For each of the five independent situations below, prepare a single journal entry that summarizes the recording and payment of income taxes and determine the amount of cash paid for income taxes. All dollars are in millions.

Prepare a single journal entry that summarizes the recording and payment of 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 millions rounded to 1 decimal place (i.e., 5,500,000 should be entered as 5.5).)

Events 1,2,3,4,5

1. A) If the consumer is consuming exactly two goods, and she is always spending all of her money, can both of them be inferior goods?

B) Show that perfect substitutes are an example of homothetic preferences.

C) Show that Cobb-Douglas preferences are homothetic preferences.

Krause Industries’ balance sheet at December 31, 2016, is presented below.

KRAUSE INDUSTRIES Balance Sheet December 31, 2016

Assets

Current Assets Cash $7,500 Accounts receivable 73,500 Finished goods inventory (1,500 units) 24,000 Total current assets 105,000 Property, Plant, and Equipment Equipment $40,000 Less: Accumulated depreciation 10,000 30,000 Total assets $135,000

Liabilities and Stockholders' Equity Liabilities Notes payable $25,000 Accounts payable 45,000 Total liabilities 70,000 Stockholders' Equity Common stock $40,000 Retained earnings 25,000 Total stockholders' equity 65,000 Total liabilities and stockholders' equity $135,000

Budgeted data for the year 2017 include the following.

2017 Quarter 4 Total Sales budget (8,000 units at $32) $76,800 $256,000 Direct materials used 17,000 62,500 Direct labor 12,500 50,900 Manufacturing overhead applied 10,000 48,600 Selling and administrative expenses 18,000 75,000

To meet sales requirements and to have 2,500 units of finished goods on hand at December 31, 2017, the production budget shows 9,000 required units of output. The total unit cost of production is expected to be $18. Krause uses the first-in, first-out (FIFO) inventory costing method. Interest expense is expected to be $3,500 for the year. Income taxes are expected to be 40% of income before income taxes. In 2017, the company expects to declare and pay an $8,000 cash dividend.

The company’s cash budget shows an expected cash balance of $5,880 at December 31, 2017. All sales and purchases are on account. It is expected that 60% of quarterly sales are collected in cash within the quarter and the remainder is collected in the following quarter. Direct materials purchased from suppliers are paid 50% in the quarter incurred and the remainder in the following quarter. Purchases in the fourth quarter were the same as the materials used. In 2017, the company expects to purchase additional equipment costing $9,000. $4,000 of depreciation expense on equipment is included in the budget data and split equally between manufacturing overhead and selling and administrative expenses. Krause expects to pay $8,000 on the outstanding notes payable balance plus all interest due and payable to December 31 (included in interest expense $3,500, above). Accounts payable at December 31, 2017, includes amounts due suppliers (see above) plus other accounts payable of $7,200. Unpaid income taxes at December 31 will be $5,000.

Instructions

Prepare a budgeted statement of cost of goods sold, budgeted multiple-step income statement and retained earnings statement for 2017, and a budgeted classified balance sheet at December 31, 2017.

Krause Industries’ balance sheet at December 31, 2016, is presented below.

Budgeted data for the year 2017 include the following.

To meet sales requirements and to have 2,500 units of finished goods on hand at December 31, 2017, the production budget shows 9,000 required units of output. The total unit cost of production is expected to be $18. Krause uses the first-in, first-out (FIFO) inventory costing method. Interest expense is expected to be $3,500 for the year. Income taxes are expected to be 40% of income before income taxes. In 2017, the company expects to declare and pay an $8,870 cash dividend.

The company’s cash budget shows an expected cash balance of $5,880 at December 31, 2017. All sales and purchases are on account. It is expected that 60% of quarterly sales are collected in cash within the quarter and the remainder is collected in the following quarter. Direct materials purchased from suppliers are paid 50% in the quarter incurred and the remainder in the following quarter. Purchases in the fourth quarter were the same as the materials used. In 2017, the company expects to purchase additional equipment costing $11,050. $10,607 of depreciation expense on equipment is included in the budget data and split equally between manufacturing overhead and selling and administrative expenses. Krause expects to pay $10,290 on the outstanding notes payable balance plus all interest due and payable to December 31 (included in interest expense $3,500, above). Accounts payable at December 31, 2017, includes amounts due suppliers (see above) plus other accounts payable of $8,750. Unpaid income taxes at December 31 will be $6,270.

A) Prepare a budgeted statement of cost of goods sold.

B) Prepare a budgeted multiple step income statement for 2017

C) Prepare retained earnings statement for 2017

D) Prepare a budgeted classified balance sheet at December 31,2017

Brighton Services repairs locomotive engines. It employs 100 full-time workers at $21 per hour. Despite operating at capacity, last year's performance was a great disappointment to the managers. In total, 10 jobs were accepted and completed, incurring the following total costs.

Of the $1,000,000 manufacturing overhead, 30 percent was variable overhead and 70 percent was fixed.

This year, Brighton Services expects to operate at the same activity level as last year, and overhead costs and the wage rate are not expected to change. For the first quarter of this year, Brighton Services completed two jobs and was beginning the third (Job 103). The costs incurred follow.

You are a consultant associated with Lodi Consultants, which Brighton Services has asked for help. Lodi's senior partner has examined Brighton Services's accounts and has decided to divide actual factory overhead by job into fixed and variable portions as follows.

In the first quarter of this year, 30 percent of marketing and administrative cost was variable and 70 percent was fixed. You are told that Jobs 101 and 102 were sold for $920,000 and $572,000, respectively. All over- or underapplied overhead for the quarter is written off to Cost of Goods Sold.

Required:

a. Present in T-accounts the actual manufacturing cost flows for the three jobs in the first quarter of this year.

b. Using last year's overhead costs and direct labor-hours as this year's estimate, calculate predetermined overhead rates per direct labor-hour for variable and fixed overhead.

c. Present in T-accounts the normal manufacturing cost flows for the three jobs in the first quarter of this year. Use the overhead rates derived in requirement (b).

d. Calculate operating profit (loss) for the first quarter of this year under actual and normal costing systems.

Brighton Services repairs locomotive engines. It employs 100 full-time workers at $22 per hour. Despite operating at capacity, last year's performance was a great disappointment to the managers. In total, 10 jobs were accepted and completed, incurring the following total costs.

Of the $1,020,000 manufacturing overhead, 40 percent was variable overhead and 60 percent was fixed.

This year, Brighton Services expects to operate at the same activity level as last year, and overhead costs and the wage rate are not expected to change. For the first quarter of this year, Brighton Services completed two jobs and was beginning the third (Job 103). The costs incurred follow.

You are a consultant associated with Lodi Consultants, which Brighton Services has asked for help. Lodi's senior partner has examined Brighton Services's accounts and has decided to divide actual factory overhead by job into fixed and variable portions as follows.

In the first quarter of this year, 30 percent of marketing and administrative cost was variable and 70 percent was fixed. You are told that Jobs 101 and 102 were sold for $874,000 and $580,000, respectively. All over- or underapplied overhead for the quarter is written off to Cost of Goods Sold.

Required:

a. Present in T-accounts the actual manufacturing cost flows for the three jobs in the first quarter of this year.

b. Using last year's overhead costs and direct labor-hours as this year's estimate, calculate predetermined overhead rates per direct labor-hour for variable and fixed overhead.

c. Present in T-accounts the normal manufacturing cost flows for the three jobs in the first quarter of this year. Use the overhead rates derived in requirement (b).

d. Calculate operating profit (loss) for the first quarter of this year under actual and normal costing systems.

Sports Enterprises experiences level sales on its regular product line. Recently the company has been given an opportunity to expand its product line. The expected sales for 2019 on the expanded product line are as follows:

First Quarter $125,000

Second Quarter $287,500

Third Quarter ` $ 62,500

Fourth Quarter $225,000

First Quarter 2014 $150,000

Sports Enterprises carries inventory equal to 25% of the next quarter’s sales, accounts payable of 10% of the next quarter’s sales and accounts receivables of 30% of this quarter’s sales. Assume that Sports Enterprises starts the first quarter with $10,000 of inventory on hand and $2,500 in accounts payable and zero in accounts receivable. Calculate the net working capital and change in net working capital for each quarter for the upcoming year – 2019.

Use the following format: Beginning Q1 Q2 Q3 Q4 Q1 2020 For this question use Excel.

Sports Enterprises experiences level sales on its regular product line. Recently the company has been given an opportunity to expand its product line. The expected sales for 2019 on the expanded product line are as follows:

First Quarter $125,000

Second Quarter $287,500

Third Quarter ` $ 62,500

Fourth Quarter $225,000

First Quarter 2014 $150,000

Sports Enterprises carries inventory equal to 25% of the next quarter’s sales, accounts payable of 10% of the next quarter’s sales and accounts receivables of 30% of this quarter’s sales. Assume that Sports Enterprises starts the first quarter with $10,000 of inventory on hand and $2,500 in accounts payable and zero in accounts receivable. Calculate the net working capital and change in net working capital for each quarter for the upcoming year – 2019.

Use the following format: Beginning Q1 Q2 Q3 Q4 Q1 2020 For this question use Excel.

Tami Tyler opened Tami’s Creations, Inc., a small manufacturing company, at the beginning of the year. Getting the company through its first quarter of operations placed a considerable strain on Ms. Tyler’s personal finances. The following income statement for the first quarter was prepared by a friend who has just completed a course in managerial accounting at State University.

Ms. Tyler is discouraged over the loss shown for the quarter, particularly because she had planned to use the statement as support for a bank loan. Another friend, a CPA, insists that the company should be using absorption costing rather than variable costing and argues that if absorption costing had been used the company probably would have reported at least some profit for the quarter.

At this point, Ms. Tyler is manufacturing only one product—a swimsuit. Production and cost data relating to the swimsuit for the first quarter follow:

Required:

1. Complete the following:

a. Compute the unit product cost under absorption costing.

b. What is the company’s absorption costing net operating income (loss) for the quarter? (Round your intermediate calculations to 2 decimal places.)

c. Reconcile the variable and absorption costing net operating income (loss) figures. (Losses and deductions should be entered as a negative.)

3. During the second quarter of operations, the company again produced 33,100 units but sold 38,100 units. (Assume no change in total fixed costs.)

a. What is the company’s variable costing net operating income (loss) for the second quarter?

b. What is the company’s absorption costing net operating income (loss) for the second quarter?

c. Reconcile the variable costing and absorption costing net operating incomes for the second quarter.

Which of the following would directly lead to the quantity of loanable funds in the market for loanable funds falling?

a. Social security is ended, leaving individuals on the hook for paying all their costs during retirement.

b. A war breaks out which galvanizes individuals to buy war bonds (bonds that fund the government's military spending).

c. A new tax is introduced that taxes all types of savings (bonds, stocks, cds, mutual funds, etc.) by taking 50% of all interest gained.

d. An ad campaign by the government to encourage companies to invest in new, more efficient, technology.