the lease and each December 31 thereafter through 2026.

The estimated useful life of the leased equipment is 10 years with no residual value. Its cost to NRC was $380,163.

The lease qualifies as a finance lease/sales-type lease.

A 10-year service agreement with Quality Maintenance Company was negotiated to provide maintenance of the equipment as required. Payments of $6,000 per year are specified, beginning January 1, 2018. NRC was to pay this cost as incurred, but lease payments reflect this expenditure.

A partial amortization schedule, appropriate for both the lessee and lessor, follows:

(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:
1. Prepare the appropriate entries for the lessee related to the lease on January 1, 2018 and December 31, 2018.
2. Prepare the appropriate entries for the lessor related to the lease on January 1, 2018 and December 31, 2018.

Al Mavali Enterprise is a manufacturer of engines for high-tech buses. The enterprise was engaged in the business of providing engineering and support services to bus manufacturers. On 1st January, 2018, the enterprise has received a fresh order from Tamin Corporation a leading bus manufacturer in a country. Tamin Corporation ordered Al Maveli Enterprise to develop a new design of electronic turbo engine, for that Tamin Corporation has sent all technical specifications. Al Maveli Enterprise was in need of funds for completing this order. The total fund required for this project was OMR 270,000. So, the enterprise mobilizes this amount of fund by availing long term loan from the enterprise’s bank. Below are the details of expenses incurred for this research and development project.

 Salaries paid to engineers and technicians on 20th February 2018 was OMR 47,250

On 8th April, 2018 the test model was developed at a cost of OMR 67,500

 On 12th July, 2018 the cost of revising the test model was for OMR 81,000

 First test model was developed on 31st July, 2018 at a cost of OMR 21,600

 On 20th November, 2018 a conference was conducted and technical experts were invited for the introduction of newly designed engine. The expenses of the conference were OMR 13,500

 On 23rd December, 2018 the new product development electronic turbo engine was achieved. According to Al Maveli Enterprise the budgeted net profit for the year 2018 was OMR 243,000.
Required: On the role of an accountant assess the proper accounting treatment relating to the research and development project of developing a new electronic turbo engine for high-tech buses in the financial statements for the year 2018.

The following information is available for the first three years of operations for Jefferson Company:

1.   Year                    Taxable Income

      2017                         $500,000

      2018                           375,000

      2019                           400,000

2.   On January 2, 2017, heavy equipment costing $800,000 was purchased. 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                                        

              2017              2018                2019                  2020                Total  

           $264,000        $360,000         $120,000           $56,000         $800,000

3.   On January 2, 2018, $360,000 was collected in advance for rental of a building for a three-year period. The entire $360,000 was reported as taxable income in 2018, but $240,000 of the $360,000 was reported as unearned revenue at December 31, 2018 for book purposes.

4.   The enacted tax rates are 40% for all years.

Instructions

(a)    Prepare a schedule comparing depreciation for financial reporting and tax purposes.

(b)    Determine the deferred tax (asset) or liability at the end of 2017.

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

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

(e)    Compute the net deferred tax expense (benefit) for 2018.

(f)     Prepare the journal entry to record income tax expense, deferred income taxes, and income tax payable for 2018.

Prepare your solution in Excel, but be sure to label your formulas and not just input the result in the cells. Each step should be properly labeled.  

Ealing Company began operations as a new subsidiary of Fundamental Company, a U.S. Corporation, on January 2, 2018, by issuing common stock for 180,000 foreign currency units (FCU). Ealing immediately borrowed 35,000 FCU with a 10-year, 10% note, interest payable annually on January 1. On the same date, Ealing bought a building for 200,000 FCU. The building was to be depreciated for 20 years on a straight-line basis with a residual value of 40,000 FCU. During the year, the building was rented for 9,000 FCU per month. At year's end, all rent had been collected. On May 1 a repair on the building of 15,000 FCU was completed and paid for. Land for a parking lot was acquired for 30,000 FCU in cash on June 1. A dividend of 20,000 FCU was declared and paid on December 1. Exchange rates for the year were as follows: January 2, 2018 1 FCU = $.30 May 1, 2018 1 FCU = .37 June 1, 2018 1 FCU = .38 November 1, 2018 1 FCU = .41 December 1, 2018 1 FCU = .39 December 31, 2018 1 FCU = .35 average for 2018 1 FCU = .36 Fundamental company determined that the FCU was the functional currency and translation using the current rate method was appropriate for consolidation. Calculate the translation adjustment for 2018. (You might remember that the translation adjustment uses the net assets approach, not the net monetary assets approach.).

LFJ Manufacturing requested the company cost accountant to prepare a cash budget for the four months ending 30 April 2018.

The following sales figures are for the months of November 2017 to June 2018. The figures from January 2018 onward are estimated:

Actual Sales for 2017

November...............60,000

December................64,000

Sales Forecast for 2018

January.............65,000

February............70,000

March...................72,500

April..................76,250

May.................80,000

June................78,750

50% of the sales are usually paid for in the month in which they occur, while the remaining sales are paid for in the month following the sale.

Goods are sold at a mark-up of 25% on the goods purchased one month before sale. Half of the purchases are paid for in the month of purchase while the remainder is paid in full in the following month.

Wages of $12000 per month are paid in the month in which they are earned. It is expected that the wages will be increased by 10% from 1 March 2018.

Rent will cost $60000 per annum payable three monthly in advance in January, April, July and December each year.

The directors have arranged a bank loan of $60000 which would be credited to company’s current account in February 2018

The half-yearly interest on 200000, 8% debentures of $1 each is due to be paid on 15 January 2018.

The ordinary dividend of $12000 for the year 2017 will be paid in March 2018.

The bank balance at 31 December 2017 is $12000.

Required: Prepare a cash budget for the four months ended 30 April 2018.

Give your answers to the nearest dollar

The following information is available for the first three years of operations for Jefferson Company:

1.   Year                    Taxable Income

      2017                         $500,000

      2018                           375,000

      2019                           400,000

2.   On January 2, 2017, heavy equipment costing $800,000 was purchased. 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                                        

              2017              2018                2019                  2020                Total  

           $264,000        $360,000         $120,000           $56,000         $800,000

3.   On January 2, 2018, $360,000 was collected in advance for rental of a building for a three-year period. The entire $360,000 was reported as taxable income in 2018, but $240,000 of the $360,000 was reported as unearned revenue at December 31, 2018 for book purposes.

4.   The enacted tax rates are 40% for all years.

Instructions

(a)    Prepare a schedule comparing depreciation for financial reporting and tax purposes.

(b)    Determine the deferred tax (asset) or liability at the end of 2017.

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

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

(e)    Compute the net deferred tax expense (benefit) for 2018.

(f)     Prepare the journal entry to record income tax expense, deferred income taxes, and income tax payable for 2018.

Prepare your solution in Excel, but be sure to label your formulas and not just input the result in the cells. Each step should be properly labeled.  

Problem 18-10

On March 1, 2017, Sandhill Construction Company contracted to construct a factory building for Fabrik Manufacturing Inc. for a total contract price of $8,310,000. The building was completed by October 31, 2019. The annual contract costs incurred, estimated costs to complete the contract, and accumulated billings to Fabrik for 2017, 2018, and 2019 are given below:

(a) Using the percentage-of-completion method, prepare schedules to compute the profit or loss to be recognized as a result of this contract for the years ended December 31, 2017, 2018, and 2019. (Ignore income taxes.)

2017

Costs to date (12/31/17)    $________

Estimated Costs to Complete $________

Estimated Total Costs $________

Percent Complete ________%

Revenue Recognized $________

Costs Incurred $________

Profit/(Loss) Recognized in 2017 $________

2018

Costs to date (12/31/18) $________

Estimated Costs to Complete $________

Estimated Total Costs $________

Percent Complete ________%

Revenue Recognized in 2018 $________

Costs Incurred in 2018 $________

Profit/ (Loss) Recognized in 2018 $________

2019

_______________? $________

Total Revenue Recognized $________

Total Profit on Contract $________

Less: Profit Previously Recognized $________

Profit/(Loss) Recognized in 2019 $________

(b) Using the completed-contract method, prepare schedules to compute the profit or loss to be recognized as a result of this contract for the years ended December 31, 2017, 2018, and 2019. (Ignore income taxes.)

2017 $________

2018 $________

2019 $________