Question 2                                                                                     

On January 1, 2015, Portia Ltd. issued shares worth $1,120,000 to Storm Ltd. to acquire 80% of Storm’s outstanding shares. On the acquisition date, Storm’s statement of financial position shows share capital of $420,000 and retained earnings of $777,000. At the acquisition date, all of Storm’s identifiable assets and liabilities equaled their fair values with the exception of the following:

          Inventories (fair value exceeded book value by $14,000)

          Investments (fair value exceeded book value by $14,000)

          Equipment (fair value exceed net book value by $105,000)

At the acquisition date, Storm’s accumulated amortization account for the equipment had a balance of $805,000. As of the acquisition date, Storm’s equipment had a remaining useful life of 10 years.

Additional information:

Portia records its investments using the cost method.

Portia uses the entity theory method of consolidation.

In 2017, Portia sold all its investments for a gain of $63,000.

In 2018, Portia purchased equipment from Storm for $127,400. At the sale date, Storm’s net book value of the equipment was $98,000. Storm had originally purchased the equipment for $140,000. After the purchase, Portia amortized the equipment at a rate of $18,200 per year for the remaining 7 years of its useful life, taking a full year of amortization in 2018.

During 2019, Storm purchased goods from Portia. At the end of 2019, Storm still had $28,000 of these goods in inventory. Portia had earned a gross margin of 40% on the sale. The goods were sold to external customers in 2020.

During 2019, Portia purchased goods from Storm. At the end of 2019, Portia still had $140,000 of these goods in inventory. Storm had earned a gross margin of 40% on the sale. The goods were sold to external customers in 2020.

During 2020, Portia sold goods of $140,000 to Storm. Portia earned a gross profit of $56,000 on this sale. At the end of 2020, Storm still had $56,000 worth of goods in inventory.

During 2020, Storm sold goods of $980,000 to Portia at a gross margin of 40%. At the end of 2020, Portia still had 10% of the goods in inventory.

During 2020, Portia received $126,000 in royalties from Storm. Between January 1, 2015 and December 31, 2019, Portia received $700,000 in royalties from Storm.

The financial statements for Portia and Storm for the year ended December 31, 2020 are presented on the following pages.

Statement of Financial Position

As of December 31, 2020

                                                                                                      Portia Ltd.      Storm Ltd.

Assets:

Current assets:

Cash                                                                                      $        70,000    $       28,000

Accounts receivable                                                                   210,000             224,000

Inventory                                                                                       252,000             140,000

                                                                                                      532,000             392,000

Noncurrent assets:

Land                                                                                             140,000                   -

Equipment                                                                                 7,000,000        3,780,000

Accumulated amortization, equipment                      (2,478,000)       (1,736,000)

Investment in Storm                                                                  1,120,000           ____-___

                                                                                                    5,782,000        2,044,000

Total assets                                                                           $ 6,314,000     $ 2,436,000

Liabilities and shareholders’ equity:

Current liabilities:

Accounts payable                                                                 $     630,000     $    280,000

Noncurrent liabilities:

Loan payable                                                                               420,000             700,000

                                                                                                    1,050,000             980,000

Shareholders’ equity:

Share capital                                                                             1,680,000             420,000

Retained earnings                                                                    3,584,000        1,036,000

                                                                                                    5,264,000        1,456,000

                                                                                                 $ 6,314,000     $ 2,436,000

Condensed Statement of Comprehensive Income

For the year ended December 31, 2020

                                                                                          Portia Ltd.      Storm Ltd.

Revenue:

            Sales                                             $ 2,804,200   $ 2,100,000

            Royalties                                            210,000                -

            Dividends                                           100,800      ____-___

                                                                      3,115,000      2,100,000

                  Expenses:

                              Cost of sales                                   1,680,000      1,260,000

                              Other                                                   784,000        575,400

                                                                                        2,464,000      1,835,400

                  Net and comprehensive income          $    651,000   $    264,600

Statement of Changes in Equity – Retained Earnings Section

For the year ended December 31, 2020

                                                                                                      Portia Ltd.      Storm Ltd.

Retained earnings, beginning of the year                           $ 3,353,000 $    897,400

Net income                                                                                   651,000         264,600

Dividends declared                                                                    (420,000)      (126,000)

Retained earnings, end of year                                $ 3,584,000 $ 1,036,000

Required:

Prepare Portia’s consolidated financial statements for the year ended December 31, 2020. Be sure to show all your supporting calculations.

As a recently hired accountant for a small business, SMC, Inc., you are provided with last year’s balance sheet, income statement, and post-closing trial balance to familiarize yourself with the business.

You are also given the following information that summarizes the business activity for the current year,2020

Assignment Summary

On the excel spreadsheet attached, perform the following tasks using the information from SMC, Inc. provided above:

1. Journalize the transactions for the current year, 2020, using the chart of accounts on the excel spreadsheet provided

Q1. Which of the following is directly included in the U.S. GDP for 2020?

i. 2020 Cadillac Escalade produced and sold as a new car in the United States in 2020

ii. tires produced in the United States, purchased by General Motors, and installed on a new Cadillac Escalade sold in 2020

iii. General Motors cars produced in Canada because General Motors is an American corporation.

Q2. As more women decide to work outside the home and therefore hire others to work around their home, GDP will increase by

a. only the value of the output produced by the newly working women.

b. only the value of the household work they are now hiring someone to perform.

c. the value of the output produced by the newly working women plus the value of any household work they are now hiring someone to perform.

d. the value of the output produced by the newly working women minus the value of the household work they were previously performing.

Q3. The base year is 2018. A country only produces Blu-ray players. The price of a Blu-ray player in 2018 was $100. The price of a Blu-ray player was $90 in 2019. The quantity of Blu-ray players produced in 2018 was 10,000 units and in 2019 was 10,500 units. Nominal GDP in 2018 was____, real GDP in 2018 was, nominal GDP in 2019 was _____and real GDP in 2019 equals_____.

Group of answer choices

a. $1,000,000; $1,000,000; $945,000; $1,050,000

b. $1,050,000; $1,000,000; $900,000; $945,000

c. $945,000; $900,000; $1,000,000; $1,050,000

d. $900,000; $945,000; $1,050,000; $1,000,000

Open Air_Traffic data. SETUP: It is believed that in July, as years go by we see higher and higher traffic. Given the data your job is to confirm or disprove this assertion.

4. What test/procedure did you perform? (4 points)

• a. Regression
• b. Two sided t-test
• c. One sided t-test
• d. Confidence Interval

5. What is the statistical interpretation? (4 points)

• a. Average of data is inconsistent with the claim
• b. P-value is too large to have a conclusive answer
• c. P-value is smaller than 5% thus we are confident to say that the slope is not zero.
• d. P-value is smaller than 5% thus we are confident that the averages are different.
• e. None of these

6. What is the conclusion? (4 points)

• a. We cannot claim that in July, as years go by we see higher and higher traffic.
• b. We can claim that in July, as years go by we see higher and higher traffic.
• c. None of these

During 2020, Vaughn Manufacturing incurred weighted-average accumulated expenditures of $1730000 during construction of assets that qualified for capitalization of interest. The only debt outstanding during 2020 was a $2000000, 12%, 5-year note payable dated January 1, 2020.

What is the amount of interest that should be capitalized by Vaughn during 2020? Question 10 options: a) $240,000 b) $207,600 c) $0 d) $32,400

VAT Deductible and VAT Received for Company C in a given tax period are as follows.

Required: a) Fill VAT tax return number on the table for each month.

b) Close the VAT Accounts and make the journal entries at the end of April, May, June 2020.

c) If it is necessary make journal entries for VAT payment to the tax offices on 26 May, 26 June, 26 July 2020.

Owen Company forgot to accrue $3,000 of salaries its employees had earned at the end of 2019. It paid and expensed the salaries in 2020. It also, in 2019, recorded $4,000 of sales as an account receivable; however, the sale really did not take place until 2020, and it should have recognized the revenue in 2020. It collected the money from the sale early in 2020.

Provide the impact of the errors on the following:

Assets as of 12/31/19: $_____________ Overstated Understated

Assets as of 12/31/20: $_____________ Overstated Understated

Liabilities as of 12/31/19: $_____________ Overstated Understated

Net income for 2020: $_____________ Overstated Understated

AMP Corporation (calendar-year-end) has 2020 taxable income of $1,900,000 for purposes of computing the §179 expense. During 2020, AMP acquired the following assets:

1.What is the maximum amount of §179 expense AMP may deduct for 2020?

2.What is the maximum total depreciation, including §179 expense, that AMP may deduct in 2020 on the assets it placed in service in 2020, assuming no bonus depreciation?