1. On December 31, 2020, for GAAP purposes, Clubs Inc. reported a balance of $40,000 in a warranty liability for anticipated costs to satisfy future warranty claims. No claims were paid in 2020. Pretax GAAP income is $300,000 and the tax rate is 25%. Assume no other differences between the tax bases and GAAP bases of assets and liabilities, or any beginning balances in deferred tax accounts.

Required:

1. Record the income tax journal entry on December 31, 2020.

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b. Assume that there was a December 31, 2019, balance of $4,000 in the DTA account. Record the income tax journal entry on December 31, 2020.

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2. In 2020, Cardinals Company operated at a tax loss, totaling $88,000 during its first year of business. Assuming a tax rate of 25%, and that income is expected in 2021, record the entry to reflect the tax benefit of the net operating loss on December 31, 2020. Cardinals Company determined that it was more likely than not that 75% of the deferred tax asset would not be realized.

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(a) George Gershwin Co. sold $2,000,000 of 10%, 10-year bonds at 104 on January 1, 2020. The bonds were dated January 1, 2020, and pay interest on July 1 and January 1. If Gershwin uses the straight-line method to amortize bond premium or discount, determine the amount of interest expense to be reported on July 1, 2020, and December 31, 2020. (Round answer to 0 decimal places, e.g. 38,548.) Interest expense to be recorded $ (b) Ron Kenoly Inc. issued $600,000 of 9%, 10-year bonds on June 30, 2020, for $562,500. This price provided a yield of 10% on the bonds. Interest is payable semiannually on December 31 and June 30. If Kenoly uses the effective-interest method, determine the amount of interest expense to record if financial statements are issued on October 31, 2020. (Round intermediate calculations to 6 decimal places, e.g. 1.251247 and final answer to 0 decimal places, e.g. 38,548.) Interest expense to be recorded $

1.Pharoah Company sells TVs. The perpetual inventory was stated as $37,200 on the books at December 31, 2020. At the close of the year, a new approach for compiling inventory was used and apparently a satisfactory cut-off for preparation of financial statements was not made. Some events that occurred are as follows.

1. TVs shipped to a customer January 2, 2021, costing $5,000 were included in inventory at December 31, 2020. The sale was recorded in 2021.

2. TVs costing $15,800 received December 30, 2020, were recorded as received on January 2, 2021.

3. TVs received during 2020 costing $4,900 were recorded twice in the inventory account.

4. TVs shipped to a customer December 28, 2020, f.o.b. shipping point, which cost $10,900, were not received by the customer until January, 2021. The TVs were included in the ending inventory.

5. TVs on hand that cost $6,300 were never recorded on the books.

Compute the correct inventory at December 31, 2020.

On November 15, 2020, a fire destroyed Youngstown Inc.’s warehouse where inventory is stored. It is estimated that $20,000 can be realized from sale of usable but damaged inventory. The accounting records concerning inventory reveal the following. Based on recent records, gross margin has averaged 35% of net sales.

a. Calculate the estimated loss of inventory using the gross profit method.
b. Assume instead that the markup is 35% of cost. Estimate the loss of inventory using the gross profit method.

• Do not round the gross profit percentage used in your calculations.
• Round your final answers below to the nearest dollar.

a. Estimated loss of inventory assuming a 35% markup on sales:

b. Estimated loss of inventory assuming a 35% markup on cost:

Complete the journal entries as necessary for both Part 1 and Part 2.

Part 1.

Transaction 1. On January 1st of 2020, Casey bought 10% of Apple Company’s 100,000 shares of outstanding common stock at $20 a share.

2. On December 31, 2020, Apple reported $40,000 of net income and paid $20,000 of dividends.

3. On December 31, 2020, the market price of the stock was $ 25 a share. Assume there was a zero balance in the fair value adjustment account.

Part 2. Complete the journal entries as required:

Transaction 4. On January 1st of 2020, Casey bought 30% of Apple Company’s 100,000 shares of outstanding common stock at $20 a share and has significant influence.

5. On December 31, 2020, Apple reported $40,000 of net income and paid $20,000 of dividends.

6. On December 31, 2020, the market price of the stock was $ 25 a share. Assume there was a zero balance in the fair value adjustment account before this transaction.

Consider the following table of activities A through E in which A is the start node and E is the stop node. Assume the project starts on Monday, May 4, 2020 and no work is done on weekends (Saturday and Sunday). All activities require the same resource. Assume no working-day holidays during the months of May and June—no Memorial Day holiday, for example.

On a piece of scratch paper, draw the early-start Gantt Chart associated with this table. Assume the project is resource-constrained but not time-constrained. Assume only one resource is available and that resource can only do one activity at a time. Given that the Month of May has 31 days, what would be the completion date for the project?

• Monday, June 8, 2020

• Wednesday, June 10, 2020

• Friday, June 5, 2020

• Thursday, June 11, 2020

• Thursday, June 4, 2020

At December 31, 2020, the investments in the portfolio of the trading securities of Mac Company included the following:

Atlanta Corp. bonds, 5%, $100,000 face value, purchased on Oct. 1, 2020 at par

Dallas Inc. bonds, 4%, $50,000 face value, purchased on July 1, 2020 at par

Required:

1. Record the receipt of quarterly interest from the Atlanta Corp. bonds on December 31, 2020.
2. Record the receipt of semiannual interest from the Dallas Inc. bonds on December 31, 2020.
3. Record the entry to adjust the bonds to fair value on December 31, 2020. The fair value of the Atlanta Corp. bonds and the Dallas In bonds on December 31, 2020, were $110,000 and $45,000 respectively.
4. Record the entry to sell the Atlanta Corporation bonds on January 2, 2021, for $112,500.
5. Record the entry to sell the Dallas Inc. bonds on January 3, 2021 for $44,500.
6. Adjust the Fair Value Adjustment account on December 31, 2021 to reflect that no trading securities are owned (if necessary).

7. Assume INSTEAD that the above bonds are held as available-for-sale investments. if we assume the bonds are AFS Securities, not Trading Securities. if the accounting for the transaction should change, write the complete corrected journal entry.

In your audit of Chris Anderson Company, you find that a physical inventory on December 31, 2020, showed merchandise with a cost of $439,750 was on hand at that date. You also discover the following items were all excluded from the $439,750.

Based on the above information, calculate the amount that should appear on Anderson’s balance sheet at December 31, 2020, for inventory.

Presented here are summarized data from the balance sheets and income statements of Wiper Inc.:

Required:

1. Calculate return on investment, based on net income and average total assets, for 2020 and 2019.
2. Calculate return on equity for 2020 and 2019.
3. Calculate working capital and the current ratio for each of the past three years.
4. Calculate earnings per share for 2020 and 2019.