Babe’s Batting Cages projects the following income statement for 2018:

Sales                       $ 241,745                          

Operating costs
excl.depr. & amort.      140,212

EBITDA                         101,533                          

Depr. & Amort.              16,000

EBIT                               85,533                          

Interest                             2,200

EBT                                 83,333                             

Taxes (40%)                  33,333

Net Income                $ 50,000                                                     

2018 Balance Sheet Assumptions:

Accounts receivable increase by $5,000

Inventory decreases by $2,000

Accounts payable increases by $2,000

Accruals increase by $1,000

Net fixed assets increase by $20,000

Notes payable increase by $2,500

Long-term debt increases by $20,000

Retained earnings increase by $40,000

Create a cash flow statement for 2018 through the net change in cash. (Show your work; 2 points)

What is the Free Cash Flow for 2018? (Show your work; 1 point)

On January 1, 2018, Wright Transport sold four school buses to the Elmira School District. In exchange for the buses, Wright received a note requiring payment of $524,000 by Elmira on December 31, 2020. The effective interest rate is 9%. (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. How much sales revenue would Wright recognize on January 1, 2018, for this transaction?
2. Prepare journal entries to record the sale of merchandise on January 1, 2018 (omit any entry that might be required for the cost of the goods sold), the December 31, 2018, interest accrual, the December 31, 2019, interest accrual, and receipt of payment of the note on December 31, 2020.

The average annual expenses on housing loans for people aged 40 and below during the year 2015 and 2018 is RM15745 and RM16834 respectively. Population standard deviation is known to be RM1990 in 2015 and RM2160 in 2018. Meanwhile the sample size is 200 for the year 2015 and 250 in 2018. The annual expenses on housing loan is assumed to be normally distributed.

a)
Assess at 1% significance level whether the population mean of annual expenses on housing loans in 2018 is higher than the expenses in 2015.

b)
Suppose that in 2017, a smaller scale research was conducted on 25 adults aged 40 and below. Based on the data, the sample and population standard deviation is RM3885 and RM2010 respectively. Assess at 95% level of significance if the standard deviation of annual expenses on housing loans in 2017 is different from RM2010.

Analyzing and Determining the Amount of a Liability

For each of the following situations, indicate the liability amount, if any, which is reported on the balance sheet of Hirst, Inc., at December 31, 2018.

Subject: Financial Accounting

Computing Basic and Diluted Earnings per Share

Zeller Corporation began 2018 with 120,000 shares of common stock and 16,000 shares of convertible preferred stock outstanding. On March 1 an additional 10,000 shares of common stock were issued. On August 1, another 16,000 shares of common stock were issued. On November 1, 6,000 shares of common stock were acquired for the treasury. The preferred stock has a $2 per-share dividend rate, and each share may be converted into one share of common stock. Zeller Corporation’s 2018 net income is $501,000.

Required
a. Compute basic earnings per share for 2018. Round to two decimal places.
$

b. Compute diluted earnings per share for 2018. Round to two decimal places.
$

Overall Planning Materiality

Based on the information provided below.

a. Explain why ABC's auditor chose Sales as a Measurement Benchmark in planning Wesly Co. Audit for the year 2018.

b. Explain why ABC's auditor chose Total Assets as a Measurement Benchmark in planning Wesly Co. Audit for the year 2018.

c. Explain why ABC's auditor chose Gross Profit as a Measurement Benchmark in planning Wesly Co. Audit for the year 2018.

P9-3A. Depreciation Methods On January 2, 2018, Skyler, Inc. Purchased a laser cutting machine to be used in the fabrication of a part of its key products. The machine cost $12,000, and its estimated useful life was four years or 920,000 cuttings, after which it could be sold for $5,000.

Required

a. Calculate each year's depreciation expense for the period 2018-2021 under each of the following depreciation methods:

1. Straight line.

2. Double-declining balance.

3. Units-of-production. Assume annual production in cutting of $200,000; 350,000; 260,000; and 110,000.

b. Assume that the machine was purchased on July 1, 2018. Calculate each year's depreciation expense for the period 2018-2022 under each of the following depreciation methods:

1. straight-line

2. Double declining balance.

Question 9

P Company acquired 75 percent of S Company on January 1, 2018 at book value. During 2018, S purchased inventory for $40,000 and sold it to P for $60,000. Of this amount, P reported $12,000 in ending inventory in 2018 and later sold it in 2019. In 2019, P sold inventory it had purchased for $35,000 to S for $50,000. S sold $45,000 of this inventory in 2019. In 2019, P reported stand-alone income of $870,000 and S reported total net income of $218,000.

1) Prepare the consolidation entries that related to intercompany sale of inventory for 2018.

2) Prepare the consolidation entries that related to intercompany sale of inventory for 2019.

3) Calculated consolidated net income AND income assigned to controlling shareholders in 2019.

Juggernaut acquired a passive partnership activity in January of 2015. His at-risk basis at the beginning of 2018 was $65,000. Juggernaut also owns a rental property that generated income of $23,000 in 2018 and $19,000 in 2019. Juggernaut’s share of income and loss from the partnership activity is: 2018 <$79,000>
2019 32,000

Complete the following tables.

(apply both at risk and passive rules together) (3 points)

FOR 2018

Deductible under at-risk provisions                             ____________________

Adjusted basis at 12/31/18                                          ____________________

Suspended under at-risk provisions                             ____________________

Deductible under passive loss provisions                     ____________________

Suspended under passive loss provisions                     ____________________

FOR 2019

Deductible under at-risk provisions                             ____________________

Adjusted basis at 12/31/19                                          ____________________

Suspended under at-risk provisions                             ____________________

Deductible under passive loss provisions                     ____________________

Suspended under passive loss provisions                     ____________________

Dan and Katlyn are married and operate a pizza restaurant as an S corporation. In 2018, the store has qualified business income of $300,000. Their itemized deductions are $22,000 and they have other income from interest and dividends of $9,000.

What is their QBI deduction for 2018?

What is their taxable income?

a. Assume the same facts as above, except that Dan and Katlyn are lawyers and jointly operate their law firm as a partnership. The income that flows to them from the partnership is $380,000. In addition, they have capital gains of $5,000.

What is their QBI deduction for 2018?

What is taxable income?

b. Assume the facts of the original problem except that their itemized deductions are $32,000, the QBI from the business is $500,000, it has W-2 wages of $160,000, and unadjusted depreciable property of $180,000.

What is their QBI deduction for 2018?

What is taxable income?