On February 8, 2018, Holly purchased a residential apartment building. The cost basis assigned to the building is $209,000. Holly also owns another residential apartment building that she purchased on December 15, 2018, with a cost basis of $588,000.
Click here to access the depreciation tables.
If required, round intermediate calculations and final answers to nearest dollar.
a. Calculate Holly's total depreciation
deduction for the apartments for 2018 using MACRS.
$
b. Calculate Holly's total depreciation deduction for the apartments for 2019 using MACRS.
$
Calculate the following:
Click here to access the various depreciation tables. If required, round your final answers to the nearest dollar. If your answer is zero, enter "0".
a. The first year of depreciation on a
residential rental building costing $200,000 purchased July 2,
2018.
$
b. The second year (2019) of depreciation on a
computer costing $5,000 purchased in May 2018, using the half-year
convention and accelerated depreciation considering any bonus
depreciation taken.
$
c. The first year of depreciation on a computer
costing $2,800 purchased in May 2018, using the half-year
convention and straight-line depreciation with no bonus
depreciation.
$
d. The third year of depreciation on business
furniture costing $8,000 purchased in March 2016, using the
half-year convention and accelerated depreciation but no bonus
depreciation.
$
In: Accounting
The Hope Co. sells direct to retail customers and also
to wholesalers. On January,
1, 2018 the balance of the retail accounts receivable was P418,000
while the allowance for bad debts with
respect to retail customers was a credit of P15,200.
The following summary pertains only to retail sales since
2015
Credit Sales - Bad Debts Written off - Bad Debts Recoveries
2015 - P2,220,000 P52,000 P4,300
2016 - 2,450,000 59,000 7,500
2017 - 2,930,000 60,000 7,200
2018 - 3,000,000 62,000 8,400
Bad debts are provided for as a percentage of credit sates. The
accountant calculates the percentage annually
by using the experience of the three years prior to the current
year. The formula is bad debts written off less
recoveries expressed as a percentage of the credit sales for the
same period. Total collections from customers
amounted to P2,760,40. This amount included P50,000 for which the
goods are to be delivered next year. During
the year. The company recorded the bad debts written off as bad
debts expense
Based on the above and the result of your audit, answer the
following:
1. The percentage to be used to compute the allowance for bad debt
on December 31,2018 is
2. How much is the doubtful accounts expense for 2018?
3. The doubtful accounts expense for 2018 is overstated by
4. The ledger balance of the accounts receivable after necessary
adjust on December 31, 2018 was a debit of
5. The ledger balance of the allowance for bad debts after
necessary adjustments on December 31, 2018 was
a credit of
In: Accounting
ohnson Corporation began 2018 with inventory of 10,000 units of its only product. The units cost $8 each. The company uses a periodic inventory system and the LIFO cost method. The following transactions occurred during 2018:
Requirements
In: Accounting
Exercise 19-18 EPS; stock dividend; nonconvertible preferred stock; treasury shares; shares sold; stock options exercised [LO19-5, 19-6, 19-7, 19-8]
On December 31, 2017, Berclair Inc. had 400 million shares of
common stock and 8 million shares of 9%, $100 par value cumulative
preferred stock issued and outstanding. On March 1, 2018, Berclair
purchased 60 million shares of its common stock as treasury stock.
Berclair issued a 6% common stock dividend on July 1, 2018. Four
million treasury shares were sold on October 1. Net income for the
year ended December 31, 2018, was $400 million.
Also outstanding at December 31 were 45 million incentive stock
options granted to key executives on September 13, 2013. The
options were exercisable as of September 13, 2017, for 45 million
common shares at an exercise price of $50 per share. During 2018,
the market price of the common shares averaged $75 per share.
The options were exercised on September 1, 2018.
Required:
Compute Berclair’s 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).)
In: Accounting
The Pyramid Company has used the LIFO method of accounting for
inventory during its first two years of operation, 2016 and 2017.
At the beginning of 2018, Pyramid decided to change to the average
cost method for both tax and financial reporting purposes. The
following table presents information concerning the change for
2016–2018. The income tax rate for all years is 40%.
| Income before Income Tax | ||||||||||||||||||||
| Average Cost Method | LIFO Method | Difference | Income Tax Effect |
Difference after Tax |
||||||||||||||||
| 2016 | $ | 89,400 | $ | 59,600 | $ | 29,800 | $ | 11,920 | $ | 17,880 | ||||||||||
| 2017 | 44,500 | 35,600 | 8,900 | 3,560 | 5,340 | |||||||||||||||
| Total | $ | 133,900 | $ | 95,200 | $ | 38,700 | $ | 15,480 | $ | 23,220 | ||||||||||
| 2018 | $ | 50,800 | $ | 45,900 | $ | 4,900 | $ | 1,960 | $ | 2,940 | ||||||||||
Pyramid issued 49,000 $1 par, common shares for $225,000 when
the business began, and there have been no changes in paid-in
capital since then. Dividends were not paid the first year, but
$12,000 cash dividends were paid in both 2017 and 2018.
Required:
1. Prepare the journal entry to record the change
in accounting principle.
2. Prepare the 2018–2017 comparative income
statements beginning with income before income taxes.
3. Prepare the 2018–2017 comparative statements of
shareholders’ equity. (Hint: The 2016 statements reported retained
earnings of $35,760. This is $59,600 – [$59,600 × 40%]).
In: Accounting
Compute, Disaggregate, and Interpret ROE and
RNOA
Headquartered in Calgary, Alberta, Husky Energy Inc. is a publicly
traded, integrated energy company. Selected fiscal year balance
sheet and income statement information for Husky Energy follow
(Canadian $ millions).
| C$ millions | 2018 | 2017 |
|---|---|---|
| Revenues, net | $40,054 | |
| Net income attributable to Husky | 2,623 | |
| Pretax NNE | 425 | |
| Operating assets | 58,016 | $54,400 |
| Operating liabilities | 17,755 | 17,136 |
| Equity attributable to Husky shareholders | 35,284 | 32,321 |
| Tax rate | 20.00% |
a. Compute the 2018 return on equity (ROE) and the 2018
return on net operating assets (RNOA).
Note: Round percentages to two decimal places (for
example, enter 6.66% for 6.6555%).
2018 Return on equity: Answer%
2018 Return on net operating assets: Answer%
b. Disaggregate RNOA into net operating profit margin
(NOPM) and net operating asset turnover (NOAT).
Note: For NOPM and RNOA, round percentages to two
decimal places (for example, enter 6.66% for 6.6555%).
Note: For NOAT, round amount to three decimal
places (for example, enter 6.776 for 6.77555).
| NOPM | x | NOAT | = | RNOA |
| Answer | x | Answer | = | Answer |
c. Compute the percentage of RNOA to ROE, and compute
Husky’s nonoperating return for 2018.
Note: Round percentages to two decimal places (for
example, enter 6.66% for 6.6555%).
Percentage of RNOA to ROE: Answer%
Nonoperating return: Answer%
In: Accounting
Question 6
1. The market value of Farmington Corp.'s common shares was quoted at $54 per share at December 31, 2018, and 2017. Planetarium 's balance sheet at December 31, 2018, and 2017, and statement of income and retained earnings for the years then ended are presented below:
Farmington Corp.
Balance Sheet
December 31
2018 2017
Assets:
Current assets:
Cash $ 9,000,000 $ 5,200,000
Short-term investments 17,200,000 15,400,000
Accounts receivable (net) 109,000,000 111,000,000
Inventories, lower of cost or market 122,000,000 140,000,000
Prepaid expenses 4,000,000 2,800,000
Total current assets $261,200,000 $274,400,000
Property, plant, and equipment (net) 350,000,000 315,000,000
Investments, at equity 2,800,000 3,500,000
Long-term receivables 15,000,000 20,000,000
Copyrights and patents (net) 6,000,000 7,000,000
Other assets 8,000,000 9,100,000
Total assets $643,000,000 $629,000,000
Liabilities and Stockholders' Equity:
Current liabilities:
Notes payable $ 7,000,000 $ 17,000,000
Accounts payable 55,000,000 52,000,000
Accrued expenses 27,500,000 30,000,000
Income taxes payable 1,500,000 2,000,000
Current portion of long-term debt 10,000,000 9,500,000
Total current liabilities 101,000,000 110,500,000
Long-term debt 180,000,000 190,000,000
Deferred income taxes 69,000,000 65,000,000
Other liabilities 15,000,000 9,500,000
Total liabilities 365,000,000 375,000,000
Stockholders' equity:
Common stock, par value $1; authorized 20,000,000
shares; issued and outstanding 12,000,000 shares 12,000,000 12,000,000
10% cumulative preferred shares, par value $100;
$100 liquidating value; authorized 100,000 shares;
issued and outstanding 60,000 shares 6,000,000 6,000,000
Additional paid-in capital 119,000,000 119,000,000
Retained earnings 141,000,000 117,000,000
Total stockholders' equity 278,000,000 254,000,000
Total liabilities and stockholders' equity $643,000,000 $629,000,000
Farmington Corp.
Statement of Income and Retained Earnings
Year ended December 31
2018 2017
Net sales $540,000,000 $500,000,000
Cost and expenses:
Cost of goods sold 390,900,000 400,000,000
Selling, general, and administrative expenses 70,000,000 65,000,000
Other, net 9,100,000 6,000,000
Total costs and expenses 470,000,000 471,000,000
Income before income taxes 70,000,000 29,000,000
Income taxes 21,000,000 11,600,000
Net income 49,000,000 17,400,000
Retained earnings at beginning of period 117,000,000 113,100,000
Dividends on common stock (24,400,000) (12,900,000)
Dividends on preferred stock (600,000) (600,000)
Retained earnings at end of period $141,000,000 $117,000,000
Instructions
Based on the above information, compute the following (for the year 2018 only): (Show supporting computations in good form.)
(a) Current ratio.
(b) Acid-test (quick) ratio.
(c) Accounts receivable turnover.
(d) Inventory turnover.
(e) Book value per share of common stock.
(f) Earnings per share.
(g) Price-earnings ratio.
(h) Payout ratio on common stock.
Question 7
1. Molina Company’s reported net incomes for 2018 and the previous two years are presented
below.
2018 2017 2016
$105,000 $95,000 $70,000
2018’s net income was properly determined after giving effect to the following accounting changes, error corrections, etc. which took place during the year. The incomes for 2016 and 2017 do not take these items into account and are stated at the amounts determined in those years. Ignore income taxes.
Instructions
(a) For each of the six accounting changes, errors, or prior period adjustment situations described below, prepare the journal entry or entries Molina Company should record during 2018. If no entry is required, write “none.”
(b) After recording the situation in part (a) above, prepare the year-end adjusting entry for December 31, 2018. If no entry, write “none.”
1. Early in 2018, Molina determined that equipment purchased in January, 2016 at a cost of $1,290,000, with an estimated life of 5 years and salvage value of $90,000 is now estimated to continue in use until December 31, 2022 and will have a $30,000 salvage value. Molina recorded its 2018 depreciation at the end of 2018.
(a)
(b)
2. Molina determined that it had understated its depreciation by $20,000 in 2017 owing to the fact that an adjusting entry did not get recorded.
(a)
(b)
3. Molina bought a truck January 1, 2015 for $80,000 with a $8,000 estimated salvage value and a six-year life. The company debited an expense account and credited cash on the purchase date. The truck is expected to be traded at the end of 2020. Molina uses straight-line depreciation for its trucks.
(a)
(b)
(a)
(b)
2. Molina determined that it had understated its depreciation by $20,000 in 2017 owing to the fact that an adjusting entry did not get recorded.
(a)
(b)
3. Molina bought a truck January 1, 2015 for $80,000 with a $8,000 estimated salvage value and a six-year life. The company debited an expense account and credited cash on the purchase date. The truck is expected to be traded at the end of 2020. Molina uses straight-line depreciation for its trucks.
(a)
(b)
(a)
(b)
2. Molina determined that it had understated its depreciation by $20,000 in 2017 owing to the fact that an adjusting entry did not get recorded.
(a)
(b)
3. Molina bought a truck January 1, 2015 for $80,000 with a $8,000 estimated salvage value and a six-year life. The company debited an expense account and credited cash on the purchase date. The truck is expected to be traded at the end of 2020. Molina uses straight-line depreciation for its trucks.
(a)
(b)
Question 8
1. On January 1, 2018, Foley Company (as lessor) entered into a noncancelable lease agreement with Pinkley Company for machinery which was carried on the accounting records of Foley at $9,060,000 and had a fair value of $9,600,000. Minimum lease payments under the lease agreement which expires on December 31, 2027, total $14,200,000. Payments of $1,420,000 are due each January 1. The first payment was made on January 1, 2018 when the lease agreement was finalized. The interest rate of 10% which was stipulated in the lease agreement is the implicit rate set by the lessor. The effective interest method of amortization is being used. Pinkley expects the machine to have a ten-year life with no salvage value, and be depreciated on a straight-line basis. Collectibility of the payments is reasonably predictable, and there are no important uncertainties surrounding the costs yet to be incurred by the lessor.
Instructions
(a) From the lessee's viewpoint, what kind of lease is the above agreement? From the lessor's viewpoint, what kind of lease is the above agreement?
(b) What should be the income before income taxes derived by Foley from the lease for the year ended December 31, 2018?
(c) Ignoring income taxes, what should be the expenses incurred by Pinkley from this lease for the year ended December 31, 2018?
(d) What journal entries should be recorded by Pinkley Company on January 1, 2018?
Question 9
1. Information concerning the debt of Cole Company is as follows:
Short-term borrowings:
Balance at December 31, 2017 $525,000
Proceeds from borrowings in 2018 325,000
Payments made in 2018 (450,000)
Balance at December 31, 2018 $400,000
Current portion of long-term debt:
Balance at December 31, 2017 $1,625,000
Transfers from caption "Long-Term Debt" 500,000
Payments made in 2018 (1,225,000)
Balance at December 31, 2018 $ 900,000
Long-term debt:
Balance at December 31, 2017 $9,000,000
Proceeds from borrowings in 2018 2,250,000
Transfers to caption "Current Portion of Long-Term Debt" (500,000)
Payments made in 2018 (1,500,000)
Balance at December 31, 2018 $9,250,000
In preparing a statement of cash flows for the year ended December 31, 2018, for Cole Company, cash flows from financing activities would reflect
|
$2,000,000 |
||
|
$2,250,000 |
||
|
$2,575,000 |
||
|
$3,175,000 |
Question 10
1. Edwards Company contracted on 4/1/17 to construct a building for $4,800,000. The project was completed in 2019. Additional data follow:
2017 2018 2019
Costs incurred to date $1,120,000 $2,700,000 $3,800,000
Estimated cost to complete 2,080,000 900,000 —
Billings to date 1,000,000 3,800,000 4,800,000
Collections to date 800,000 2,600,000 4,400,000
Instructions
(a) Calculate the income recognized by Edwards under the percentage-of-completion method of accounting in each of the years 2017, 2018, and 2019.
(b) Prepare all necessary entries for the year 2018.
(c) Present the balance sheet disclosures at December 31, 2018. Proper headings or subheadings must be indicated.
In: Accounting
Your broker, the leading sales generator at the firm Dewey, Cheatem and Howe, calls you with an investment opportunity. If you send him $2000 today, he will send back to you $1050 a year from now, and $1300 a year after that. You require a 12% annual return. Based on the present value of these future cash flows, is this a good investment?
Yes
No
In: Finance
Suppose that unemployment insurance system is structured such that Bmin = 200, Bmax = 500, and B = 100 + 0:5w in between, where w is the previous weekly wage and B is the level of weekly UI bene ts. Graph this bene t formula and calculate the bene ts and replacement rates for workers who earned $100, $500, and $2000 in the last week of working.
In: Economics
A random sample of 25 inpatients in a hospital had a mean healthcare expenditure of $2000 and standard deviation of $300. Use these values to test the following hypotheses at α = 0.01:
(a) whether or not the mean healthcare expenditure among all inpatients in the hospital is less than $2300.
(b) whether or not the mean healthcare expenditure among all inpatients in the hospital is different from $2100.
In: Statistics and Probability