Depreciation and Rate of Return

Burrell Company purchased a machine for $51,000 on January 2, 2016. The machine has an estimated service life of 5 years and a zero estimated residual value. The asset earns income before depreciation and income taxes of $25,500 each year. The tax rate is 25%.

Required:

Compute the rate of return earned (on the average net asset value) by the company each year of the asset's life under the straight-line and the double-declining-balance depreciation methods. Assume that the machine is the company's only asset.

Straight-line method. Do not round intermediate calculations. Round final answers to two decimal places.

Double-declining-balance depreciation method. Do not round intermediate calculations. Round final answers to two decimal places.

.   For the year ended December 31, 2016, Martin Marietta Manufacturing Company

    has the following information:    

     Work In Process Inventory, December 31                   $ 30,000

     Finished Goods Inventory, December 31                      55,000

     Raw Materials Inventory, December 31                       28,000

     Raw Materials purchases                                    36,000

     Factory supervisory salaries                                6,000

     Operating expenses                                         47,000

     Factory depreciation expense                                2,000

     Factory utilities expense                                   4,000

     Direct labor                                               30,000

     Indirect labor                                             10,000

     Sales revenue                                             230,000

     Sales discounts                                             5,000

     Work In Process Inventory, January 1                       60,000

     Finished Goods Inventory, January 1                        50,000

     Raw Materials Inventory, January 1                         44,000

     INSTRUCTIONS

Prepare a Cost of Goods Manufactured Schedule for the year ended

December 31, 2016.

     B. Prepare a complete income statement for the year ended December 31, 2016

Consider the data in the table above for a 1-good economy (the only good produced and consumed)

Given that the CPI for 2016 is 100,

• Compute the CPI inflation rates for the years 2017 and 2018.
• Determine the percentage change in GDP deflator for 2016-2017 and 2017-2018. Compare your results with your answers in (a) and justify.
• Explain three problems associated with using CPI to measure cost of living.
• The government in 2018 announced and implemented a 10 percent increase in the nominal salary of an average public servant from $500 in 2017. Does the salary of an average public servant have more purchasing power in 2017 or 2018?
• Briefly describe the concept of ‘rebasing’. Explain how rebasing affects the income and cost of living estimates of a country.

At December 31, 2015, the followings require inclusion in a company’s financial statements: On December 1, 2015 the company made a loan of $12,000 to an employee, repayable on December 1, 2018, charging interest at 2% per year. On the due date, she repaid the loan and paid the whole of the interest due on the loan to that date. The company paid an annual insurance premium of $9,000 in 2015, good for coverage through to July 31, 2016. On January 31, 2016, the company received rent from a tenant of $6,000 covering the six months to January 31, 2016.

A) Given the above information, how much current assets have to be reported in the company’s statement of financial position as at December 31, 2015?

B) Given the above information, how much non-current assets have to be reported in the company’s statement of financial position as at December 31, 2015?

The following information was taken from Egeland Ltd.'s adjusted trial balance as at July 31, 2016:

Question:

a.  

Prepare a single-step statement of income for the year ended July 31, 2016.

b.  

Prepare a multi-step statement of income for the year ended July 31, 2016.

c.  

Determine Egeland's gross margin percentage for the year.

d.  

If Egeland had 80,000 common shares outstanding throughout the year, determine the company's basic earnings per share.

Green Ltd owns 100% of Arrow Ltd.During the financial year ending 30 June 2016, Green Ltd sold inventory, originally costing $98 000, to Arrow Ltd for $180 000. Arrow Ltd sold inventory, originally costing $120 000, to Green Ltd for $160,000. At year end 30 June 2016, Green Ltd has sold 40% of the inventory it purchased from Arrow Ltd outside the group, while Arrow Ltd still has 25% of the inventory it purchased from Green Ltd on hand. Tax rate is 30%.

(a)  Why does this information create a elimination entry for consolidation purposes at year end?

(b)  What is the consolidation/elimination entry at 30 June 2016?

(c)  What is the consolidation/elimination entry for the item shown above at 30 June 2017?

Our firm purchased equipment for US$100,000 on Dec 1, 2015. Our year end is December 31, and the payable is due on Jan 31, 2016. On December 1, 2015, we entered into a forward exchange contract with the bank to provide us with the US dollars on January 31, 2016.

The following rates were in effect:

Forward Rates:

Dec1,2015; 60 day forward rate US$1= CDN$1.152

Dec 31, 2015; 30 day forward rate US$1 = CDN$ 1.162

Spot rates

Dec 1, 2015 US$1 = CDN$ 1.130

Dec 31, 2015 US$1 = CDN$ 1.16

Jan 31, 2016 US$1 = CDN$ 1.210

Prepare all the journal entries arising from this transaction, from original sale to final settlement.

What is the cash flow of the firm, or (CF(A)), for 2017?

Identify a matching firm in your firm's industry with similar size as your firm (use 2016 total assets to choose a matching firm). Compare your firm's long term debt/total assets and long term debt/equity ratio with your matching firm

Question 1. During 2016, Charley wants to take advantage of the annual exclusion and make gifts to his 2 married children (including their spouses) and his 5 minor grandchildren. a. How much property can Charley give away without creating a taxable gift?b. How does your answer change if Charley’s wife, Coleen, elects to join in making the gifts?

Question 2.  

In 2016, Alejandro made a gift of $2,000,000 to each of his three sons in 2016. He has made no previous gifts. What is the amount of his taxable gifts and the gift tax?

Click to access Exhibit 27-1, Unified Tax Credit, Unified Transfer Tax (2011 - 2012) and Unified Transfer Tax (2012) rates to use for this problem.

The amount of Alejandro's taxable gifts is _________ and the gift tax is $_____________