On January 1, 2020, The Justice League issued $100,000, 9%, four-year bonds. Interest is paid semiannually on June 30 and December 31. The bonds were issued at $96,768 to yield an annual return of 10%.
Required:
|
Date |
Cash Payment |
Interest Expense |
Amortization |
Carry Value |
|
1/1/2020 |
||||
|
6/30/2020 |
||||
|
12/31/2020 |
||||
|
6/30/2021 |
|
Date |
Account |
DR |
CR |
3) What amount would the bonds be reported on the balance sheet at the end 2020?
In: Accounting
Violet Ltd owns all the share capital of Indigo Ltd. The following transactions are independent:
Required
In relation to the above intragroup transactions:
1. Prepare adjusting journal entries for the consolidation worksheet at 30 June 2020.
2. Explain in detail why you made each adjusting journal entry.
In: Accounting
Partnership Income Allocation
Whitman and Greene are partners in a real estate venture. At January 1, 2020, their respective capital balances were $200,000 and $245,000. Their partnership agreement provides that Whitman is to receive a guaranteed salary of $100,000, and that remaining profits after the salary are to be shared in a 2:3 ratio. Partnership operations for the year 2020 resulted in income of $75,000, before distributions to partners. Whitman’s salary is paid in cash during the year, but there are no other withdrawals or capital changes. Assume full implementation.
Required
a. Compute the balance of each partner’s capital account at December 31, 2020.
| Balance at December 31, 2020 | |
|---|---|
| Whitman | $Answer |
| Greene | $Answer |
b. Compute the balance of each partner’s capital account at December 31, 2020, assuming partnership income was $150,000.
| Balance at December 31, 2020 | |
|---|---|
| Whitman | $Answer |
| Greene | $Answer |
In: Accounting
Jamie Bard is the owner Café Corner, a popular restaurant located at a busy traffic intersection in the city of Clutchmore.
For the financial year ended 30 June 2020:
The following are balances extracted from the Statements of Financial Position of Café Corner at the end of its most recent two financial years:
|
30 June 2020 |
30 June 2019 |
|
|
$ |
$ |
|
|
Accounts payable |
12,000 |
27,000 |
|
Accounts receivable |
28,000 |
103,000 |
|
Accrued expenses |
5,000 |
11,000 |
|
Accumulated depreciation |
84,000 |
65,000 |
|
Cash |
34,000 |
23,000 |
|
Inventory |
72,000 |
46,000 |
|
Plant and equipment |
293,000 |
228,000 |
|
Prepaid expenses |
4,000 |
15,000 |
|
Share capital |
180,000 |
160,000 |
Jamie wants to understand the cash flow of Café Corner better and has asked for your assistance to help him prepare some information regarding the cash flows of the business.
|
Required: |
||
|
a) |
Calculate the cash receipts from customers, cash payments to suppliers and |
|
|
cash payments for other expenses. Show all workings. |
||
|
b) |
Using the direct method, prepare the Statement of Cash Flows for Café |
|
|
Corner for the financial year ended 30 June 2020. |
||
|
c) |
Prepare a reconciliation of Cash Flows from Operating Activities and Profit |
|
|
After Tax for Café Corner. |
||
In: Accounting
Jamie Bard is the owner Café Corner, a popular restaurant located at a busy traffic intersection in the city of Clutchmore.
For the financial year ended 30 June 2020:
Café Corner earned a profit after income tax of $16,000. This was
after taking into account sales of $821,000 and cost of sales of
$623,000.
Other operating expenses incurred to operate the business
totalled $179,000. This figure included:
(i) depreciation expenses, and
(ii) interest expenses of $11,000 which were fully paid.
There were some additional plant and equipment purchased for cash. However, there were no disposals of property, plant and equipment.
The company paid $7,000 to the Tax Office in full settlement of its income tax obligations.
The company received some interest income amounting to $4,000 when it placed some of its excess cash in an investment fund.
The shareholders of Café Corner received dividends of $18,000 from the company.
The following are balances extracted from the Statements of
Financial Position of Café Corner at the end of its most recent two
financial years:
30 June 2020 30 June 2019
$ $
Accounts payable 12,000 27,000
Accounts receivable 28,000 103,000
Accrued expenses 5,000 11,000
Accumulated depreciation 84,000 65,000
Cash 34,000 23,000
Inventory 72,000 46,000
Plant and equipment 293,000 228,000
Prepaid expenses 4,000 15,000
Share capital 180,000 160,000
Jamie wants to understand the cash flow of Café Corner better and has asked for your assistance to help him prepare some information regarding the cash flows of the business.
Required:
a) Calculate the cash receipts from customers, cash payments to suppliers and cash payments for other expenses. Show all workings. (7½ marks)
b) Using the direct method, prepare the Statement of Cash Flows for Café Corner for the financial year ended 30 June 2020. (6½ marks)
c) Prepare a reconciliation of Cash Flows from Operating Activities and Profit After Tax for Café Corner.
In: Accounting
taxed as a partnership and has four shareholders each owning 25% of the outstanding Interests (Shares). The shareholders’ outside basis in their respective Interests is $1.00
On February 20, 2018, POM LLCBLG is a limited liability Company, a single member limited liability company, sold its 25% in BLG Interests to ODY LLC, a limited liability company taxed as a Partnership, for $700,000 payable $100,000 cash at closing and a Promissory Note in the amount of $600,000 bearing interest at 5% with monthly principal payments of $10,000 plus monthly interest payments for sixty months. ODY LLC’s Managing Member personally guaranteed the Promissory Note
On February 20, 2019 by mutual agreement between the parties, the Promissory Note was renegotiated and the payment of principal on the Promissory Note, which had been reduced by principal payments of $120,000, was extended two years, principal payments were modified to $8,000 per month and the interest rate was raised to 7% annually on the outstanding balance of $480,000.
In December of 2019, ODY LLC received a notice of default from POM LLC. Subsequently, ODY LLC, to avoid filing for bankruptcy, negotiated a restructuring of the Promissory Note.
On February 20, 2020 with the remaining principal balance of the Promissory Note reduced to $440,000 plus accrued and unpaid interest of $18,000, the parties further agreed to restructure the Promissory Note reducing the principal and accrued interest due to $270,000 with payment terms of $5,000 per month without interest.
Assume that the Managing Member of ODY LLC had a net worth of $100,000 at all times prior to any cancellation of indebtedness in 2020 exclusive of his interest in ODY LLC which had had a zero net worth.
Question: identify all the tax issues associated with these facts faced by POM LLC and ODY LLC and their respective Members in each of the following tax years: 2018, 2019 and 2020. Consider taxable gains and losses, investment interest deductions and any imputed interest income or deductions to the parties stemming from imputed interest.
In: Accounting
Exercise 5-13 (Video)
Billings Company has the following information available for
September 2020.
Unit selling price of video game consoles$400
Unit variable costs$280
Total fixed costs$54,000
Units sold600
Compute the unit contribution margin.
Unit contribution margin
Prepare a CVP income statement that shows both total and per
unit amounts.
BILLINGS COMPANY
CVP Income Statement
For the Month Ended September 30, 2020
Total
Per Unit
Administrative ExpensesContribution MarginCost of Goods SoldFixed CostsGross ProfitNet Income/(Loss)SalesSelling ExpensesVariable Costs
$
$
Administrative ExpensesContribution MarginCost of Goods SoldFixed CostsGross ProfitNet Income/(Loss)SalesSelling ExpensesVariable Costs
Administrative ExpensesContribution MarginCost of Goods SoldFixed CostsGross ProfitNet Income/(Loss)SalesSelling ExpensesVariable Costs
$
Administrative ExpensesContribution MarginCost of Goods SoldFixed CostsGross ProfitNet Income/(Loss)SalesSelling ExpensesVariable Costs
Administrative ExpensesContribution MarginCost of Goods SoldFixed CostsGross ProfitNet Income/(Loss)SalesSelling ExpensesVariable Costs
$
Compute Billings’ break-even point in units.
Break-even point in units units
Prepare a CVP income statement for the break-even point that
shows both total and per unit amounts.
BILLINGS COMPANY
CVP Income Statement
For the Month Ended September 30, 2020
Total
Per Unit
Administrative ExpensesContribution MarginCost of Goods SoldFixed CostsGross ProfitNet Income/(Loss)SalesSelling ExpensesVariable Costs
$
$
Administrative ExpensesContribution MarginCost of Goods SoldFixed CostsGross ProfitNet Income/(Loss)SalesSelling ExpensesVariable Costs
Administrative ExpensesContribution MarginCost of Goods SoldFixed CostsGross ProfitNet Income/(Loss)SalesSelling ExpensesVariable Costs
$
Administrative ExpensesContribution MarginCost of Goods SoldFixed CostsGross ProfitNet Income/(Loss)SalesSelling ExpensesVariable Costs
Administrative ExpensesContribution MarginCost of Goods SoldFixed CostsGross ProfitNet Income/(Loss)SalesSelling ExpensesVariable Costs
$
In: Accounting
An investment is an asset acquired with the goal of generating income. In finance, an investment is a monetary asset purchased with the idea that the asset will provide income in the future or will later be sold at a higher price for a profit. A financial intermediary is an entity that acts as the middleman between two parties in a financial transaction. As a student of financial management, can you write a brief note on financial intermediary. can you write eight points how financial intermediary improve and attract the prospective investor
In: Accounting
Profit Center Responsibility Reporting for a Service Company
Thomas Railroad Company organizes its three divisions, the North (N), South (S), and West (W) regions, as profit centers. The chief executive officer (CEO) evaluates divisional performance, using income from operations as a percent of revenues. The following quarterly income and expense accounts were provided from the trial balance as of December 31:
| Revenues—N Region | $938,000 |
| Revenues—S Region | 1,117,900 |
| Revenues—W Region | 1,945,600 |
| Operating Expenses—N Region | 594,400 |
| Operating Expenses—S Region | 665,300 |
| Operating Expenses—W Region | 1,176,600 |
| Corporate Expenses—Dispatching | 459,800 |
| Corporate Expenses—Equipment Management | 228,000 |
| Corporate Expenses—Treasurer’s | 142,700 |
| General Corporate Officers’ Salaries | 315,000 |
The company operates three service departments: the Dispatching Department, the Equipment Management Department, and the Treasurer’s Department. The Dispatching Department manages the scheduling and releasing of completed trains. The Equipment Management Department manages the railroad cars inventories. It makes sure the right freight cars are at the right place at the right time. The Treasurer’s Department conducts a variety of services for the company as a whole. The following additional information has been gathered:
| North | South | West | ||||
| Number of scheduled trains | 5,200 | 6,300 | 9,400 | |||
| Number of railroad cars in inventory | 1,000 | 1,500 | 1,300 | |||
Required:
1. Prepare quarterly income statements showing income from operations for the three regions. Use three column headings: North, South, and West. Do not round your interim calculations.
| Thomas Railroad Company | |||
| Divisional Income Statements | |||
| For the Quarter Ended December 31 | |||
| North | South | West | |
| Revenues | $ | $ | $ |
| Operating expenses | |||
| Income from operations before service department charges | $ | $ | $ |
| Service department charges: | |||
| Dispatching | $ | $ | $ |
| Equipment Management | |||
| Total service department charges | $ | $ | $ |
| Income from operations | $ | $ | $ |
2. What is the profit margin of each division? Round to one decimal place.
| Region | Profit Margin |
| North Region | % |
| South Region | % |
| West Region | % |
Identify the most successful region according to the profit
margin.
3. What would you include in a recommendation to the CEO for a better method for evaluating the performance of the divisions?
The method used to evaluate the performance of the divisions should be reevaluated.
A better divisional performance measure would be the rate of return on investment (income from operations divided by divisional assets).
A better divisional performance measure would be the residual income (income from operations less a minimal return on divisional assets).
None of these choices would be included.
All of these choices (a, b & c) would be included.
In: Accounting
Profit CenterResponsibility Reporting for a Service Company
Thomas Railroad Company organizes its three divisions, the North (N), South (S), and West (W) regions, as profit centers. The chief executive officer (CEO) evaluates divisional performance, using income from operations as a percent of revenues. The following quarterly income and expense accounts were provided from the trial balance as of December 31:
| Revenues—N Region | $920,300 |
| Revenues—S Region | 1,094,500 |
| Revenues—W Region | 1,883,300 |
| Operating Expenses—N Region | 583,200 |
| Operating Expenses—S Region | 651,400 |
| Operating Expenses—W Region | 1,138,900 |
| Corporate Expenses—Dispatching | 435,600 |
| Corporate Expenses—Equipment Management | 235,000 |
| Corporate Expenses—Treasurer’s | 140,000 |
| General Corporate Officers’ Salaries | 309,100 |
The company operates three service departments: the Dispatching Department, the Equipment Management Department, and the Treasurer’s Department. The Dispatching Department manages the scheduling and releasing of completed trains. The Equipment Management Department manages the railroad cars inventories. It makes sure the right freight cars are at the right place at the right time. The Treasurer’s Department conducts a variety of services for the company as a whole. The following additional information has been gathered:
| North | South | West | ||||
| Number of scheduled trains | 5,000 | 5,900 | 8,900 | |||
| Number of railroad cars in inventory | 1,300 | 2,000 | 1,700 | |||
Required:
1. Prepare quarterly income statements showing income from operations for the three regions. Use three column headings: North, South, and West. Do not round your interim calculations.
| Thomas Railroad Company | |||
| Divisional Income Statements | |||
| For the Quarter Ended December 31 | |||
| North | South | West | |
| Revenues | $ | $ | $ |
| Operating expenses | |||
| Income from operations before service department charges | $ | $ | $ |
| Service department charges: | |||
| Dispatching | $ | $ | $ |
| Equipment Management | |||
| Total service department charges | $ | $ | $ |
| Income from operations | $ | $ | $ |
2. What is the profit marginof each division? Round to one decimal place.
| Region | Profit Margin |
| North Region | % |
| South Region | % |
| West Region | % |
Identify the most successful region according to the profit
margin.
3. What would you include in a recommendation to the CEO for a better method for evaluating the performance of the divisions?
The method used to evaluate the performance of the divisions should be reevaluated.
A better divisional performance measure would be the rate of return on investment (income from operations divided by divisional assets).
A better divisional performance measure would be the residual income (income from operations less a minimal return on divisional assets).
None of these choices would be included.
All of these choices (a, b & c) would be included.
In: Accounting