Fantasy Fashions had used the LIFO method of costing inventories, but at the beginning of 2018 decided to change to the FIFO method. The inventory as reported at the end of 2017 using LIFO would have been $26 million higher using FIFO. Retained earnings reported at the end of 2016 and 2017 was $246 million and $266 million, respectively (reflecting the LIFO method). Those amounts reflecting the FIFO method would have been $256 million and $278 million, respectively. 2017 net income reported at the end of 2017 was $34 million (LIFO method) but would have been $36 million using FIFO. After changing to FIFO, 2018 net income was $42 million. Dividends of $8 million were paid each year. The tax rate is 40%. Required: 1. Prepare the journal entry at the beginning of 2018 to record the change in accounting principle. 2. In the 2018–2017 comparative income statements, what will be the amounts of net income reported for 2017 and 2018? 3. Prepare the 2018–2017 retained earnings column of the comparative statements of shareholders’ equity.

Problem 3 Eagles Inc. had the following statement of financial position at the end of operations for 2017:

Cash 32000 Accounts payable 48000 Accounts receivable 33920 Bonds payable 65600 FV-NI investments 51200 Common shares 160000 Equipment (net) 129600 Retained earnings 37120 Land 64000 Total 310720 310720

During 2018, the following occurred:

1. Eagles sold its FV-NI investments portfolio at a gain of $9,600.

2. A parcel of land was purchased for $75,200.

3. An additional $60,800 worth of common shares was issued.

4. Dividends totalling $19,200 were declared and paid to shareholders.

5. Net income for 2018 was $73,600.

6. Depreciation for 2018 was 19,200.

7. At December 31, 2018, Cash was $125,120; Accounts Receivable was $67,200; and Accounts Payable was $64,000.

1. Prepare the statement of financial position as it would appear at December 31, 2018.

2Prepare a statement of cash flows for the year ended December 31, 2018 using the indirect method. Assume dividends paid are treated as financing activities

Newton Labs leased chronometers from Brookline Instruments on January 1, 2018. Brookline Instruments manufactured the chronometers at a cost of $330,000. The chronometers have a fair value of $429,000. Appropriate adjusting entries are made quarterly. (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 appropriate entries for Newton Labs to record the arrangement at its commencement, January 1, 2018, and on March 31, 2018.
2. Prepare appropriate entries for Brookline Instruments to record the arrangement at its commencement, January 1, 2018, and on March 31, 2018.

On Sept. 1, Jacob Furniture Mart agreed to sell the assets of its Office Furniture Division to Albanese Inc. for $24 million. The sale was completed on December 31, 2018.

The following additional facts pertain to the transaction:

• The Office Furniture Division qualifies as a component of the entity according to GAAP regarding discontinued operations.

• The book value of the Division’s assets totaled $19 million on the date of the sale.

• The Division’s operating loss was a pre-tax loss of $3 million in 2018.

• Jacob's income tax rate is 25%.

Required:

1. In the income statement for the year ended December 31, 2018, what would Jacob Furniture Mart report as income/(loss) from discontinued operations?

2. Suppose that the Office Furniture Division's assets had not been sold by December 31, 2018, but were considered held for sale. Assume that the fair value of these assets was $24 million at December 31, 2018. In the income statement for the year ended December 31, 2018, what would Jacob Furniture Mart report as income/(loss) from discontinued operations?

You are the CFO of Jordan company. The year-end of Jordan is 31 March. The CEO of Jordan company informed you that the company intends to open a new branch in the next few weeks. The company has spent a substantial sum on a series of television advertisements to promote this new branch. The company paid for advertisements costing JOD 1,500,000 before 31 March 2018. JOD 900,000 of this sum relates to advertisements shown before 31 March 2018 and JOD 350,000 to advertisements shown in April 2018. Since 31 March 2018, The company has paid for further advertisements costing JOD 250,000. A discussion between the CEO and the board of directors whether these costs should be written off as expenses in the year to 31 March 2018. The board of Directors doesn’t want to charge JOD 3 million. Required: Explain and justify the treatment of these costs of JOD 3 million in the financial statements for the year ended 31 March 2018 according to IAS 38 assuming that market research indicates that this new branch is likely to be highly successful.

6. Scotti Company had the following transactions during the year 2018: *On January 1, 2018, its first year of business, Scotti Company issued 800,000 shares of $5 par value Common Stock for $18 per share. *On July 5, 2018, Scotti repurchased 200,000 shares at $20 per share. *On August 4, 2018, Scotti reissued 50,000 of its Treasury shares at $25 per share. *On September 15, 2018, Scotti reissued 50,000 of its Treasury shares at $23 per share. *On December 29, Scotti reissued the remaining 100,000 shares for $15.50 per share. Scotti earned $420,000 of net income throughout the year and did not pay any dividends in its first year.

What is the balance in the Retained Earnings account on December 31, 2018? (Hint: Write down the entries for all the transactions since August 4th and keep track of the balance in the Paid-in Capital - Treasury Stock account).

Group of answer choices

Cannot be determined from the information given.

$470,000

$420,000

$0

$370,000

The Prince-Robbins partnership has the following capital account balances on January 1, 2018:

Prince is allocated 60 percent of all profits and losses with the remaining 40 percent assigned to Robbins after interest of 7 percent is given to each partner based on beginning capital balances.

On January 2, 2018, Jeffrey invests $58,000 cash for a 20 percent interest in the partnership. This transaction is recorded by the goodwill method. After this transaction, 7 percent interest is still to go to each partner. Profits and losses will then be split as follows: Prince (50 percent), Robbins (30 percent), and Jeffrey (20 percent). In 2018, the partnership reports a net income of $18,000.

Prepare the journal entry to record Jeffrey’s entrance into the partnership on January 2, 2018.

Determine the allocation of income at the end of 2018.

1. Record the entry for goodwill allocation, during the admission of a new partner.

2. Record the cash received from new partner.

Determine the allocation of income at the end of 2018.

Question 3 During 2018, Vancare Company first year of operations, the company reported pretax financial income of $580,000. Vancare’s enacted tax rate is 35% for 2018 and 40% for all later years. Vancare expects to have taxable income in each of the next 5 years. The effects on future tax returns of temporary differences existing at December 31, 2018, are summarized below. FUTURE YEARS 2019 2020 2021 2022 2023 Total Future taxable (deductible) amounts Instalment sales $80,000 $80,000 $80,000 $240,000 Depreciation $12,000 $12,000 $12,000 $12,000 $12,000 $ 60,000 Unearned rent ($35,000) ($35,000) ($70,000) Instructions (a) Prepare a schedule to show the calculation of deferred taxes at December 31, 2018. (b) Compute taxable income for 2018. (c) Prepare the journal entry to record income taxes payable, deferred taxes and income tax expense for 2018. Listed below are items that are treated differently for accounting purposes than they are for tax purposes. (d) (i) Explain the difference between a temporary difference and a permanent difference.

Fantasy Fashions had used the LIFO method of costing inventories, but at the beginning of 2018 decided to change to the FIFO method. The inventory as reported at the end of 2017 using LIFO would have been $21 million higher using FIFO.

Retained earnings reported at the end of 2016 and 2017 was $241 million and $261 million, respectively (reflecting the LIFO method). Those amounts reflecting the FIFO method would have been $251 million and $273 million, respectively. 2017 net income reported at the end of 2017 was $29 million (LIFO method) but would have been $31 million using FIFO. After changing to FIFO, 2018 net income was $37 million. Dividends of $9 million were paid each year. The tax rate is 40%.
  
Required:
1. Prepare the journal entry at the beginning of 2018 to record the change in accounting principle.
2. In the 2018–2017 comparative income statements, what will be the amounts of net income reported for 2017 and 2018?
3. Prepare the 2018–2017 retained earnings column of the comparative statements of shareholders’ equity.
  

Fantasy Fashions had used the LIFO method of costing inventories, but at the beginning of 2018 decided to change to the FIFO method. The inventory as reported at the end of 2017 using LIFO would have been $15 million higher using FIFO.

Retained earnings reported at the end of 2016 and 2017 was $235 million and $255 million, respectively (reflecting the LIFO method). Those amounts reflecting the FIFO method would have been $245 million and $267 million, respectively. 2017 net income reported at the end of 2017 was $23 million (LIFO method) but would have been $25 million using FIFO. After changing to FIFO, 2018 net income was $31 million. Dividends of $8 million were paid each year. The tax rate is 40%.
  
Required:
1. Prepare the journal entry at the beginning of 2018 to record the change in accounting principle.
2. In the 2018–2017 comparative income statements, what will be the amounts of net income reported for 2017 and 2018?
3. Prepare the 2018–2017 retained earnings column of the comparative statements of shareholders’ equity.