The DeVille Company reported pretax accounting income on its income statement as follows:
   

   
Included in the income of 2018 was an installment sale of property in the amount of $44,000. However, for tax purposes, DeVille reported the income in the year cash was collected. Cash collected on the installment sale was $17,600 in 2019, $22,000 in 2020, and $4,400 in 2021.

Included in the 2020 income was $18,000 interest from investments in municipal bonds.

The enacted tax rate for 2018 and 2019 was 30%, but during 2019 new tax legislation was passed reducing the tax rate to 25% for the years 2020 and beyond.

Required:
Prepare the year-end journal entries to record income taxes for the years 2018–2021.

At the end of 2017, Payne Industries had a deferred tax asset account with a balance of $40 million attributable to a temporary book–tax difference of $100 million in a liability for estimated expenses. At the end of 2018, the temporary difference is $80 million. Payne has no other temporary differences and no valuation allowance for the deferred tax asset. Taxable income for 2018 is $205 million and the tax rate is 40%. Required: 1. Prepare the journal entry(s) to record Payne’s income taxes for 2018, assuming it is more likely than not that the deferred tax asset will be realized. 2. Prepare the journal entry(s) to record Payne’s income taxes for 2018, assuming it is more likely than not that one-fourth of the deferred tax asset will ultimately be realized.

1.      On August 1, 2018 Barkley Corporation purchased equipment for $90,000 from RCH Company, paying $18,000 in cash and signing a 9% note for the balance. Interest and the note balance are due in full on July 31, 2019.
2.      On September 30, 2018, Barkley Corporation borrowed $275,862 from Fast Eddie’s Financing. Barkley signed a promise to pay contract -- agreeing to pay $300,000 at the end of 12 months on July 31, 2019.

Barkley Corporation has a year end of December 31^st.

Required:

a. For each situation above, prepare journal entries for 2018, including necessary adjusting entries at year end 2018 for both situations.

b. Next, prepare the journal entries necessary in 2019 for both situations above.

Fanning Corporation’s balance sheet indicates that the company has $550,000 invested in operating assets. During 2018, Fanning earned operating income of $60,500 on $1,100,000 of sales.

Required

1. Compute Fanning’s profit margin for 2018.

2. Compute Fanning’s turnover for 2018.

3. Compute Fanning’s return on investment for 2018.

4. Recompute Fanning’s ROI under each of the following independent assumptions:
   (1) Sales increase from $1,100,000 to $1,320,000, thereby resulting in an increase in operating income from $60,500 to $67,320.
   (2) Sales remain constant, but Fanning reduces expenses, resulting in an increase in operating income from $60,500 to $62,700.
   (3) Fanning is able to reduce its invested capital from $550,000 to $440,000 without affecting operating income.

Fanning Corporation’s balance sheet indicates that the company has $550,000 invested in operating assets. During 2018, Fanning earned operating income of $60,500 on $1,100,000 of sales.

Required

1. Compute Fanning’s profit margin for 2018.

2. Compute Fanning’s turnover for 2018.

3. Compute Fanning’s return on investment for 2018.

4. Recompute Fanning’s ROI under each of the following independent assumptions:
   (1) Sales increase from $1,100,000 to $1,320,000, thereby resulting in an increase in operating income from $60,500 to $67,320.
   (2) Sales remain constant, but Fanning reduces expenses, resulting in an increase in operating income from $60,500 to $62,700.
   (3) Fanning is able to reduce its invested capital from $550,000 to $440,000 without affecting operating income.

6. P company a Mexican subsidiary of a US company, sold equipment costing 200,000 pesos with accumulated depreciation of 75,000 pesos for 140,000 pesos on 3/1/2018. The equipment was purchased on 1/1/2017. Relevant exchange rates for the peso are as follows:

1/1/2017 $0.110

3/1/2018 $0.106

12/31/2018 $0.102

Average 2018 $0.105

The financial statements for P are translated by its US parent. What amount of gain or loss would be reported in its translated income statement?

The financial statement for P are remeasured by its US parent. What amount of again of loss would be reported in its translated income statement?

Answers: $1590 and $1090

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Universal Foods issued 10% bonds, dated January 1, with a face amount of $140 million on January 1, 2018. The bonds mature on December 31, 2037 (20 years). The market rate of interest for similar issues was 12%. Interest is paid semiannually on June 30 and December 31. Universal uses the straight-line method. (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. Determine the price of the bonds at January 1, 2018.
2. to 4. Prepare the journal entry to record their issuance by Universal Foods on January 1, 2018, interest on June 30, 2018 and interest on December 31, 2025.

LCD Industries purchased a supply of electronic components from Entel Corporation on November 1, 2018. In payment for the $25.2 million purchase, LCD issued a 1-year installment note to be paid in equal monthly payments at the end of each month. The payments include interest at the rate of 18%. (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. & 2. Prepare the journal entry for LCD’s purchase of the components on November 1, 2018 and the first installment payment on November 30, 2018.
3. What is the amount of interest expense that LCD will report in its income statement for the year ended December 31, 2018?

Question 2

KOL Limited purchased a machine on 1 January 2018 at $500,000. It has an expected useful life of 5 years and an estimated salvage value of $50,000. It is also expected that the machine can run for 30,000 hours. For the year ended 31 December 2018, KOL has used the machine for 4,000 hours.

KOL has another equipment with the following data on 31 December 2018.

Required:

e. Discuss when a company should perform an impairment review for a long-lived tangible asset, and when it is impaired.

f. Determine the impairment loss for the equipment on 31 December 2018

g. Compute the asset turnover for the shop.

h. Compute the profit margin on sales for the shop.

i. Compute the return on assets for the shop.

Information from the financial statements of Henderson-Niles Industries included the following at December 31, 2018:

Henderson-Niles’s net income for the year ended December 31, 2018, is $620 million. The income tax rate is 40%. Henderson-Niles paid dividends of $2 per share on its preferred stock during 2018.

Required:
Compute basic and diluted earnings per share for the year ended December 31, 2018. (Enter your answers in millions (i.e., 10,000,000 should be entered as 10).)