The following changes took place last year in Pavolik Company’s balance sheet accounts:

D = Decrease; I = Increase.

Long-term investments that cost the company $22 were sold during the year for $48 and land that cost $47 was sold for $25. In addition, the company declared and paid $19 in cash dividends during the year. Besides the sale of land, no other sales or retirements of plant and equipment took place during the year. Pavolik did not retire any bonds during the year or issue any new common stock.

The company’s income statement for the year follows:

The company’s beginning cash balance was $130 and its ending balance was $109.

Required:

1. Use the indirect method to determine the net cash provided by operating activities for the year.

2. Prepare a statement of cash flows for the year.

What impact do lower fuel cost and other changes have on airlines net income? American Airlines group ( AAL ), the world's biggest Airline, has been reporting record profits in recent quarters. United Continental Holdings and Southwest Airlines also reported record profits. Part of what has contributed to the record it profits has been the decline in the cost of oil. the price of oil has fallen during 2014; we are spending much less at the gas pump to fill out cars. The airlines are also experiencing the effects of low oil prices; the price of jet fuel is down 18% since August 2014. Increased revenues have also contributed to the high profits in the airline industry. Overall, Airfares are up 3% for 2014. according to airlines for America, an Industry trade group. In addition, planes have been about 85% full in 2014, which is a record high for the airline industry. On the other hand, Airline spent more on fuel in 2014 than in 2010. Airlines also spent more on labor due to higher renegotiated labor contracts. Questions: A. what each of the following changes Increase or Decrease an Airlines net income (consider each item independently)? B. What income statement account would be impacted by each item? 1. The 3% increase in airfare (ticket prices). 2. The 18% decrease in the price of per gallon of jet fuel. 3. The increase in the number of seats sold. 4. The increase in the total spent on Jet fuel. 5. The increase in the cost of Labor contracts. 6. Have you experienced hirer or lower ticket prices over the last 2 years? 7. What are other ways that Airlines use to increase Revenue? 8. What are other causes for decline in the revenue of airlines? What are other factors that increase or decrease expenses of Airlines?

Described below are six independent and unrelated situations involving accounting changes. Each change occurs during 2018 before any adjusting entries or closing entries were prepared. Assume the tax rate for each company is 40% in all years. Any tax effects should be adjusted through the deferred tax liability account.

1. Fleming Home Products introduced a new line of commercial awnings in 2017 that carry a one-year warranty against manufacturer’s defects. Based on industry experience, warranty costs were expected to approximate 4% of sales. Sales of the awnings in 2017 were $4,300,000. Accordingly, warranty expense and a warranty liability of $172,000 were recorded in 2017. In late 2018, the company’s claims experience was evaluated and it was determined that claims were far fewer than expected: 3% of sales rather than 4%. Sales of the awnings in 2018 were $4,800,000, and warranty expenditures in 2018 totaled $109,200.
2. On December 30, 2014, Rival Industries acquired its office building at a cost of $1,160,000. It was depreciated on a straight-line basis assuming a useful life of 40 years and no salvage value. However, plans were finalized in 2018 to relocate the company headquarters at the end of 2022. The vacated office building will have a salvage value at that time of $780,000.
3. Hobbs-Barto Merchandising, Inc., changed inventory cost methods to LIFO from FIFO at the end of 2018 for both financial statement and income tax purposes. Under FIFO, the inventory at January 1, 2018, is $770,000.
4. At the beginning of 2015, the Hoffman Group purchased office equipment at a cost of $418,000. Its useful life was estimated to be 10 years with no salvage value. The equipment was depreciated by the sum-of-the-years’-digits method. On January 1, 2018, the company changed to the straight-line method.
5. In November 2016, the State of Minnesota filed suit against Huggins Manufacturing Company, seeking penalties for violations of clean air laws. When the financial statements were issued in 2017, Huggins had not reached a settlement with state authorities, but legal counsel advised Huggins that it was probable the company would have to pay $280,000 in penalties. Accordingly, the following entry was recorded:

Late in 2018, a settlement was reached with state authorities to pay a total of $438,000 in penalties.

6. At the beginning of 2018, Jantzen Specialties, which uses the sum-of-the-years’-digits method, changed to the straight-line method for newly acquired buildings and equipment. The change increased current year net earnings by $533,000.

Required:
For each situation:
1. Identify the type of change.
2. Prepare any journal entry necessary as a direct result of the change as well as any adjusting entry for 2018 related to the situation described.

Problem 15-8

Baskin Company's net income last year was $98,000. Changes in the company's balance sheet accounts for the year appear below:

The company declared and paid cash dividends of $36,000 last year.

Required:

A. Prepare the operating activities section of the company's statement of cash flows for the year. (Use the indirect method.) Amounts to be deducted should be indicated by a minus sign.

B. Prepare the investing activities section of the company's statement of cash flows for the year. Amounts to be deducted should be indicated by a minus sign.

C. Prepare the financing activities section of the company's statement of cash flows for the year. Amounts to be deducted should be indicated by a minus sign.

During June, the following changes in inventory item 27 took place:

Perpetual inventories are maintained.

What is the cost of the ending inventory for item 27 under the FIFO method?

Cost of the ending Inventory?

1. Why do you think, energy policy connected to environmental policy?

2. What were the changes in the 1980s that lead to much less action on environmental policy in the US?

3. List 3 areas of environmental policy identified by Environmental Policy as dominated by states.

4. What is policy implementation?

5. Why is fracking a controversial method of obtaining oil and gas in the U.S.?

Described below are six independent and unrelated situations involving accounting changes. Each change occurs during 2021 before any adjusting entries or closing entries were prepared. Assume the tax rate for each company is 25% in all years. Any tax effects should be adjusted through the deferred tax liability account.

1. Fleming Home Products introduced a new line of commercial awnings in 2020 that carry a one-year warranty against manufacturer’s defects. Based on industry experience, warranty costs were expected to approximate 3% of sales. Sales of the awnings in 2020 were $3,800,000. Accordingly, warranty expense and a warranty liability of $114,000 were recorded in 2020. In late 2021, the company’s claims experience was evaluated, and it was determined that claims were far fewer than expected: 2% of sales rather than 3%. Sales of the awnings in 2021 were $4,300,000, and warranty expenditures in 2021 totaled $97,825.
2. On December 30, 2017, Rival Industries acquired its office building at a cost of $1,060,000. It was depreciated on a straight-line basis assuming a useful life of 40 years and no salvage value. However, plans were finalized in 2021 to relocate the company headquarters at the end of 2025. The vacated office building will have a salvage value at that time of $730,000.
3. Hobbs-Barto Merchandising, Inc., changed inventory cost methods to LIFO from FIFO at the end of 2021 for both financial statement and income tax purposes. Under FIFO, the inventory at January 1, 2021, is $720,000.
4. At the beginning of 2018, the Hoffman Group purchased office equipment at a cost of $363,000. Its useful life was estimated to be 10 years with no salvage value. The equipment was depreciated by the sum-of-the-years’-digits method. On January 1, 2021, the company changed to the straight-line method.
5. In November 2019, the State of Minnesota filed suit against Huggins Manufacturing Company, seeking penalties for violations of clean air laws. When the financial statements were issued in 2020, Huggins had not reached a settlement with state authorities, but legal counsel advised Huggins that it was probable the company would have to pay $230,000 in penalties. Accordingly, the following entry was recorded:

Late in 2021, a settlement was reached with state authorities to pay a total of $383,000 in penalties.

6. At the beginning of 2021, Jantzen Specialties, which uses the sum-of-the-years’-digits method, changed to the straight-line method for newly acquired buildings and equipment. The change increased current year net earnings by $478,000.

Required:
For each situation:
1. Identify the type of change.
2. Prepare any journal entry necessary as a direct result of the change, as well as any adjusting entry for 2021 related to the situation described.

Described below are three independent and unrelated situations involving accounting changes. Each change occurs during 2021 before any adjusting entries or closing entries are prepared.

1. On December 30, 2017, Rival Industries acquired its office building at a cost of $10,500,000. It has been depreciated on a straight-line basis assuming a useful life of 40 years and no residual value. Early in 2021, the estimate of useful life was revised to 28 years in total with no change in residual value.
2. At the beginning of 2017, the Hoffman Group purchased office equipment at a cost of $540,000. Its useful life was estimated to be 10 years with no residual value. The equipment has been depreciated by the straight-line method. On January 1, 2021, the company changed to the double-declining-balance method.
3. At the beginning of 2021, Jantzen Specialties, which uses the straight-line method, changed to the double-declining-balance method for newly acquired vehicles. The change decreased current year net income by $495,000.

Required:

1. Identify the type of change.
2. Prepare any journal entry necessary as a direct result of the change as well as any adjusting entry for 2021 related to the situation described. (Ignore income tax effects.)

Problem Set 4.8: Critical Values

Criterion: Explain changes in critical value based on calculations.

Instructions: Read the following and answer the questions.

The chi-square table. The degrees of freedom for a given test are listed in the column to the far left; the level of significance is listed in the top row to the right. These are the only two values you need to find the critical values for a chi-square test.

Work through the following exercise and write down what you see in the chi-square table. This will help familiarize you with the table.

Increasing k and a in the chi-square table:

1. Record the critical values for a chi-square test, given the following values for k at each level of significance:

Note: Because there is only one k given, assume this is a goodness-of-fit test and compute the degrees of freedom as (k − 1).

2. As the level of significance increases (from .01 to .10), does the critical value increase or decrease? Explain. ___________________________________
3. As k increases (from 10 to 30), does the critical value increase or decrease? Explain your answer as it relates to the test statistic. ___________________________________

Described below are six independent and unrelated situations involving accounting changes. Each change occurs during 2021 before any adjusting entries or closing entries were prepared. Assume the tax rate for each company is 25% in all years. Any tax effects should be adjusted through the deferred tax liability account.

1. Fleming Home Products introduced a new line of commercial awnings in 2020 that carry a one-year warranty against manufacturer’s defects. Based on industry experience, warranty costs were expected to approximate 2% of sales. Sales of the awnings in 2020 were $2,900,000. Accordingly, warranty expense and a warranty liability of $58,000 were recorded in 2020. In late 2021, the company’s claims experience was evaluated, and it was determined that claims were far fewer than expected: 1% of sales rather than 2%. Sales of the awnings in 2021 were $3,400,000, and warranty expenditures in 2021 totaled $77,350.
2. On December 30, 2017, Rival Industries acquired its office building at a cost of $880,000. It was depreciated on a straight-line basis assuming a useful life of 40 years and no salvage value. However, plans were finalized in 2021 to relocate the company headquarters at the end of 2025. The vacated office building will have a salvage value at that time of $640,000.
3. Hobbs-Barto Merchandising, Inc., changed inventory cost methods to LIFO from FIFO at the end of 2021 for both financial statement and income tax purposes. Under FIFO, the inventory at January 1, 2021, is $630,000.
4. At the beginning of 2018, the Hoffman Group purchased office equipment at a cost of $264,000. Its useful life was estimated to be 10 years with no salvage value. The equipment was depreciated by the sum-of-the-years’-digits method. On January 1, 2021, the company changed to the straight-line method.
5. In November 2019, the State of Minnesota filed suit against Huggins Manufacturing Company, seeking penalties for violations of clean air laws. When the financial statements were issued in 2020, Huggins had not reached a settlement with state authorities, but legal counsel advised Huggins that it was probable the company would have to pay $140,000 in penalties. Accordingly, the following entry was recorded:

Late in 2021, a settlement was reached with state authorities to pay a total of $284,000 in penalties.

6. At the beginning of 2021, Jantzen Specialties, which uses the sum-of-the-years’-digits method, changed to the straight-line method for newly acquired buildings and equipment. The change increased current year net earnings by $379,000.

Required:
For each situation:
1. Identify the type of change.
2. Prepare any journal entry necessary as a direct result of the change, as well as any adjusting entry for 2021 related to the situation described.