Exercise 23-15

Presented below are data taken from the records of Oriole Company.

Additional information:

Prepare a statement of cash flows for the year 2020 using the indirect method. (Show amounts that decrease cash flow with either a - sign e.g. -15,000 or in parenthesis e.g. (15,000).)

Exercise 9-24

Larkspur Company began operations on January 1, 2019, adopting the conventional retail inventory system. None of the company’s merchandise was marked down in 2019 and, because there was no beginning inventory, its ending inventory for 2019 of $37,700 would have been the same under either the conventional retail system or the LIFO retail system.

On December 31, 2020, the store management considers adopting the LIFO retail system and desires to know how the December 31, 2020, inventory would appear under both systems. All pertinent data regarding purchases, sales, markups, and markdowns are shown below. There has been no change in the price level.

Determine the cost of the 2020 ending inventory under both (a) the conventional retail method and (b) the LIFO retail method. (Round ratios for computational purposes to 2 decimal place, e.g. 78.72% and final answers to 0 decimal places, e.g. 28,987.)

1. At the beginning of its fiscal year 2020, an analyst made the following forecast for Greenfield, Inc. (in millions of dollars):

Greenfield has a net debt of $1,950 at the end of 2019. Assume that free cash flow will grow at 4 percent per year in 2024 and 2025, after that this will grow at 5 percent per year. Greenfield had 425 million shares outstanding at the end of 2019, trading at $72.5 per share. Using a required return of 9 percent, calculate the following for Greenfield at the beginning of 2020 (You have to fill in the table below, and also show your working process):

1. The enterprise value                                                                           

[5 marks]

2. Equity value                                                                            

[2 mark]

3. Equity value per share                                                                        

[1 mark]

4. Based on your estimate, should investors buy the share of this company?

                                                                                                              [1 mark]

2019 is the first year of operation for Flitz Company. Applicable tax rates enacted by the end of 2018 are as follows:2019 25%2020 20%2021 and later 30%Compute the amount of deferred taxes to appear on the balance sheet at 12/31/19 with proper classifications, prepare the journal entry to record income tax expense for 2019, and show the current and deferred portions of income tax expense on the income statement for 2019.(a) In 2019 Flitz had pre-tax financial income of $450,000.(b) Pre-tax financial income was different from taxable income due to the following:Depreciation, the straight-line method for financial purpose while MACRS is used for tax purpose 35,000(tax-deductible in 2019, expense in 2020 20,000 in 2021 15,000)Fine for pollution 8,000(not tax-deductible, expense in 2019) Revenue received in advance 14,000(taxable 2019, revenue in 2020)Revenue from investment on equity method for financial purpose and cost method is used for tax purpose 10,000(revenue in 2019, taxable in 2020) Litigation accrual 80,000(expense in 2019, tax-deductible in 2022)Interest received on municipal bonds 6,000(revenue in 2019, not taxable)

Jacob’s grandfather died on 1 November 2009 and, in her will, left Jacob cash and watches worth $500,000. The watches had been bought by Jacob’s grandmother in August 1985 at a cost of $40,000, and its market value on 1 November 2009 was $150,000.

Jacob used the money from his grandfather and his savings to buy the following assets in January 2010:

• an apartment in Melbourne (cost was $360,000 plus $20,000 legal fees and stamp duty),
• a rare painting (cost was $50,000), and
• 2,000 bank shares (cost was $20 per share, plus $200 brokerage).

In 2019/20, Jacob disposed of these assets as follows:

• on 12 March 2020, he sold the apartment for $470,000 – he had lived in it all the time he owned it,
• on 1 April 2020, the painting was stolen from his apartment – he received $30,000 compensation from his insurance company,
• on 13 May 2020, Jacob sold 1000 bank shares for $30 per share (brokerage cost $150), and
• on 15 June 2020, he lost the watches, which wasn’t insured, when he left his briefcase on a train.

Question 1.

Prepare a report that explains the CGT consequences of these transactions

The following information is available for Vandal Corporation for 2019. There is no Beginning deferred taxes.                                                                                               

1. Depreciation reported on the tax return exceeded depreciation reported on the income statement by $3,540,000. This difference will reverse in equal amounts of $708,000 over the years 2020-2024.

2. Vandal accrues a loss and a related liability of $4,130,000 due to a pending litigation in 2019.         

3. Life insurance proceeds from a key executive is $20,650,000.                                            

4. Rent collected in advance on January 1, 2019, totaled $6,490,000 for a 4-year period. Of this amount, $1,622,500 was reported as earned at December 31, 2019 for book purposes.

5. The tax rates are 30% for 2019 and 20% for 2020 and subsequent years.   

6. Pretax Financial income for 2019 is $149,122,500. .                                              

7. The company was fined $7,375,000 for pollution.                    

8. No deferred taxes existed at the beginning of 2019.                                                                                 

Instructions:                                                                                    

(a) Compute taxable income for 2019 (8 points).                                                                                           

(b) Prepare the journal entries to record income tax expense, deferred income taxes, and income taxes payable for 2019 and 2020. Assume taxable income is $103,250,000 in 2020 (12 points).

(c) Prepare the income tax expense section of the income statement for 2019, beginning with "Income before income taxes." (6 points)                                                                          

The Lynbrook Rentals Company offers credit terms to all of its customers. At the end of 2019, accounts receivables totaled $3,400,000. During 2020 credit sales were $2,100,000 and cash collections from customers were $3,700,000. The allowance method is used to account for uncollectible accounts. The allowance for uncollectible accounts had a credit balance of $42,000 at the beginning of 2020 and $70,000 in receivables were written off during the year as uncollectible. In addition, $20,000 was collected from a customer whose account was written off in 2019. The allowance for uncollectible accounts is determined by an ageing of accounts receivable. An aging of accounts receivable at December 31, 2020, reveals the following:

Age Group 0-60 days 61-90 days 91-120 days Over 120 days

Required:

Percentage of Year-end Percent Receivable in Group Uncollectible

55% 5% 30 15 10 45 5 60

a. Prepare journal entries to record the write-off of receivables, collection of the accounts receivable previously written off, and the year-end adjusting entry for bad debt expense.
b. Show how accounts receivables would be presented in the 2020 year-end balance sheet?

The Lynbrook Rentals Company offers credit terms to all of its customers. At the end of 2019, accounts receivables totaled $3,400,000. During 2020 credit sales were $2,100,000 and cash collections from customers were $3,700,000. The allowance method is used to account for uncollectible accounts. The allowance for uncollectible accounts had a credit balance of $42,000 at the beginning of 2020 and $70,000 in receivables were written off during the year as uncollectible. In addition, $20,000 was collected from a customer whose account was written off in 2019. The allowance for uncollectible accounts is determined by an ageing of accounts receivable. An aging of accounts receivable at December 31, 2020, reveals the following:

Age Group   Percentage of Year-end Receivable in Group Percent Uncollectible

0-60 days 55%   5%

61-90 days 30 15

91-120 days 10 45

Over 120 days 5 60

Required:

a. Prepare journal entries to record the write-off of receivables, collection of the accounts receivable previously written off, and the year-end adjusting entry for bad debt expense.
b. Show how accounts receivables would be presented in the 2020 year-end balance sheet?

Presented below are data taken from the records of Blue Company.

Additional information:

Prepare a statement of cash flows for the year 2020 using the indirect method. (Show amounts that decrease cash flow with either a - sign e.g. -15,000 or in parenthesis e.g. (15,000).)

51.

When Carrie drove up in her new car, Ken told her that she had made a mistake. Even though the car was very sporty, easy on gas, and had lots of trunk space, he ignored these attributes and told her it would need to be repaired frequently. He said this because he had previously owned the same car, and that was his experience. This is an example of

Group of answer choices

Self-serving bias

stereotyping

projection

overconfidence

52.

_______ has been found to be more important than other traits in the success of CEOs of private equity companies.

Group of answer choices

Agreeableness

Extraversion

Openness to experience

Conscientiousness

53.

________ leaders inspire followers to transcend their self-interests for the good of the organization and can have an extraordinary effect on their followers.

Group of answer choices

Transactional

Task-oriented

Laissez-faire

Transformational

54.

Mr. Henshaw, CEO of MBA Bank, decides that the organization needs to provide more convenient service to customers. He decides to increase the bank’s service hours from 8 hours a day, Monday through Friday, to 12 hours a day, plus 8 hours a day each weekend day. He has his assistant compile a report that gives data on how the number of open hours of many banks is correlated with their customers’ satisfaction, and presents the data to his executive committee. What stage of Lewin’s change process is Mr. Henshaw operating in?

Group of answer choices

reinforcement

refreezing

unfreezing

freezing

55.

Abis Sneakers & Stuff states that it plans to be “the number one athletic company in the world.” What does this represent?

Group of answer choices

organizational structure

vision

strategic plan

mission statement

56

A(n) ______ is someone who is a catalyst in helping organizations to deal with old problems in new ways.

Group of answer choices

initiator

change agent

mentor

recipient

57.

For an OB team project, you have been assigned to a group of classmates to complete an assignment. According to the Punctuated-Equilibrium Model, teams tend to experience ________ about halfway between the first meeting and the assignment deadline.

Group of answer choices

transition

equilibrium

mid-life crisis

stagnation

PreviousNext

58.

Marion will receive a promotion and a raise if she completes a difficult assignment. This is an example of

Group of answer choices

extrinsic motivation.

organizational citizenship behavior

job satisfaction

intrinsic motivation

59.

An artifact is

Group of answer choices

part of the organization’s structure.

a physical manifestation of an organization’s culture.

an explicitly stated value preferred by the organization.

an organizational value that has become taken for granted.

60.

Hilton is a hospitality company, whose __________ is “dedicated to providing high-quality desserts in a comfortable atmosphere for clients who seek a fun gourmet experience outside restaurants.”

Group of answer choices

vision statement

SWOT analysis

mission statement

strategic plan