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Problem 1:

The information is available for the first year of operations for Medeiros, Inc.

The following differences enter into the reconciliation of financial income and taxable income of Medeiros, Inc. for the year ended December 31, 2018, its first year of operations. The enacted income tax rate is 40% for all years

a) The company has chosen to depreciate all of its fixed assets on an accelerated basis for tax purposes but on a straight-line basis for accounting purposes. The excess tax depreciation over book depreciation is 240,000 and will reverse equally over a four-year period, 2019-2022.

b) In 2018 the company incurred a lawsuit which is probable and estimated at $120,000. It has been properly recorded as a litigation liability at 12/31/18 and will be paid in 2019.

c) On October 1, 2018 the company received a rental income payment of $120,000 which covers 24 months. The unearned rent revenue has been properly recorded on the books and the full amount appropriately recognized in taxable income for the year ending December 31, 2018.

d) The company will receive interest revenue from the New York bonds of $21,000 each year until their maturity at the end of 2024

e) In 2018, Medeiros insured the lives of its chief executives. The premiums paid amount to $45,000 and this amount was shown as an expense on the income statement.

f) Pretax accounting income was $950,000 in 2018.

Instructions

Prepare a reconciliation of Pretax accounting income to Taxable Income

2) Prepare a schedule of future taxable and (deductible amounts)

3) Prepare a schedule of the deferred tax (asset) and liability

4) Prepare the journal entry to record income tax expense, deferred taxes, and the income        taxes payable for 2018

The following income statement items appeared on the adjusted trial balance of Schembri Manufacturing Corporation for the year ended December 31, 2018 ($ in 000s): sales revenue, $18,300; cost of goods sold, $7,700; selling expenses, $1,450; general and administrative expenses, $950; interest revenue, $230; interest expense, $320. Income taxes have not yet been recorded. The company’s income tax rate is 20% on all items of income or loss. These revenue and expense items appear in the company’s income statement every year. The company’s controller, however, has asked for your help in determining the appropriate treatment of the following nonrecurring transactions that also occurred during 2018 ($ in 000s). All transactions are material in amount.

1. Investments were sold during the year at a loss of $370. Schembri also had unrealized gains of $470 for the year on investments.
2. One of the company’s factories was closed during the year. Restructuring costs incurred were $1,800.
3. During the year, Schembri completed the sale of one of its operating divisions that qualifies as a component of the entity according to GAAP. The division had incurred a loss from operations of $710 in 2018 prior to the sale, and its assets were sold at a gain of $1,700.
4. In 2018, the company’s accountant discovered that depreciation expense in 2017 for the office building was understated by $350.
5. Negative foreign currency translation adjustment for the year totaled $420.

Required:
1. Prepare Schembri’s single, continuous multiple-step statement of comprehensive income for 2018, including earnings per share disclosures. One million shares of common stock were outstanding at the beginning of the year and an additional 200,000 shares were issued on July 1, 2018.
2. Prepare a separate statement of comprehensive income for 2018.
  

PLEASE TELL ME HOW TO GET TO THESE ANSWERS AND SHOW WORK.

Below is the shareholders’ equity section of Matt Co.’s balance sheet for December 31, 2018 and December 31, 2017. Matt uses the treasury stock method to account for repurchases. During 2017, Matt repurchased 1,000 shares at $10 per share.

During 2018, the following events took place:

On January 17, Matt issued new common shares of stock to new investors for $20 per share.

On September 12, Matt reissued 400 of the shares it had in treasury.

On December 18, the company declared dividends of to be paid to shareholders. The dividend will be paid on January 6, 2019.

For the year 2018, Matt reported net income of $6,000.

1. How many shares were issued on January 17, 2018? (5 points)

2,000 new shares

Cash                             40,000

            Common Stock                                     20

            Paid-in Capital, in excess of par        39,980

2. When Matt reissued its own shares on September 12, 2018, how much did the company receive per share? (5 points)

$18 per share

Cash                             7,200

            Treasury Stock                                      4,000

            Paid-in Capital, share repurchase           3,200

3. How much dividends did Matt declare on December 18, 2018? (5 points)

53,000 + 6,000 – Dividends = 54,000

Dividends = $5,000

On July 1, 2018, a two-year insurance premium on equipment in the amount of $792 was paid and debited in full to Prepaid Insurance on that date. Coverage began on July 1. Give the adjusting journal entry required for each item at December 31, 2018.

For the United States:

What are some economical ways the government can strengthen the housing market in 2018? (Cite sources if possible)

What are some economical ways the government can solve health care costs and problems in 2018? (Cite sources if possible)

Von Maur average weeks sales in 2017 were $1,336,780. The CEO stated in a press conference today that FY 2018 sales are forecasted to increase 4.35% increase. What would the average weekly sales be in FY 2018?

Please show work!

Company: Campbell Soup

What inventory costing method does the company use (LIFO/FIFO, etc) in 2018? Do you think it is appropriate?

What are the key raw materials in 2018?

Are there supply or price change risks associated with the raw materials?

You are the audit partner at Preston & Associates, a mid-tier audit firm. You are responsible for the audits of the following three independent entities for the year ended 30 June 2018:

1. Helping Hand Ltd is a non-profit entity. You have discovered that it has not kept substantiating vouchers or receipts for more than 65 per cent of its expenses, excluding salaries and allowances.

2. Skyscraper Ltd is a building contractor with a varying workload. In order to compensate for the irregularity of its contracted building projects, Skyscraper also purchases large vacant blocks of land that it later subdivides for the construction of houses and units. Skyscraper then sells these on its own account. Your analysis strongly suggests that the apportionment of costs to houses and units sold has been kept low in order to boost profits. In your opinion, this has resulted in the overvaluation of the unsold properties. The directors of the company do not agree, and hold to their view that the stock of properties is correctly valued.

3. Big Event Ltd arranges for popular overseas entertainment artists to perform in Australia. The band Eclipse was booked by Big Event to play in major cities across the country. Big Event’s written contract required the company to pay the band in US dollars but, in order to reduce costs, it did not hedge the amounts. Subsequent to year end, the Australian dollar fell against the US dollar and a substantial loss relating to the band’s tour was predicted. The management of Big Event tried unsuccessfully to renegotiate the band’s contract and has been unable to obtain finance to cover the expected shortfall. Big Event has now cancelled the tour and expects a substantial claim from Eclipse. It is clear to you, as the auditor, that Big Event does not have the income, cash or other assets to sustain such a loss.

REQUIRED

Assuming that all amounts involved are material, identify and discuss the most likely auditor’s opinion that you would issue on each financial report for the year ending 30 June 2018.

Facts: Casey Jones is a 2012 graduate of Tulane University Law School and admitted to practice law in the state of Louisiana. He has been employed by the family general practice law firm of Jones, Jones, and Jones since graduating law school. The firm’s three partners are Casey’s mother, father and uncle. Casey is one of seven other lawyer associates in the firm, which includes a cousin, and five other unrelated persons. There are also 5 non-lawyer clerical staff. No one at the firm has any specialized training in tax matters, but Casey has been trying to handle at least some simple tax issues for the firm. The partners had decided that it would be very good for business if they could establish a tax practice specialty within the firm. As a result, the firm sent Casey to the LL.M (tax) program at the NYU law school to earn an LL.M. degree in taxation. He attended from September 2018 to June 2019, at which time he graduated with the degree of Master of Laws in Taxation (LL.M). While he attended the program in New York the firm continued to pay him his $125,000. per year salary, his tuition and fees of $63,000 and $34,000 of living expense for rent and food at one of the NYU Law School dormitories, as well as his travel expenses to and from New York. Half was paid in 2018 and 2019. Upon graduation he returned to his firm’s New Orleans offices where he worked to establish their tax department. It is now time to file his return for 2019.

Questions:

1. What are the tax effects, if any, of these transactions on Casey and his law firm?

2. Would the result be any different if Casey were a CPA graduate of Tulane’s business school with a BA degree in accounting, and the degree he earned at NYU was a Masters in Tax in accounting in their business school, and Jones, Jones and Jones was a CPA firm?