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 $62,000. However, for tax purposes, DeVille reported the income in the year cash was collected. Cash collected on the installment sale was $24,800 in 2019, $31,000 in 2020, and $6,200 in 2021.

Included in the 2020 income was $26,000 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, 2019,  2020 , 2021.

Question:

LCD Industries purchased a supply of electronic components from Entel Corporation on November 1, 2018. In payment for the $25.3 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 24%. (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?

The following is a partial trial balance for General Lighting Corporation as of December 31, 2018:

200,000 shares of common stock were outstanding throughout 2018. Income tax expense has not yet been recorded. The income tax rate is 40%.

Required:
1. Prepare a single-step income statement for 2018, including EPS disclosures.
2. Prepare a multiple-step income statement for 2018, including EPS disclosures.

The following is a partial trial balance for General Lighting Corporation as of December 31, 2018: Account Title Debits Credits Sales revenue 2,650,000 Interest revenue 86,000 Loss on sale of investments 25,500 Cost of goods sold 1,250,000 Loss from write-down of inventory due to obsolescence 260,000 Selling expenses 360,000 General and administrative expenses 180,000 Interest expense 85,000 300,000 shares of common stock were outstanding throughout 2018. Income tax expense has not yet been recorded. The income tax rate is 40%. Required: 1. Prepare a single-step income statement for 2018, including EPS disclosures. 2. Prepare a multiple-step income statement for 2018, including EPS disclosures.

Multiple Choice Question 82

An analysis of stockholders' equity of Bonita Industries as of January 1, 2018, is as follows:

Bonita uses the cost method of accounting for treasury stock and during 2018 entered into the following transactions:

Acquired 2460 shares of its stock for $78720.
Sold 1890 treasury shares at $36 per share.
Sold the remaining treasury shares at $18 per share.

Assuming no other equity transactions occurred during 2018, what should Bonita report at December 31, 2018, as total additional paid-in capital?

Cucina Corp. signed a new installment note on January 1, 2018, and deposited the proceeds of $62,000 in its bank account. The note has a 3-year term, compounds 5 percent interest annually, and requires an annual installment payment on December 31. Cucina Corp. has a December 31 year-end and adjusts its accounts only at year-end.

Required:

1. Use an online application, such as the loan calculator with annual payments at mycalculators.com, to generate an amortization schedule. Enter that information into an amortization schedule with the following headings: Year, Beginning Notes Payable, Interest Expense, Repaid Principal on Notes Payable, and Ending Notes Payable.
2. Prepare the journal entries on (a) January 1, 2018, and December 31 of (b) 2018, (c) 2019, and (d) 2020.
3. If Cucina Corp.’s year-end were March 31, rather than December 31, prepare the adjusting journal entry would it make for this note on March 31, 2018?

Use an online application, such as the loan calculator with annual payments at mycalculators.com, to generate an amortization schedule. Enter that information into an amortization schedule with the following headings: Year, Beginning Notes Payable, Interest Expense, Repaid Principal on Notes Payable, and Ending Notes Payable. (Do not round intermediate calculations. Round final answers to nearest whole dollar.)

• Record the signing of the installment note on January 1, 2018.

• 2

  Record the installment payment on December 31, 2018.

• 3

  Record the installment payment on December 31, 2019.

• 4

  Record the installment payment on December 31, 2020.

Sage Inc. experienced the following transactions for 2018, its first year of operations:

1. Issued common stock for $100,000 cash.
2. Purchased $200,000 of merchandise on account.
3. Sold merchandise that cost $154,000 for $306,000 on account.
4. Collected $276,000 cash from accounts receivable.
5. Paid $180,000 on accounts payable.
6. Paid $48,000 of salaries expense for the year.
7. Paid other operating expenses of $64,000.
8. Sage adjusted the accounts using the following information from an accounts receivable aging schedule:

1. Organize the transaction data in accounts under an accounting equation. (Enter any decreases to account balances with a minus sign. If there is no effect on the Accounts Titles for Retained Earnings, leave the cell blank.)

2. Prepare the income statement, statement of changes in stockholders’ equity, balance sheet, and statement of cash flows for Sage Inc. for 2018.

Prepare the income statement for Sage Inc. for 2018.

Prepare the statement of changes in stockholders’ equity for Sage Inc. for 2018.

Prepare the balance sheet for Sage Inc. for 2018. (Be sure to list the assets in the order of their liquidity.)

Prepare the statement of cash flows for Sage Inc. for 2018. (Amounts to be deducted should be indicated with a minus sign.)

3. What is the net realizable value of the accounts receivable at December 31, 2018?

Net realizable value:

Problem 13-4 Various liabilities [LO13-1, 13-2, 13-3, 13-4]

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:

1. The bank notes, issued August 1, 2018, are due on July 31, 2019, and pay interest at a rate of 9%, payable at maturity.
2. The mortgage note is due on March 1, 2019. Interest at 8% has been paid up to December 31 (assume 8% 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 $492,500 in cash on the principal balance and refinanced the remaining $952,500.
3. Included in the accounts receivable balance at December 31, 2018, were two subsidiary accounts that had been overpaid and had credit balances totaling $20,700. The accounts were of two major customers who were expected to order more merchandise from Manufacturing and apply the overpayments to those future purchases.
4. On November 1, 2018, Manufacturing rented a portion of its factory to a tenant for $31,200 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.

Problem 13-4 Various liabilities [LO13-1, 13-2, 13-3, 13-4]

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:

1. The bank notes, issued August 1, 2018, are due on July 31, 2019, and pay interest at a rate of 10%, payable at maturity.
2. The mortgage note is due on March 1, 2019. Interest at 9% has been paid up to December 31 (assume 9% 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 $250,000 in cash on the principal balance and refinanced the remaining $950,000.
3. Included in the accounts receivable balance at December 31, 2018, were two subsidiary accounts that had been overpaid and had credit balances totaling $18,000. The accounts were of two major customers who were expected to order more merchandise from Manufacturing and apply the overpayments to those future purchases.
4. On November 1, 2018, Manufacturing rented a portion of its factory to a tenant for $30,000 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.

Bahira Limited reporting period ends on December 31. The following statement of income was prepared by the accounts assistant who has limited Knowledge of accounting.

In a meeting of shareholders, one of the shareholders of Bahira Limited, who is your childhood friend, questioned the figures. He argued, among other things, the figures appear to be on a 100 percent cash basis. “In the meeting, the shareholders agree to invite you, who was recommended by your childhood friend, to review the records and financial statements.

Your investigations reveal the following:

1. Of the Sh. 115, 000,000 fees collected in 2018, Sh. 36,000, 000 was for services performed prior to 2018.
2. At the end of 2018, fees of Sh. 9,000,000 for services performed during the year were uncollected.
3. Office equipment owned and used by Bahira Limited cost Sh. 5,000,000. Depreciation on the equipment was estimated at Sh. 500,000 annually.
4. A count of office supplies at December 31, 2018 reflected Sh. 200,000 worth of items purchased during the year that were still on hand. Also, the records for 2017 indicated that the supplies on hand at the end of that year were about Sh. 125,000.
5. At the end of 2018, the secretary whose salary is Sh. 60,000 per month had not been paid for December 2018.
6. A Sh. 13,000,000 office rent paid was for 13 months (it included the rent for January, 2019).

Required:

1. On the basis of your findings, prepare the correct statements of income for Bahira Limited for the period December 31, 2018.                                                   
2. Show all your workings for any amounts changed from those in the statement of income prepared by the accounts assistant.