Parnell Company acquired construction equipment on January 1, 2017, at a cost of $75,000. The equipment was expected to have a useful life of five years and a residual value of $13,000 and is being depreciated on a straight-line basis. On January 1, 2018, the equipment was appraised and determined to have a fair value of $69,300, a salvage value of $13,000, and a remaining useful life of four years. In measuring property, plant, and equipment subsequent to acquisition under IFRS, Parnell would opt to use the revaluation model in IAS 16.
Assume that a U.S.- based company is issuing securities to foreign investors who require financial statements prepared in accordance with IFRS. Thus, adjustments to convert from U.S. GAAP to IFRS must be made. Ignore income taxes.
Required:
a. Prepare journal entries for this equipment for the years ending December 31, 2017, and December 31, 2018, under (1) U.S, GAAP and (2) IFRS
(1) Record the entry for depreciation expense as per U.S. GAAP
(2) Record the entry for depreciation expense as per IFRS
(3) Record the entry for the revaluation of equipment as per U.S. GAAP
(4) Record the entry for the revaluation of equipment as per IFRS
(5) Record the entry for depreciation expense as per U.S. GAAP
(6) Record the entry for depreciation expense as per IFRS
b. Prepare the entry(ies) that Parnell would make on the December 31, 2018 conversion worksheet to convert U.S. GAAP balances to IFRS
(1) Record the entry for recording profit on revaluation of equipment due to conversion from U.S. GAAP to IFRS
(2) Record the entry for additional depreciation expense on revaluation of equipment due to conversion from U.S. GAAP to IFRS
In: Accounting
1A) On January 1, 2014, Garr Company acquired machinery at a cost of $320,000 The machinery was being depreciated using the double declining balance method. It had an estimated useful life of 8 years and no residual value. At the beginning of 2016, Garr changed to the straight-line method of depreciation. Prepare any journal entry required to account for this change.
1B) Gundrum Inc. purchased equipment on January1, 2012 for $850,000. The equipment was expected to have a useful life of 10 years and a salvage value of $30,000. Gundrum uses the straight line method of depreciation. At the beginning of 2017, Gundrum determined that the total estimated life of the equipment was 13 years and that the residual value would be $10,000. Prepare the journal entry necessary to account for this change.
In: Accounting
On January 1, Staley Utilities Company acquired a power plant at a total cost of $23,580,000, and paid cash. The estimated cost (in today's market) to dismantle the plant and restore the property at the end of the plant's 15-year life is $4,859,000 Staley's cost of capital is 2. Staley will depreciate the asset over its useful life using the straight-line method. The asset has no residual value.
Requirements:
|
a. |
Prepare the journal entries required to record the acquisition of the plant asset. |
|
b. |
Prepare the journal entry to record the first year's depreciation and accretion accrual. Now journalize the first year's accretion accrual. |
|
c. |
Prepare the journal entries required to record the disposal of the asset and the settlement of the asset retirement obligation at the end of the fifth year after acquisition. Staley sold the asset for $16,007,000 and the costs of dismantling the plant and restoring the property totaled $5,420,000. Begin by journalizing the disposal of the asset at the end of the fifth year after acquisition. Now journalize the settlement of the asset retirement obligation at the end of the fifth year after acquisition. |
In: Accounting
Problem 1
On January 2, 20x8, the Todd Company acquired a truck with a list price of $400,000. The Todd Company's incremental borrowing rate is 8% (imputed rate). Assume that the
truck manufacturer is offering Todd the following terms (each situation is independent). For each of the terms, prepare the journal entries for the life of the note. Assume a December 31 year end.
Todd company is a publicly accountable company.
a) Todd Company has to make equal annual payments of principal and interest over five years. Payments are due on December 31 of every year. The interest rate charged is 10%.
b) Todd Company pays the $400,000 in three years. No interest is charged on the note.
c) Todd Company pays the $400,000 in three years. Interest of 3% is charged on the note payable on December 31 of every year.
d) Todd Company pays $80,000 on the principal at the end of every year, over 5 years. No interest is charged.
e) Todd Company has to make equal annual payments of principal and interest over five years. The interest rate charged is 4%.
In: Accounting
|
The following transactions pertain to the operations of Blair Company for 2014: |
| 1. | Acquired $22,500 cash from the issue of common stock. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2. | Performed services for $36,500 cash. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 3. | Paid a $29,200 cash advance for a one-year contract to rent equipment. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 4. | Recognized $32,200 of accrued salary expense. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5. | Accepted a $2,200 cash advance for services to be performed in the future. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 6. | Provided $17,150 of services on account. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 7. | Incurred $9,750 of other operating expenses on account. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 8. | Collected $5,200 cash from accounts receivable. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 9. | Paid a $8,900 cash dividend to the stockholders. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 10. |
Paid $17,800 cash on accounts payable.
|
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In: Accounting
Plug Products owns 80 percent of the stock of Spark Filter
Company, which it acquired at underlying book value on August 30,
20X6. At that date, the fair value of the noncontrolling interest
was equal to 20 percent of the book value of Spark Filter.
Summarized trial balance data for the two companies as of December
31, 20X8, are as follows:
| Plug Products | Spark Filter Company | ||||||||||||||||
| Debit | Credit | Debit | Credit | ||||||||||||||
| Cash and Accounts Receivable | $ | 165,000 | $ | 91,000 | |||||||||||||
| Inventory | 239,000 | 117,000 | |||||||||||||||
| Buildings & Equipment (net) | 290,000 | 183,000 | |||||||||||||||
| Investment in Spark Filter Company | 267,200 | ||||||||||||||||
| Cost of Goods Sold | 174,000 | 139,000 | |||||||||||||||
| Depreciation Expense | 45,000 | 35,000 | |||||||||||||||
| Current Liabilities | $ | 226,171 | $ | 44,571 | |||||||||||||
| Common Stock | 183,000 | 86,000 | |||||||||||||||
| Retained Earnings | 452,000 | 211,000 | |||||||||||||||
| Sales | 273,429 | 223,429 | |||||||||||||||
| Income from Spark Filter Company | 45,600 | ||||||||||||||||
| Total | $ | 1,180,200 | $ | 1,180,200 | $ | 565,000 | $ | 565,000 | |||||||||
On January 1, 20X8, Plug's inventory contained filters purchased
for $76,000 from Spark Filter, which had produced the filters for
$56,000. In 20X8, Spark Filter spent $116,000 to produce additional
filters, which it sold to Plug for $157,429. By December 31, 20X8,
Plug had sold all filters that had been on hand January 1, 20X8,
but continued to hold in inventory $47,229 of the 20X8 purchase
from
Plug Products owns 80 percent of the stock of Spark Filter
Company, which it acquired at underlying book value on August 30,
20X6. At that date, the fair value of the noncontrolling interest
was equal to 20 percent of the book value of Spark Filter.
Summarized trial balance data for the two companies as of December
31, 20X8, are as follows:
| Plug Products | Spark Filter Company | ||||||||||||||||
| Debit | Credit | Debit | Credit | ||||||||||||||
| Cash and Accounts Receivable | $ | 165,000 | $ | 91,000 | |||||||||||||
| Inventory | 239,000 | 117,000 | |||||||||||||||
| Buildings & Equipment (net) | 290,000 | 183,000 | |||||||||||||||
| Investment in Spark Filter Company | 267,200 | ||||||||||||||||
| Cost of Goods Sold | 174,000 | 139,000 | |||||||||||||||
| Depreciation Expense | 45,000 | 35,000 | |||||||||||||||
| Current Liabilities | $ | 226,171 | $ | 44,571 | |||||||||||||
| Common Stock | 183,000 | 86,000 | |||||||||||||||
| Retained Earnings | 452,000 | 211,000 | |||||||||||||||
| Sales | 273,429 | 223,429 | |||||||||||||||
| Income from Spark Filter Company | 45,600 | ||||||||||||||||
| Total | $ | 1,180,200 | $ | 1,180,200 | $ | 565,000 | $ | 565,000 | |||||||||
On January 1, 20X8, Plug's inventory contained filters purchased
for $76,000 from Spark Filter, which had produced the filters for
$56,000. In 20X8, Spark Filter spent $116,000 to produce additional
filters, which it sold to Plug for $157,429. By December 31, 20X8,
Plug had sold all filters that had been on hand January 1, 20X8,
but continued to hold in inventory $47,229 of the 20X8 purchase
from Spark Filter.
Required:
a. Prepare all consolidation entries needed to complete a
consolidation worksheet for 20X8. (If no entry is required
for a transaction/event, select "No journal entry required" in the
first account field.)
b. Compute consolidated net income and income assigned to the
controlling interest in the 20X8 consolidated income
statement.
c. Compute the balance assigned to the noncontrolling interest in the consolidated balance sheet as of December 31, 20X8.
In: Accounting
Eaton Ross Puppet Company acquired a new plastic molding machine at the beginning of the current year at a cost of $ 450 comma 000. The asset has a 6-year useful life for financial reporting purposes and is depreciated on a straight-line basis with no residual value expected at the end of its useful life. The company uses the double-declining balance method on its income tax returns. The company is subject to a 35% tax rate. Compute the deferred tax portion of the income tax expense for the first 2 years. Complete the table below to compute the straight-line book depreciation and double-declining tax depreciation method through year 2 to determine the book-tax difference. (Round your calculations to the nearest dollar.)
In: Accounting
Question No. 1 (Marks 15)
C Company’s forecasted 2020 financial statements are given below, along with industry average ratios.
C Company: Forecasted Balance sheet as of December 31, 2020
|
Cash |
72,000 |
|
Accounts Receivable |
439,000 |
|
Inventories |
894,000 |
|
Total Current Assets |
1,405,000 |
|
Land and Buildings |
238,000 |
|
Machinery |
132,000 |
|
Other Fixed assets |
61,000 |
|
Total Assets |
,1,836,000 |
|
Equity & Liabilities |
|
|
Accounts and Notes Payable |
432,000 |
|
Accrued liabilities |
170,000 |
|
Total Current liabilities |
602,000 |
|
Long term Debt |
404,290 |
|
Common stock |
575,000 |
|
Retained earnings |
254,710 |
|
Total Equity & Liabilities |
1,836,000 |
C Company: Forecasted Income Statement for the year ended December 31, 2020
|
Sales |
4,290,000 |
|
Cost of goods sold |
3,580,000 |
|
Gross profit |
710,000 |
|
General Selling and Admin Expenses |
236,320 |
|
Depreciation |
159,000 |
|
Other Expenses |
134,000 |
|
Profit before Tax |
180,680 |
|
Taxes 40% |
72,272 |
|
Profit after tax |
108,408 |
Per Share data
EPS 4.71
DPS .95
Market Price Per Share 23.57
P/E Ratio 5 times
Total No. of Shares 23,000
Industry Average Ratios - 2020
|
Current Ratio |
2.7 |
|
Inventory Turnover |
7 times |
|
Average Collection Period |
32 days |
|
Total Asset turnover |
2.6 times |
|
Debt Ratio |
50% |
|
Profit Margin on Sales |
3.5% |
Quesytion : Calculate C Company’s forecasted Ratios, compare them the industry average data and comment briefly on strength and weaknesses of the company ?
In: Accounting
Question
C Company’s forecasted 2020 financial statements are given below, along with industry average ratios.
C Company: Forecasted Balance sheet as of December 31, 2020
|
Cash |
72,000 |
|
Accounts Receivable |
439,000 |
|
Inventories |
894,000 |
|
Total Current Assets |
1,405,000 |
|
Land and Buildings |
238,000 |
|
Machinery |
132,000 |
|
Other Fixed assets |
61,000 |
|
Total Assets |
,1,836,000 |
|
Equity & Liabilities |
|
|
Accounts and Notes Payable |
432,000 |
|
Accrued liabilities |
170,000 |
|
Total Current liabilities |
602,000 |
|
Long term Debt |
404,290 |
|
Common stock |
575,000 |
|
Retained earnings |
254,710 |
|
Total Equity & Liabilities |
1,836,000 |
C Company: Forecasted Income Statement for the year ended December 31, 2020
|
Sales |
4,290,000 |
|
Cost of goods sold |
3,580,000 |
|
Gross profit |
710,000 |
|
General Selling and Admin Expenses |
236,320 |
|
Depreciation |
159,000 |
|
Other Expenses |
134,000 |
|
Profit before Tax |
180,680 |
|
Taxes 40% |
72,272 |
|
Profit after tax |
108,408 |
Per Share data
EPS 4.71
DPS .95
Market Price Per Share 23.57
P/E Ratio 5 times
Total No. of Shares 23,000
Industry Average Ratios - 2020
|
Current Ratio |
2.7 |
|
Inventory Turnover |
7 times |
|
Average Collection Period |
32 days |
|
Total Asset turnover |
2.6 times |
|
Debt Ratio |
50% |
|
Profit Margin on Sales |
3.5% |
Required: Calculate C Company’s forecasted Ratios, compare them the industry average data and comment briefly on strength and weaknesses of the company.
In: Accounting
Volmar Company had sales in 2020 of $1,602,000 on 53,400 units.
Variable costs totalled $534,000, and fixed costs totalled
$911,400.
A new raw material is available that will decrease the variable
costs per unit by 20% (or $2.00). However, to process the new raw
material, fixed operating costs will increase by $43,500.
Management feel that one half of the decline in the variable costs
per unit should be passed on to customers in the form of a sales
price reduction. The marketing department expects that this sales
price reduction will result in a 10% increase in the number of
units sold.
Prepare a CVP income statement for 2020: (Round per
unit cost to 2 decimal places, e.g. 15.25.)
(a) Assuming the changes have not been made:
| VOLMAR
COMPANY CVP Income Statement (Unchanged) December 31, 2020For the Month Ended December 31, 2020For the Year Ended December 31, 2020 |
||||
| Total | Per Unit | |||
| Operating incomeFixed costsContribution marginVariable costsSales | $ | $ | ||
| Fixed costsContribution marginSalesVariable costsOperating income | ||||
| SalesContribution marginFixed costsVariable costsOperating income |
$ |
|||
| Fixed costsContribution marginVariable costsSalesOperating income | ||||
| SalesContribution marginOperating incomeFixed costsVariable costs |
$ |
|||
(b) Assuming that changes are made as
described.
| VOLMAR
COMPANY CVP Income Statement (with changes) December 31, 2020For the Month Ended December 31, 2020For the Year Ended December 31, 2020 |
||||
| Total | Per Unit | |||
| Fixed costsContribution marginOperating incomeVariable costsSales | $ | $ | ||
| Operating incomeVariable costsSalesFixed costsContribution margin | ||||
| Operating incomeVariable costsFixed costsSalesContribution margin |
$ |
|||
| Contribution marginSalesVariable costsOperating incomeFixed costs | ||||
| Contribution marginOperating incomeSalesFixed costsVariable costs |
$ |
|||
In: Accounting