Balance Sheet

As at Dec 31 2017 and 2018

Carl’s Jr Restaurants

2017               2018

Current Assets:

Cash $210,000,000        $215,000,000

Accounts Receivables                     355,000,000         310,000,000

Inventory                                       507,000,000       328,000,000

Total Current Assets                      $1,072,000,000       $853,000,000

Long-Term Assets:

Net Equipment, Furniture, Fixtures       $6,085,000,000     $6,527,000,000

Total Assets                                      $7,157,000,000     $7,380,000,000

Current Liabilities:

Accounts Payable                           $207,000,000        $298,000,000

Notes Payable                              $1,715,000,000     $1,427,000,000

Total Current Liabilities                       $1,922,000,000      $1,725,000,000

Long-term Liabilities                           $1,987,000,000      $2,308,000,000

Owners’ Equity:

Common stock plus Capital Surplus   $1,000,000,000      $1,000,000,000

Retained Earnings                                 2,248,000,000        2,347,000,000

Total Owners’ Equity                           3,248,000,000    3,347,000,000

Total Liabilities and Owners’ Equity $7,157,000,000       $7,380,000,000

Income Statement 2018

Carl’s Jr Restaurants

Net Revenues                                         $4,053,000,000

Cost of food and beverage                       2,780,000,000

Gross Profit 1,273,000,000

Amortization 100,000,000

Depreciation                                            450,000,000

EBIT                                                      723,000,000

Interest expense                                       502,000,000

Taxes                                                      75,000,000

Net Income                                               146,000,000

a) Prepare a comparative balance sheet statement for the two years.  

b) Prepare a common-size income statement.   

c) Explain whether liquidity (current ratio and quick ratio) and solvency (debt/equity ratio and debt ratio), have improved for the company.

Growth Rate Calculations. U.S. GDP in 2018 was $20.9 trillion, and U.S. GDP/person in 2018 was about $62,500, while China’s GDP in 2019 is projected to be $14.2 trillion (converted to US$ at market exchange rates), and China’s GDP/person in 2019 is projected to be $19,520 (converted to US$ at PPP-adjusted exchange rates).

a) Suppose that U.S. real GDP continues to grow at its recent pace of 2.3%/yr. What will U.S. real GDP (in 2018$) be in 2028? (Recall that if a series y grows at a constant rate g, then yt = y0 egt, or equivalently, yt = ys eg(t-s).)

b) Suppose instead that U.S. real GDP grows at its longer-run historical rate of 3.25%/yr. What would U.S. real GDP (in 2018$) be in 2028 in that case?

c) Suppose that U.S. real GDP/person continues to grow at its recent pace of 1.6%/yr. What will U.S. real GDP/person (in 2018$) be in 2028?

d) Suppose instead that U.S. real GDP/person grows at its longer-run historical rate of 2.1%/yr. What would U.S. real GDP/person (in 2018$) be in 2028 in that case?

e) Suppose that China’s real GDP continues to grow at its historical average rate of 9.1%/yr. What will China’s real GDP (in 2019US$) be in 2029?

f) Suppose that China’s real GDP/person continues to grow at its historical average rate of 8.2%/yr. What will China’s real GDP/person (in PPP-adjusted 2019US$) be in 2029?

g) If the U.S. grows at the same rate as in part a, and China grows at the same rate as in part e, in how many years from now will China’s real GDP be equal to the U.S.’s real GDP? (Let’s ignore the difference between 2018US$ and 2019US$ and just assume they are the same.)

h) If the U.S grows at the same rate as in part c and China grows at the same rate as in part f, in what year will China’s standard of living be equal to the U.S.’s standard of living? (Again, ignore the difference between 2018US$ and 2019US$.)

International Roofing Systems (IRS) Company began operations several years ago. At the end of 2017, the only existing temporary differences were the difference described in (e) and (f) below (hint: this creates balances at the end of 2017 in the deferred tax balance sheet accounts). In addition, there are four other tax differences arising in 2018 and 2019. These differences are as follows:

1. Interest revenue earned on an investment in tax-exempt municipal bonds is $34,000 each year.

2. In 2018, pretax financial income includes payments of fines for polluting of $100,000.

3. IRS began franchising its business at the beginning of 2018 and collected $30,000 of franchise fees for services to be rendered in the initial year and over the next several years. Franchise fees are reported when collected for tax purposes. For financial reporting purposes, franchise fees are recognized as revenue when services related to the franchise agreement are provided; these amounts are $20,000 in 2018 and $4,000 in 2019.

4. At July 1, 2018, IRS purchased a subsidiary that resulted in an amount of $600,000 being assigned to goodwill. For tax purposes, the goodwill is amortized and deducted over a 15-year period on a straight-line basis. For financial reporting purposes, goodwill is not amortized, but is required to be tested for impairment; at the end of 2018, IRS determined that goodwill is not impaired, but at the end of 2019, IRS determined that the goodwill has an impairment loss of $45,000.

5. Several years ago, IRS purchased equipment at a cost of $200,000. For financial accounting purposes, straight-line depreciation over the estimated useful life of 10 years is used. For tax purposes, the MACRS system is used and the equipment falls in the 7-year recovery class. As of the end of 2017, the accounting basis for the carrying value was $120,000 and the tax basis was $62,480. For 2018 and 2019, the MACRS rates for depreciation are 8.93% and 8.92%, respectively.

6. IRS has a defined benefit pension plan for its employees. For financial reporting purposes, the accrual basis is used and for tax purposes, pension costs are deducted as funding contributions to the plan are paid. As of the end of 2017, pension expense for financial reporting has been $200,000 greater than funding contributions. Pension expense for financial reporting purposes is $42,000 in 2018 and $50,000 in 2019, and the amount deducted for tax purposes is $2,000 in 2018 and $5,000 in 2019.

Additional information:

• Pretax financial income $180,000 for 2018 and $210,000 for 2019.

• The enacted tax rate, effective in 2018, is 25%.

• As of the end of each year, management estimates that it is more likely than not that future deductible amounts will not be realized as follows: 2017: $10,000; 2018: $12,000; 2019: $15,000

REQUIRED:

1. Complete year-by-year schedules through 2019 for each temporary difference showing the book amount, tax amount, current year taxable (deductible) amount, and future taxable (deductible) amount; note that for (e) and (f), you will need to start your schedule with the future taxable (deductible) amount as of the end of 2017.

2. Prepare schedules to reconcile between pretax financial income and taxable income for 2018 and 2019. Classify the tax differences as permanent or temporary.

Prepare journal entries to record the current portion of income tax expense for 2018 and 2019

and Medical manufactures lithotripters. Lithotripsy uses shock waves instead of surgery to eliminate kidney stones. Physicians’ Leasing purchased a lithotripter from Rand for $1,920,000 and leased it to Mid-South Urologists Group, Inc., on January 1, 2018. (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. How should this lease be classified by Mid-South Urologists Group and by Physicians' Leasing?
2. Prepare appropriate entries for both Mid-South Urologists Group and Physicians' Leasing from the beginning of the lease through the second rental payment on April 1, 2018. Adjusting entries are recorded at the end of each fiscal year (December 31).
3. Assume Mid-South Urologists Group leased the lithotripter directly from the manufacturer, Rand Medical, which produced the machine at a cost of $1.6 million. Prepare appropriate entries for Rand Medical from the beginning of the lease through the second lease payment on April 1, 2018.

Complete this question by entering your answers in the tabs below.

1. How should this lease be classified by Mid-South Urologists Group and by Physicians' Leasing?

2. Prepare appropriate entries for both Mid-South Urologists Group and Physicians' Leasing from the beginning of the lease through the second rental payment on April 1, 2018. Adjusting entries are recorded at the end of each fiscal year (December 31). (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in whole dollars and not in the millions of dollars. Round your answers to nearest whole dollars.)

Requested: Lessee Journal Entry

* Record Lease Jan 01, 2018

*Record Cash Payment Jan 01, 2018

*Record Cash Payment. April 01, 2018

Requested: Lesor Journal Entry

* Record Lease Jan 01, 2018

* Record cash received.  Jan 01, 2018

* Record cash received. April 01, 2018

3. Requested: Assume Mid-South Urologists Group leased the lithotripter directly from the manufacturer, Rand Medical, which produced the machine at a cost of $1.6 million. Prepare appropriate entries for Rand Medical from the beginning of the lease through the second lease payment on April 1, 2018. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in whole dollars and not in the millions of dollars. Round your answers to nearest whole dollars.)

* Record Lease Jan 01, 2018

* Record cash received.  Jan 01, 2018

* Record cash received. April 01, 2018

The 2019 list of the 15 largest banks in the world by assets:

A. Compute the median and the mean assets from this group.

B. Which of these two measures do you think is most appropriate for summarizing these data and why?

C. What is the value of Q2 and Q3?

D. Determine the 63rd percentile for the data.

E. Determine the 29th percentile for the data

F. Build a box plot for 2019 and compare with 2018.

For Part F: The 2018 list of the 15 largest banks in the world by assets:

Show all the steps

At December 31, 2017, Cord Company's plant asset and accumulated depreciation and amortization accounts had balances as follows:

Charles Austin of the controller’s office of Cheyenne Corporation was given the assignment of determining the basic and diluted earnings per share values for the year ending December 31, 2018. Austin has compiled the information listed below.

Circle the correct answer symbol

1. installment sales for 2018 is $600,000 and cost of goods sold $300,000 while the installment sales in 2019 is $1,000,000 and cost of goods sold $800,000, cash collection from 2018 sales was $400,000 in 2018 and $200,000 in 2019, cash collection from 2019 sales was $500,000 in 2019 and $500,000 in 2020, using installment sales method compute gross profit rate for two years sales?

a.

2018 is 50% and 2019 is 20%.

b.

2018 is 20% and 2019 is 50%.

c.

2018 is 50% and 2019 is 50%.

d.

2018 is 20% and2019 is 20%.

2. Imar Construction company signed a contract to build new bridge at a contract price of $5,000,000 and total estimated cost of $4,000,000 the project will be completed within 4 years, the cost incurred to date for each period is, first year $1,000,000- second year $2,500,000- third year $3,200,000 and fourth year $4,100,000 while the estimasted cost to,complete the project for each each period is, first year $3,000,000- second year $1,700,000- third year $1,000,000 and fourth year is $0, based on above question and using Cost recover method, what is the gross profit recognized in second year?

a.

$226,190.

b.

$476,190.

c.

$250,000.

d.

0

3. installment sales for 2018 is $600,000 and cost of goods sold $300,000 while the installment sales in 2019 is $1,000,000 and cost of goods sold $800,000, cash collection from 2018 sales was $400,000 in 2018 and $200,000 in 2019, cash collection from 2019 sales was $500,000 in 2019 and $500,000 in 2020, using cost recovery method compute gross profit realized in 2018?

a.

$100,000.

b.

$300,000.

c.

$150,000.

d.

$200,000.

4. estimated cost of $4,000,000 the project will be completed within 4 years, the cost incurred to date for each period is, first year $1,000,000- second year $2,500,000- third year $3,200,000 and fourth year $4,100,000 while the estimasted cost to, complete the project for each each period is, first year $3,000,000- second year $1,700,000- third year $1,000,000 and fourth year is $0, based on above question and using percentage of completion method, what is the required journal entry in first year?

a.

Debit Construction Expense $3,0000,000, debit construction in process $1,000,000, credit construction revenue $5,000,000.

b.

Debit Construction Expense $1,0000,000, debit Unralized GP $250,000, credit construction revenue $1,250,000.

c.

Debit Construction Expense $1,0000,000, debit construction in process $250,000, credit construction revenue $1,250,000.

d.

Debit Construction Expense $3,0000,000, debit construction in process $900,000, credit construction revenue $5,000,000.

5. installment sales for 2018 is $600,000 and cost of goods sold $300,000 while the installment sales in 2019 is $1,000,000 and cost of goods sold $800,000,cash collection from 2018 sales was $400,000 in 2018 and $200,000 in 2019,cash collection from 2019 sales was $500,000 in 2019 and $500,000 in 2020, using cost recovery method compute unrealized gross profit in 2019?

a.

$150,000.

b.

$200,000.

c.

$300,000.

d.

$100,

The unadjusted trial balance of the Manufacturing Equitable at December 31, 2018, the end of its fiscal year, included the following account balances. Manufacturing’s 2018 financial statements were issued on April 1, 2019.

Other information:

The bank notes, issued August 1, 2018, are due on July 31, 2019, and pay interest at a rate of 12%, payable at maturity.

The mortgage note is due on March 1, 2019. Interest at 11% has been paid up to December 31 (assume 11% is a realistic rate). Manufacturing intended at December 31, 2018, to refinance the note on its due date with a new 10-year mortgage note. In fact, on March 1, Manufacturing paid $442,000 in cash on the principal balance and refinanced the remaining $1,000,000.

Included in the accounts receivable balance at December 31, 2018, were two subsidiary accounts that had been overpaid and had credit balances totaling $19,050. The accounts were of two major customers who were expected to order more merchandise from Manufacturing and apply the overpayments to those future purchases.

On November 1, 2018, Manufacturing rented a portion of its factory to a tenant for $26,400 per year, payable in advance. The payment for the 12 months ended October 31, 2019, was received as required and was credited to rent revenue.

Required:
1. Prepare any necessary adjusting journal entries at December 31, 2018, pertaining to each item of other information (a–d).
2. Prepare the current and long-term liability sections of the December 31, 2018, balance sheet.
  

Requirement 1:

a) Record the bank notes, issued August 1, 2018, are due on July 31, 2019, and pay interest at a rate of 12%, payable at maturity.

b) Record the mortgage note is due on March 1, 2019. Interest at 11% has been paid up to December 31 (assume 11% is a realistic rate). Manufacturing intended at December 31, 2018, to refinance the note on its due date with a new 10-year mortgage note. In fact, on March 1, Manufacturing paid $442,000 in cash on the principal balance and refinanced the remaining $1,000,000.

c) Record included in the accounts receivable balance at December 31, 2018, were two subsidiary accounts that had been overpaid and had credit balances totaling $19,050. The accounts were of two major customers who were expected to order more merchandise from Manufacturing and apply the overpayments to those future purchases.

d)

Record on November 1, 2018, Manufacturing rented a portion of its factory to a tenant for $26,400 per year, payable in advance. The payment for the 12 months ended October 31, 2019, was received as required and was credited to rent revenue.

Requirement 2:

Prepare the current and long-term liability sections of the December 31, 2018, balance sheet.

Balance Sheet (partial)

At December 31, 2018

Current Liabilities:

Total Current Liabilities:

Long- Term Liabilities: