Over a 4 year period the black corp purchased 100% of the outstanding voting shares of White Co. The acquisition was made in a series of steps as follows:

DATE:                             %                        Purchase Price

Jan 1, Year 1 5% 5,000

Jan 1, Year 2 10% 12,000

Jan 1, Year 3 10% 15,000

Jan 1, Year 4 75% 200,000

Total 100% 232,000

Any excess of the purchase price over the net book value of the assets was attributed to goodwill.

The acquisition in Year 3 allowed Black to have significant influence over the operating policies of white.

The acquisition in Year 4 gave Black control over White.

Operating results, dividends paid and fair value of white for the 4 years were as follows:

Net Income Dividend Paid Fair Value

Jan 1 Year 1 100,000

Year 1 25,000 15,000 120,000

Year 2 30,000 15,000 150,000

Year 3 40,000 20,000 170,000

Year 4 50,000 25,000 250,000

1. For each of the 4 years compute the amount of income that will be recorded on Black’s books related to its investment in White Co. AND compute the balance in “Investment in White Co. Account” on Blacks books at December, 31 of each year

*SHOW ALL WORK*

Danube recently acquired a delivery van for $24,200 paying cash. Danube projects a 4 year useful service life and a remaining residual value on the delivery van of $2,200. Danube expects to drive the van 106,000 miles during the useful service life. Please compute the annual depreciation for the 4 year life of the delivery van for each of these methods:

1. Straight-line

Depreciation expense

2. Double-declining-balance. (Round your depreciation rate to 2 decimal places. Round your final answers to the nearest whole dollar.) End year ammounts. Years 1,2,3, with depreciation expense, accumulated depreciation and book value for each year.

3. Actual miles driven each year were 19,000 miles in Year 1; 29,000 miles in Year 2; 23,000 miles in Year 3; and 25,000 miles in Year 4. Note that actual total miles of 96,000 fall short of expectations by 10,000 miles. Calculate annual depreciation for the four-year life of the van using activity-based. (Round your depreciation rate to 2 decimal places.) end of year amounts year 1, 2, 3, 4, with depreciation expense, accumulated depreciation and book value for each year.

Jasper and Crewella Dahvill were married in year 0. They filed joint tax returns in years 1 and 2. In year 3, their relationship was strained and Jasper insisted on filing a separate tax return. In year 4, the couple divorced. Both Jasper and Crewella filed single tax returns in year 4. In year 5, the IRS audited the couple’s joint year 2 tax return and each spouse’s separate year 3 tax returns. The IRS determined that the year 2 joint return and Crewella’s separate year 3 tax return understated Crewella’s self-employment income, causing the joint return year 2 tax liability to be understated by $5,800 and Crewella’s year 3 separate return tax liability to be understated by $8,450. The IRS also assessed penalties and interest on both of these tax returns. Try as it might, the IRS has not been able to locate Crewella, but they have been able to find Jasper. (Leave no answer blank. Enter 0 if applicable.)

Problem 4-52 Part-a (Algo)

a. What is the maximum amount of tax that the IRS can require Jasper to pay for the Dahvill’s year 2 joint return?

b. What is the maximum amount of tax that the IRS can require Jasper to pay for Crewella’s year 3 separate tax return?

1. Lessee enters into a five-year lease of office space on January 1, and concludes that the agreement is an operating lease. Lessee pays initial direct costs of $5,000. The agreement provides the following:

Complete the following table to show the impact on each year of Lessee’s income statement and balance sheet. Prepare the journal entries for the Lessee at the commencement of the lease and at the end of year 1.

Subject Financial Accounting

6. Pure expectations theory

The pure expectations theory, or the expectations hypothesis, asserts that long-term interest rates can be used to estimate future short-term interest rates.

The yield on a one-year Treasury security is 4.9200%, and the two-year Treasury security has a 6.6420% yield. Assuming that the pure expectations theory is correct, what is the market’s estimate of the one-year Treasury rate one year from now? (Note: Do not round your intermediate calculations.)

9.5672%

10.6582%

7.1335%

8.3923%

Recall that on a one-year Treasury security the yield is 4.9200% and 6.6420% on a two-year Treasury security. Suppose the one-year security does not have a maturity risk premium, but the two-year security does and it is 0.2%. What is the market’s estimate of the one-year Treasury rate one year from now? (Note: Do not round your intermediate calculations.)

10.1423%

9.1042%

6.7882%

7.9861%

Suppose the yield on a two-year Treasury security is 5.83%, and the yield on a five-year Treasury security is 6.20%. Assuming that the pure expectations theory is correct, what is the market’s estimate of the three-year Treasury rate two years from now? (Note: Do not round your intermediate calculations.)

5.46%

6.45%

6.53%

6.69%

Walsh Company manufactures and sells one product. The following information pertains to each of the company’s first two years of operations: Variable costs per unit: Manufacturing: Direct materials $ 26 Direct labor $ 12 Variable manufacturing overhead $ 5 Variable selling and administrative $ 4 Fixed costs per year: Fixed manufacturing overhead $ 400,000 Fixed selling and administrative expenses $ 50,000 During its first year of operations, Walsh produced 50,000 units and sold 40,000 units. During its second year of operations, it produced 40,000 units and sold 50,000 units. The selling price of the company’s product is $51 per unit. Required: 1. Assume the company uses variable costing: a. Compute the unit product cost for year 1 and year 2. b. Prepare an income statement for year 1 and year 2. 2. Assume the company uses absorption costing: a. Compute the unit product cost for year 1 and year 2. (Round your answers to 2 decimal places.) b. Prepare an income statement for year 1 and year 2. (Round your intermediate calculations to 2 decimal places) 3. Reconcile the difference between variable costing and absorption costing net operating income in year 1 and year 2.

Assignment Exercise 23–1: Cost of Owning and Cost of Leasing Cost of owning and cost of leasing tables are reproduced below.

Required Using the appropriate table from the Chapter 13 Time Value of Money Appendices appearing as 13-A, 13-B, and 13-C, record the present-value factor at 10% for each year and compute the present-value cost of owning and the present value of leasing. Which alternative is more desirable at this interest rate? Do you think your answer would change if the interest rate was 6% instead of 10%?

Listed below are several transactions that took place during the second and third years of operations for RPG Company. Year 2 Year 3 Amounts billed to customers for services rendered $ 370,000 $ 470,000 Cash collected from credit customers 280,000 420,000 Cash disbursements: Payment of rent 82,000 0 Salaries paid to employees for services rendered during the year 142,000 162,000 Travel and entertainment 32,000 42,000 Advertising 16,000 37,000 In addition, you learn that the company incurred advertising costs of $27,000 in year 2, owed the advertising agency $5,200 at the end of year 1, and there were no liabilities at the end of year 3. Also, there were no anticipated bad debts on receivables, and the rent payment was for a two-year period, year 2 and year 3. Required: 1. Calculate accrual net income for both years. 2. Determine the amount due the advertising agency that would be shown as a liability on RPG’s balance sheet at the end of year 2. Calculate accrual net income for both years. Question 1 Year 2 Year 3 Revenues Expenses: Rent Salaries Travel and entertainment Advertising Net income Question 2 Determine the amount due the advertising agency that would be shown as a liability on RPG’s balance sheet at the end of year 2.

Walsh Company manufactures and sells one product. The following information pertains to each of the company’s first two years of operations: Variable costs per unit: Manufacturing: Direct materials $ 27 Direct labor $ 10 Variable manufacturing overhead $ 2 Variable selling and administrative $ 1 Fixed costs per year: Fixed manufacturing overhead $ 240,000 Fixed selling and administrative expenses $ 80,000 During its first year of operations, Walsh produced 50,000 units and sold 40,000 units. During its second year of operations, it produced 40,000 units and sold 50,000 units. The selling price of the company’s product is $51 per unit. Required: 1. Assume the company uses variable costing: a. Compute the unit product cost for year 1 and year 2. b. Prepare an income statement for year 1 and year 2.