Lecondo Company is engaged in the manufacture and sale of fitness apparel. Several years ago it bought a health food business that has incurred losses since its acquisition. In 2018, the company sold the health food business. The results of operations and other activities for 2018 are summarized below.

                   Fitness Apparel        Health foods

Net sales               $17,400,000           $2,600,000

Cost of goods sold              8,100,000              1,700,000

Other operating expenses          4,700,000             1,200,000

Other:

The health food business was sold in September 2018 at a disposal loss of $500,000.

Treasury stock that had been acquired in 2017 for $130,000 was sold in 2018 for $195,000. The difference between cost and reissue price is not taxable.

During 2018, Lecondo sold 10,000 shares of its previously unissued $10 par value common stock to the public at a price of $27 per share.

Interest revenue of $2,000 was earned during 2018.

Cash dividends declared and paid during 2018 amounted to $700,000.

The fitness apparel division sold land at a $98,000 gain during 2018.

All of the foregoing amounts are before considering the effects of income taxes. The income tax rate is 40%.

Required: Calculate the following amounts that would appear on Lecondo’s income statement. Be alert for items that should not be included in the computation of net income.

Gross profit

Operating income

Income from continuing operations before taxes

Income from continuing operations

Net income

Check figures:

b. Operating income, $4,600,000

c. Income from continuing operations (before taxes), $4,700,000

d. Income from continuing operations (after taxes), $2,820,000

e. Net income, $2,340,000

Question 3: Woo Ltd. recently conducted an extensive review of its accounting and reporting policies. The following accounting changes are an outgrowth of that review: 1. Woo acquired a machine at a cost of $400,000 in 2016. The machine has been depreciated on a straight-line basis with no residual value since it was acquired. During 2019, it was decided that the benefits from the machine would be consumed over a total of 13 years rather than the 20-year useful life now being used to depreciate its cost. 2. At the beginning of 2019, Woo changed its method of valuing inventory from the FIFO cost method to the weighted-average cost method. At December 31, 2018 and 2017, Woo’s inventories were as follow: 2018 2017 On a FIFO cost basis $560,000 $540,000 On a weighted-average cost basis $500,000 $490,000 3. Woo‘s income tax rate is 20%. 4. Woo reports net income for 2019 and 2018 for the following amounts: 2019 2018 Net income $840,000 $900,000 5. The retained earnings of Woo as at December 31, 2018 and 2017 before adjusting the effect from the changes in inventory valuation method are as follow: 2018 2017 Retain earnings $3,200,000 $2,800,000 6. Dividends declared during 2019 and 2018 were $100,000 and $500,000, respectively. Required: a. Prepare the journal entries needed in 2019 related to each change. [10 marks] b. Prepare the statements of changes in equity (in part) for the year ended at 31 December 2019 after the adjustments (including comparative figure for 2018) in accordance with HKAS 8. [10 marks]

The financial statements of Morgan Ltd appear below:

Morgan LTD

Comparative Statement of Financial Position

31 December 2018

________________________________________________________________________________________

Assets                                                                                                         2018                    2017   

Cash ..................................................................................................     $ 25,000              $ 40,000

Marketable securities ...........................................................................         15,000                 60,000

Accounts receivable (net) .....................................................................         50,000                 30,000

Inventory ............................................................................................       150,000                170,000

Property, plant and equipment (net) ......................................................       160,000                200,000

      Total assets ..................................................................................     $400,000              $500,000

Liabilities and equity

Accounts payable ................................................................................     $ 20,000              $ 30,000

Short-term notes payable .....................................................................         40,000                 90,000

Bonds payable ....................................................................................         80,000                160,000

Ordinary shares ..................................................................................       170,000                145,000

Retained earnings ...............................................................................         90,000                  75,000

      Total liabilities and equity................................................................     $400,000              $500,000

Morgan LTD

Income Statement

For the Year Ended 31 December 2018

Net sales ............................................................................................                                 $360,000

Cost of sales .......................................................................................                                   184,000

Gross profit .........................................................................................                                   176,000

Expenses

      Interest expense ............................................................................        $24,000

      Selling expenses ...........................................................................         30,000

      Administrative expenses ................................................................          20,000

            Total expenses ........................................................................                                     74,000

Profit before income taxes ...................................................................                                   102,000

Income tax expense ............................................................................                                     30,000

Profit ..................................................................................................                                 $ 72,000

Additional information:

a.     Cash dividends of $57,000 were declared and paid in 2018.

b.     Weighted-average number of shares of ordinary shares outstanding during 2018 was 60,000 shares.

c.     Market value of ordinary shares on 31 December 2018 was $18 per share.

d.     Net cash provided by operating activities for 2018 was $63,000.

Required

Using the financial statements and additional information, compute the following ratios for Morgan Ltd for 2018. Show all computations.

1.     Current ratio

2.     Return on ordinary shareholders’ equity

3.     Price-earnings ratio

4.     Acid-test/Quick ratio

5.     Receivables turnover

On January 1, 2018, Baddour, Inc., issued 10% bonds with a face amount of $160 million. The bonds were priced at $140 million to yield 12%. Interest is paid semiannually on June 30 and December 31. Baddour’s fiscal year ends September 30.

Required:
1. What amount(s) related to the bonds would Baddour report in its balance sheet at September 30, 2018?
2. What amount(s) related to the bonds would Baddour report in its income statement for the year ended September 30, 2018?
3. What amount(s) related to the bonds would Baddour report in its statement of cash flows for the year ended September 30, 2018? In which section(s) should the amount(s) appear?
(For all requirements, Enter your answers in whole dollars.)
On January 1, 2018, Baddour, Inc., issued 10% bonds with a face amount of $160 million. The bonds were priced at $140 million to yield 12%. Interest is paid semiannually on June 30 and December 31. Baddour’s fiscal year ends September 30.

Required:
1. What amount(s) related to the bonds would Baddour report in its balance sheet at September 30, 2018?
2. What amount(s) related to the bonds would Baddour report in its income statement for the year ended September 30, 2018?
3. What amount(s) related to the bonds would Baddour report in its statement of cash flows for the year ended September 30, 2018? In which section(s) should the amount(s) appear?
(For all requirements, Enter your answers in whole dollars.)

Bass hunt is a local outdoor store that competes with other outdoor stores.

They are proposing two marketing plans follow (consider them independent of each other)

Plan 1: They sell a deer tree stand. they take a standard tree and modify it to make it work.

- They sold 80 stands during 2018 for $400 each

- the stands are warrantied for 3 years (manufacture defects)

- the company's purchase cost per stand is $250 and they spent another $3,000 modifying the 80 stands.

- in addition to the sale of the stand, they sold extended warranties for 20 stands that added 2 years to the period.

- the extended warranty was sold for $250 each

- the company estimates that they will incur $2,600 of total cost servicing the 3 year standard warranty for the 80 stands sold during 2018.

Plan 2: they have a customer royalty program that "rewards" customer with one point for every $10 purchase.

- each point is redeemable for $1.00 off any purchase from the store in the next two years.

- during 2018, customers bought $100,000 of products and earned 10,000 points.

- the standalone selling price of the products was $100,000

- based on previous data, they expect 9,400 of the points to be redeemed from the 10,000

Required:

A- prepare journal entries for the 2018 sale of tree stands and warranty.

B- The company incurred $350 of warranty cost during 2018 relating with 2018 sales. prepare journal entry to record the incurrence of these costs and prepare any 12/31/18 adjusting entries.

C- prepare journal entries related to bonus point sales for 2018.

D- How much will the company recognize additional revenue in 2019 assuming 4,600 of the 2018 points are redeemed.

      Income Statement Items:
 
 
Sales                                        
$76,000
 
- Cost of goods sold
  49,000
 
Gross profit
 
  27,000
- Cash Operating expenses
$9,000
 
- Depreciation
  2,000
 
       Total Operating Expenses
 
  11,000
EBIT
 
  16,000
- Interest expense
 
       840
EBT
 
  15,160
- Income tax expense
 
    5,306
Net Income
 
  $9,854

    Balance Sheet Items:
 
Cash                               
  $9,000
Marketable securities
    2,000
Accounts receivable
  11,000
Inventories
    7,000
Fixed Assets, net
  24,000
  Total Assets
$53,000
 
 
 Accounts payable
  $8,000 
 Accrued payables
    3,000
 Bonds payable
  12,000 
 Common stock
  16,000 
 Retained earnings
  14,000 
   Total Liabilities and Equity 
$53,000 

$5,000 of the cash operating expenses for 2018 are considered variable costs, and the remainder are fixed costs.

Depreciation and the remainder of cash operating expenses are considered to be fixed costs.

Cash, accounts receivable, inventories, accounts payable, and accrued payables are considered to be spontaneous items.

Marketable securities, net fixed assets, bonds payable, and common stock are discretionary.

$5,000 of bonds payable at the end of 2018 are considered "current liabilities," and will be repaid on January 1, 2019. The interest rate on the bonds for 2019 will remain the same as it was in 2018.

The company will purchase fixed assets of $3,600 in 2019, but overall depreciation for 2019 will remain the same dollar amount as it was for 2018.

The firm paid a dividend of $3,942 in 2018, and will maintain its 2018 dividend payout ratio for 2019.

The income tax rate for 2019 is expected to be the same as it was in 2018.  

Keeton Company sponsors a defined benefit pension plan for its 600 employees. The company’s actuary provided the following information about the plan.

The average remaining service life per employee is 10.5 years. The service cost component of net periodic pension expense for employee services rendered amounted to $400,000 in 2017 and $475,000 in 2018. The accumulated OCI (PSC) on January 1, 2017, was $1,260,000. No benefits have been paid.

Correct answer iconYour answer is correct.

Compute the amount of accumulated OCI (PSC) to be amortized as a component of net periodic pension expense for each of the years 2017 and 2018.

Prepare a schedule which reflects the amount of accumulated OCI (G/L) to be amortized as a component of pension expense for 2017 and 2018.

Determine the total amount of pension expense to be recognized by Keeton Company in 2017 and 2018.

Atlantic Imports, a U.S. company, acquired a wholly-owned subsidiary, located in Portugal, on January 1, 2018 for €200,000,000. The subsidiary’s functional currency is the euro. The balance sheet of the subsidiary at the date of acquisition was as follows: Assets Current assets € 30,000,000 Noncurrent assets, net 150,000,000 Total assets €180,000,000 Liabilities and Stockholders' Equity Liabilities € 60,000,000 Capital stock 80,000,000 Retained earnings 40,000,000 Total liabilities and stockholders' equity €180,000,000 Appropriate revaluations of the subsidiary’s assets at the date of acquisition are as follows: Inventories are undervalued by €500,000. The subsidiary uses FIFO. Noncurrent assets are undervalued by €10,000,000. The noncurrent assets have a 10-year remaining life, straight-line. Identifiable indefinite life intangible assets, previously unreported, have a fair value of €5,000,000. During 2018 there was no impairment of either identifiable intangible assets or goodwill. The exchange rate on January 1, 2018 was $1.10/€. The average rate for 2018 was $1.12/€, and the rate at the end of 2018 was $1.15/€. The excess of acquisition cost over book value for this acquisition, in U.S. dollars, is: The entries required to consolidate the balance sheets of Atlantic Imports and its subsidiary at the date of acquisition include recognition of goodwill of: The entries required to consolidate the balance sheets of Atlantic Imports and its subsidiary at the date of acquisition include an increase in the subsidiary's noncurrent assets in the amount of: At the end of 2018, consolidation eliminating entry (R) includes a debit to current assets in the amount of: At the end of 2018, consolidation eliminating entry (O) includes a debit to depreciation expense in the amount of: At the end of 2018, consolidation eliminating entries (R) and (O) together will have what effect on consolidated other comprehensive income (increase or decrease)?

Solomon Manufacturing Company was started on January 1, 2018, when it acquired $80,000 cash by issuing common stock. Solomon immediately purchased office furniture and manufacturing equipment costing $9,100 and $33,100, respectively. The office furniture had an eight-year useful life and a zero salvage value. The manufacturing equipment had a $3,500 salvage value and an expected useful life of four years. The company paid $11,300 for salaries of administrative personnel and $15,600 for wages to production personnel. Finally, the company paid $13,000 for raw materials that were used to make inventory. All inventory was started and completed during the year. Solomon completed production on 4,800 units of product and sold 3,880 units at a price of $15 each in 2018. (Assume that all transactions are cash transactions and that product costs are computed in accordance with GAAP.)

Required

1. Determine the total product cost and the average cost per unit of the inventory produced in 2018. (Round "Average cost per unit" to 2 decimal places.)

2. Determine the amount of cost of goods sold that would appear on the 2018 income statement. (Do not round intermediate calculations.)

3. Determine the amount of the ending inventory balance that would appear on the December 31, 2018, balance sheet. (Do not round intermediate calculations.)

4. Determine the amount of net income that would appear on the 2018 income statement. (Round your answer to the nearest dollar amount.)

5. Determine the amount of retained earnings that would appear on the December 31, 2018, balance sheet. (Round your answer to the nearest dollar amount.)

6. Determine the amount of total assets that would appear on the December 31, 2018, balance sheet. (Round your answer to the nearest dollar amount.)

Presented below is income statement information of the Nebraska Corporation for the year ended December 31, 2018.

Required:

Prepare the necessary closing entries at December 31, 2018. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Record the entry to close the revenue and losses using the income summary.

Record the entry to close the expense accounts using the income summary.

Record the entry to close the income summary account.