Trader Joe's company operates in the US supermarket industry. How difficult is it to make money in the supermarket industry? Why? How have its prospects changed in the last 10 years?

Income Tax Credits (LO. 6)

Brendan and Theresa are married and have three children in college. Their twin daughters, Christine and Katlyn, are freshmen and attend the same university. Their son, Kevin, is a graduate student. In 2020, Brendan and Theresa pay $12,100 in tuition and fees ($6,050 each) and $2,920 in textbooks ($1,430 and $1,490, respectively) for their daughters and $4,230 in tuition and fees for Kevin and $350 in textbooks. The twins' room and board is $2,590, while Kevin's room and board is $1,310. Brendan and Theresa have an adjusted gross income of $72,100.

a. Brendan and Theresa can claim ______ as a tax credit for the higher education expenses.

Round intermediate computations and final answer to the nearest dollar.

b. Assume that their adjusted gross income is $124,400, then they can claim _______ as a tax credit for the higher education expenses.

c. Assume the same facts as in part a, except that Kevin is a freshman and the twins are graduate students. Brendan and Theresa can claim ________ as a tax credit for the higher education expenses.

JJJ Corporation owns a number of shopping centers used to produce rental income. In 2020, the corporation received an advanced rental payment of $20,000 from one of the tenants. The advance payment represented the payment of the rent for the year 2021.

A. If JJJ Corporation used the cash method of accounting, indicate the amount of income, if any, the corporation would need to report in 2020.

B. If JJJ Corporation used the accrual method of accounting, indicate the amount of income, if any, the corporation would need to report in 2020.

Caldor Health accrued $140,000 for a warranty liability related to sales made in 2020. Warranties cover defects for 2 years from the date of sale. Claims in 2020 were $60,000 and in 2021 were $70,000. Warranty expense fro 2020 and 2021 are:

A) $60,000 and $70,000

B)$60,000 and $80,000

C)$140,000 and $0

D)$140,000 expense and $10,000 income

Please give specific reason for every choice that why it is correct and why it is wrong if you can. Thank you so much!!!!!

Antara Ltd operates in the construction industry and do not prepare consolidated financial statements. Laura Jones is the senior accountant of the company, leading the financial reporting team. As a result of being profitable for the last five years, on 1 July 2018, Antara Ltd acquired 25% of the issued ordinary shares of Blanca Ltd paying $198 000 in cash. This provided Antara Ltd with the significant influence over Blanca Ltd. At the acquisition date, Laura and her team received the information below for Blanca Ltd:  Equity comprised $180 000 share capital and $144 000 retained earnings.  All identifiable assets and liabilities were recorded at their carrying amounts equal to the fair values with the exceptions of three assets: Inventory, Land, and Equipment. $ $ Inventory 126 000 153 000 Land 162 000 198 000 Equipment 414 000 432 000 Other information related to the above assets includes:  Blanca Ltd sold all the inventory by 30 June 2020.  After acquisition, Land was revalued by Blanca Ltd and revaluation was recognised in Blanca Ltd’s own accounting book. The company uses the revaluation model to account for its non-current assets. At 30 June 2019, Blanca Ltd had Land recorded at $252 000 fair value, and at 30 June 2020 at $288 000 fair value.  Blanca Ltd planned to use Equipment for another 5 years, using the straight line method of depreciation. During two financial years following the acquisition, Antara Ltd and Blanca Ltd carried out the inter-entity transactions below.  Antara Ltd sold a machine to Blanca Ltd for $85 000. The machine had a carrying amount of $79 600 at the time of sale on 1 January 2019. Blanca Ltd planned to use the machine for a further 3-year with depreciation based on the straight line method.  On 15 May 2019, Antara Ltd sold inventory to Blanca Ltd for $20 800. The inventory had cost Antara Ltd $10 000. Blanca Ltd sold half of the inventory externally by 30 June 2019.  On 30 April 2020, Antara Ltd sold inventory to Blanca Ltd for $126 000. The profit before-tax of this transaction was $14 400. Blanca Ltd sold 90% of the inventory externally by 30 June 2020. ACCT6005 Assessment 2 Case Study Brief.docx Page 3 of 6 Blanca Ltd’s balance of Retained earnings at 30 June 2019 was $306 000. Both companies apply the tax rate of 30%. Laura approved the following consolidated statements of profit or loss and other comprehensive incomes for Antara Ltd and Blanca Ltd for the year ended 30 June 2020. She made a note that the statement for Antara Ltd does not include the financial results of Blanca Ltd prepared using the equity account method. Accounts Revenues $900 000 $432 000 Expenses 504 000 144 000 Profit before tax 396 000 288 000 Income tax expense (144 000) (90 000) Profit after tax 252 000 198 000 Other comprehensive income (OCI) items Gains on non-current asset revaluation 54 000 25 200 Comprehensive income $306 000 $223 200 For the financial year ended 30 June 2020, the Chief Financial Officer (CFO) of Antara Ltd has been advised by the company’s auditor that the consolidated financial statements should be prepared, which include the financial results of Blanca Ltd based on the equity method. The CFO came to Laura seeking her professional opinions regarding this matter. Laura has decided to ask you as a member of her reporting team to undertake a number of tasks to provide her with sufficient information before she responds to the CFO. The tasks comprise Part A and Part B below. Part A Practical Problem Solving a) Prepare the journal entries for Antara Ltd at 30 June 2020 to account for its investment in Blanca Ltd, assuming Antara Ltd prepares consolidated financial statements. b) Prepare the consolidated statement of profit or loss and other comprehensive income for Antara Ltd for the year ended at 30 June 2020, assuming this statement includes Blanca Ltd’s financial results.

1. The following questions refer to options on SNAP (Ticker: SNAP), which closed today at $22.59/share.  Below are a table of closing prices on SNAP options on 8/31/2020:

_____________________________________________________

Strike              Expiration                   Calls                Puts________

20                    October, 2020                        $3.30               $0.71

21                    October, 2020                        $2.61               $1.04

22                    October, 2020                        $2.04               $1.44

23                    October, 2020                        $1.55               $1.95

24                    October, 2020                        $1.15               $2.54

______________________________________________________

1. Which of these options are in-the-money?
2. Suppose you think that the price is unlikely to remain above $23 during the next month so you write a call with a strike of $23.  Create a table of values of your call position as a function of the price of SNAP at the expiration of the option position.  Use share prices in intervals of $0.25 in the range from $20 to $25.
3. What if instead of the call you purchased a put with a strike of $23.  Create a similar table of values as in (b).  
4. Plot the values depicted in your tables from parts (b) and (c)
5. Suppose instead that you are bullish on SNAP stock and decide to buy calls with a strike of $22.  Give a table of values of your spread as a function of the underlying stock of SNAP at the expiration date of the option, and finally, plot the payout as a function of the underlying stock price at expiration.

The following information is from Alberta Ltd financial statements for the year ended Dec 31, 2020: - Net income for the year $ 460,000. - 8% Convertible bonds issued at par $1,000,000 ($1000 per bond), each bond convertible into 20 common shares $1,000,000 - 6% non-cumulative preferred shares $100 par value. $1,000,000 - Common shares 120,000 authorized, 60,000 issued and outstanding $ 600,000 - Stock options (call option granted in a prior year) to purchase 30,000 common shares at $10 per common share. - Average market price per common share during 2020 was $12, and the tax rate for 2020 is 35% - Alberta declare and pay $100,000 dividends during 2020 There were no changes during 2020 in the number of common shares, preferred shares, stock options or convertible bonds. Also for simplicity, ignore the requirement to book the convertible bonds’ equity portion separately. Instruction: A) Calculate the basic EPS for 2020 B) Calculate diluted EPS for 2020 (Show your calculation for each transaction/ affect)

The following information is from Alberta Ltd financial statements for the year ended Dec 31, 2020: - Net income for the year $ 460,000. - 8% Convertible bonds issued at par $1,000,000 ($1000 per bond), each bond convertible into 20 common shares $1,000,000 - 6% non-cumulative preferred shares $100 par value. $1,000,000 - Common shares 120,000 authorized, 60,000 issued and outstanding $ 600,000 - Stock options (call option granted in a prior year) to purchase 30,000 common shares at $10 per common share. - Average market price per common share during 2020 was $12, and the tax rate for 2020 is 35% - Alberta declare and pay $100,000 dividends during 2020 There were no changes during 2020 in the number of common shares, preferred shares, stock options or convertible bonds. Also for simplicity, ignore the requirement to book the convertible bonds’ equity portion separately. Instruction: A) Calculate the basic EPS for 2020 B) Calculate diluted EPS for 2020 (Show your calculation for each transaction/ affect)

In December 2019, Emily, a cash basis taxpayer, received a $2,500 cash scholarship for the spring semester of 2020. However, she did not use the funds to pay the tuition until January 2020. Emily can exclude the $2,500 from her gross income in 2019.

a. True

b. False