Your client, Mr. and Mrs. Smith, have asked you about making a $120,000 cash charitable contribution to their church. They have heard that the new tax law has changed some of the rules about itemized deductions and charitable contribution limits, but they don’t know the details. They have provided you with their expected adjusted gross income (before any itemized or standard deduction) for 2018 which will be $100,000. Their AGI for 2019 will be $50,000 because Mr. Smith is retiring at the end of 2018. They have no other itemized deduction expenses in 2018 and expect none in 2019.

1)Explain to your manager how this contribution will be deducted on the client’s return in 2018 and 2019 and any future years if applicable ,List the code section that applies to charitable contribution limitations  

2)List the code section that applies to charitable contribution limitations  

On December 31, 2017, Dow Steel Corporation had 700,000 shares of common stock and 40,000 shares of 10%, noncumulative, nonconvertible preferred stock issued and outstanding. Dow issued a 5% common stock dividend on May 15 and paid cash dividends of $500,000 and $79,000 to common and preferred shareholders, respectively, on December 15, 2018.

On February 28, 2018, Dow sold 64,000 common shares. In keeping with its long-term share repurchase plan, 6,000 shares were retired on July 1. Dow's net income for the year ended December 31, 2018, was $2,600,000. The income tax rate is 40%.

Required: Compute Dow's earnings per share for the year ended December 31, 2018. (Do not round intermediate calculations. Enter your answers in thousands.)

Carlson Automotive Company manufactures fuel-injection systems. It manufactured and sold 60,000 units
in 2018 and 64,000 units in 2019 at $25 per unit. In 2018, the firm used 75,000 pounds of alloy TPX–45 at
$7.20 per pound and used 10,000 direct labor hours at an hourly wage rate of $30. In 2019, the firm used
89,600 pounds of alloy TPX–45 at $6.80 per pound and used 10,847 direct labor hours at an hourly wage
rate of $32. The total amount of all other expenses remains the same at $450,000 each year. Jerry Olson,
CEO, was disappointed that although the total sales increased in 2019, operating income declined from
$210,000 in 2018 to $193,616 in 2019.

1. Detailed partition of partial financial productivity.
2. Total productivity for 2018 and 2019 as measured in both units and sales dollars.

Fuzzy Monkey Technologies, Inc., purchased as a long-term investment $ 140 million of 10% bonds, dated January 1, on January 1, 2018. Management intends to have the investment available for sale when circumstances warrant. For bonds of similar risk and maturity the market yield was 12%. The price paid for the bonds was $124 million. Interest is received semiannually on June 30 and December 31. Due to changing market conditions, the fair value of the bonds at December 31, 2018, was $130 million.

Required:

1. to 3. Prepare the relevant journal entries on the respective dates (record the interest at the effective rate).
4-a. At what amount will Fuzzy Monkey report its investment in the December 31, 2018, balance sheet?
4-b. Prepare the entry necessary to achieve this reporting objective.
5. How would Fuzzy Monkey's 2018 statement of cash flows be affected by this investment?

(NOL Carryforward, Valuation Account Needed)

Topper Company reported the following pretax financial income (loss) for the years 2018 through 2022:

2018 $ 70,000

2019 45,000

2020 (260,000)

2021 90,000

2022 215,000

Pretax financial income (loss) and taxable income (loss) were the same for all years involved. The enacted tax rate was 30% for 2018 through 2020, and 20% for 2021 and thereafter.

Instructions

(a) Prepare the journal entries for the years 2018 through 2022 to record income tax expense, income tax payable (refund- able), and the tax effects of the loss carryforward, assuming that based on the weight of available evidence, it is more likely than not that 60 percent of the benefits of the loss carryforward will not be realized.

(b) Prepare the income tax section of the 2020 income statement beginning with the line “Income (loss) before income taxes.”

Fuzzy Monkey Technologies, Inc., purchased as a long-term investment $ 80 million of 6% bonds, dated January 1, on January 1, 2018. Management intends to have the investment available for sale when circumstances warrant. For bonds of similar risk and maturity the market yield was 8%. The price paid for the bonds was $64 million. Interest is received semiannually on June 30 and December 31. Due to changing market conditions, the fair value of the bonds at December 31, 2018, was $70 million.

Required:

1. to 3. Prepare the relevant journal entries on the respective dates (record the interest at the effective rate).
4-a. At what amount will Fuzzy Monkey report its investment in the December 31, 2018, balance sheet?
4-b. Prepare the entry necessary to achieve this reporting objective.
5. How would Fuzzy Monkey's 2018 statement of cash flows be affected by this investment?

The Bradford Company issued 8% bonds, dated January 1, with a face amount of $75 million on January 1, 2018 to Saxton-Bose Corporation. The bonds mature on December 31, 2022 (5 years). For bonds of similar risk and maturity, the market yield is 10%. Interest is paid semiannually on June 30 and December 31. (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. to 3. Prepare the journal entry to record the purchase of the bonds by Saxton-Bose on January 1, 2018, interest revenue on June 30, 2018 and interest revenue on December 31, 2018 (at the effective rate). (Enter your answers in whole dollars. If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Forecasting

A) Dexter Company reported the following 2018 income statement

Forecast Dexter’s income statement assuming a 5% increase in sales, a 17% effective tax rate, and a continuation of the 2018 percentage relation to net sales for expenses except for interest where the company projects no change.

B) Snap-On Corp 2018 financial statements include the following:

Forecast accounts receivable, inventory, and accounts payable for 2019 given that sales are expected to grow by 8% in 2019.

The DeVille Company reported pretax accounting income on its income statement as follows: 2018 $ 355,000 2019 275,000 2020 345,000 2021 385,000 Included in the income of 2018 was an installment sale of property in the amount of $30,000. However, for tax purposes, DeVille reported the income in the year cash was collected. Cash collected on the installment sale was $12,000 in 2019, $15,000 in 2020, and $3,000 in 2021. Included in the 2020 income was $10,000 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 2018–2021. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

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 $34,000. However, for tax purposes, DeVille reported the income in the year cash was collected. Cash collected on the installment sale was $13,600 in 2019, $17,000 in 2020, and $3,400 in 2021.

Included in the 2020 income was $12,000 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 2018–2021. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)