An investor considers the purchase of a 2-year bond with a 5% coupon rate, with interest paid annually and par of 100. The spot rates observed in the market today are as follows: 1-yr spot is 3%, the 2-yr spot is 4% and the 3-yr spot is 5%. The clean price of the bond is closest to: a. 101.93. b. 102.85. c. 105.81. d. 102.36. e. 103.10.

The following data are available for Hollis for the fiscal year ended on January 31, 2020:

Required:
a. Calculate cost of goods sold and ending inventory under the cost flow assumptions, FIFO, LIFO and Weighted average (using a periodic inventory system): (Round unit cost to 2 decimal places.)


b. Assume that net income using the weighted-average cost flow assumption is $14,600. Calculate net income under FIFO and LIFO.(Round unit cost to 2 decimal places.)

Redbud began operations at the beginning of Year 1, and has one depreciable asset with an original cost of $200, acquired at the start of Year 1. Redbud uses straight-line depreciation over 5 years for financial reporting and MACRS (3-year asset). Information about carrying value and tax basis of the asset is found in the table below.

In Years 1 and 2, Redbud had a small amount of positive net income and positive taxable income. In Year 3, Redbud experienced a $2,000 loss for net income. Redbud is not in an industry that is eligible for the carryback option, so Redbud will carry the loss forward. Redbud’s tax rate is 20%.

Requirements:

1. Calculate the net operating loss for Year 3.
2. Prepare the journal entry to record income taxes for Year 3.
3. Assume that Redbud only expects to realize 60% of the tax carryforward in future years. Prepare the necessary journal entry to adjust for this expectation.
4. In Year 4, Redbud earned net income of $200. Prepare the journal entry to record income taxes.

Problem Facts Information related to the Sosa Company for the year 2020: Common Stock As of the end of 2020, Sosa had 240,000 shares of common stock outstanding. The shares are due to the following common stock transactions:  January 1, 2020 – 100,000 shares of common stock outstanding  April 1, 2020 – issued an additional 50,000 shares for cash  July 1, 2020 - issued a 2 for 1 stock split  September 1, 2020 – purchased 60,000 shares for treasury stock Preferred Stock As of the end of 2020, Sosa had 30,000 shares of 6%, $10 par value, cumulative, convertible preferred stock outstanding. The stock had been outstanding all year and the conversion ratio was each share of preferred stock is convertible into 3 shares of common stock. Bonds Payable As of the end of 2020, Sosa had $800,000, 7% bonds payable outstanding. The bonds had been outstanding for the entire year and each $1,000 bond was convertible into 10 shares of common stock. Options Sosa also had 10,000 common stock options outstanding all year. Each option allowed the holder to purchase 1 share of Sosa’s common stock for $45. During 2020, the average market price of Sosa’s common stock was $48 per share. Additional Information Sosa’s 2020 net income was $580,000, and the company’s income tax rate was 34%. REQUIRED 1. Compute the weighted average number of common shares Sosa will use to compute basic earnings per share. (5 points) 2. Compute 2020 basic earnings per share (3 points) 3. Identify which of the potentially dilutive securities (preferred stock, bonds, options) are dilutive (support must be shown to receive credit for this question) (8 points) 4. Compute diluted earnings per share (4 points)

Basic EPS = $2.20

Diluted EPS = $1.68

Note: This problem is for the 2019 tax year.

Alfred E. Old and Beulah A. Crane, each age 42, married on September 7, 2017. Alfred and Beulah will file a joint return for 2019. Alfred's Social Security number is 111-11-1109. Beulah's Social Security number is 123-45-6780, and she adopted "Old" as her married name. They live at 211 Brickstone Drive, Atlanta, GA 30304.

Alfred was divorced from Sarah Old in March 2016. Under the divorce agreement, Alfred is to pay Sarah $1,250 per month for the next 10 years or until Sarah's death, whichever occurs first. Alfred pays Sarah $15,000 in 2019. In addition, in January 2019, Alfred pays Sarah $50,000, which is designated as being for her share of the marital property. Also, Alfred is responsible for all prior years' income taxes. Sarah's Social Security number is 123-45-6788.

Alfred's salary for 2019 is $150,000. He is an executive working for Cherry, Inc. (Federal I.D. No. 98-7654321). As part of his compensation package, Cherry provides him with group term life insurance equal to twice his annual salary. His employer withheld $24,900 for Federal income taxes and $8,000 for state income taxes. The proper amounts were withheld for FICA taxes.

Beulah recently graduated from law school and is employed by Legal Aid Society, Inc. (Federal I.D. No. 11-1111111), as a public defender. She receives a salary of $42,000 in 2019. Her employer withheld $7,500 for Federal income taxes and $2,400 for state income taxes. The proper amounts were withheld for FICA taxes.

Alfred and Beulah had interest income of $500. Alfred and Beulah receive a $1,900 refund on their 2018 state income taxes. They claimed the standard deduction on their 2018 Federal income tax return. Alfred and Beulah pay $4,500 interest and $1,450 property taxes on their personal residence in 2019. Their charitable contributions total $2,400 (all to their church). They paid sales taxes of $1,400, for which they maintain the receipts. Both spouses had health insurance for all of 2019 and they do not want to contribute to the Presidential Election Campaign.

Required:

Compute the Olds' net tax payable (or refund due) for 2019. Use Form 1040 and Schedule 1 to complete tax return.

• It may be necessary to complete the tax schedule and worksheet before completing Form 1040.
• Enter all amounts as positive numbers.
• If an amount box does not require an entry or the answer is zero, enter "0".
• Make realistic assumptions about any missing data.
• When computing the tax liability, do not round your immediate calculations. If required round your final answers to the nearest dollar.
• Use the 2019 Tax Rate Schedule provided. Do not use the Tax Tables.

• Assume that you are a partner of Apples and Oranges, CPAs. During the last year, you were part of the team that audited Parker and Smith, Inc., a small publicly held company. The audit went quite well, and the client had high praise for the work done by you and the other members of the audit team. One day six months after the completion of the audit, you receive this email from Jerome Parker, a president of Parker and Smith:

Hi [your name],

We are still talking around here about the good job you and the other members of the audit team did on our audit. You all seemed to have a thorough understanding of our business, and we found working with you a pleasure. Based on the good experience we had with the audit, we would like to engage your firm to do additional work for us. Specifically, we’d like your help in designing a new financial information system for our company. We’re also considering investing in stock being offered by one of our suppliers, and we’d like your input into that decision. Hope you can help us here! Looking forward to hearing from you. Regards, Jerome.

Write a letter to Mr. Parker in response to his email. Remember that you want to maintain a good working relationship with Parker and Smith. You also want to maintain proper professional and ethical standards.

Use the following information regarding ABC Co. in 2020 (assume this is the first year of operations for ABC Co., and assume ABC pays cash unless noted otherwise). Assume ABC uses FIFO perpetual for inventory, straight-line depreciation, and estimates it will not collect 4% of accounts receivable.

1/1 Issues 10,000 shares of common stock for $5 each.
2/15 Purchase 2,000 units of inventory at $4/unit.
3/1 Sells 500 units of inventory for $16/unit, customer pays on account.
4/1 Signs a 2-year lease for its manufacturing facility, paying the first years’ rent of $3,600 upfront.
6/1 Purchases equipment for $60,000 on account, 6 year useful life, $7,000 salvage value. It cost ABC $10,000 to have the equipment installed, also paid on account.
7/1 Sells 100 units of inventory for $20 per unit, customer pays on account.
9/1 The customer from the 3/1 sale of inventory paid back 70% of their balance.  
10/15 Declared and paid $3,000 of dividends.
12/1 Purchase $1,200 worth of supplies. By 12/31, 20% have been used.

What is ABC’s bad debt expense for 2020?

Group of answer choices

$176

$4,000

$400

$320

None of the above.

What is cost of goods sold for 2020?

Group of answer choices

$8,000

None of the above.

$2,400

$5,600

$2,000

What amount is reported on ABC’s 2020 Balance Sheet related to Property, Plant, & Equipment, assuming ABC depreciates beginning with the month of acquisition?

Group of answer choices

$63,875

$59,500

$51,167

None of the above.

$58,847

What is the journal entry related to the 3/1 sale of inventory?

Group of answer choices

Accounts Receivable 8,000

Sales   8,000

Cash   8,000

     Sales   8,000

Accounts Receivable 8,000

Inventory 8,000

Cost of Goods Sold 2,000

Sales   2,000

No entry required

Accounts Receivable 8,000

Sales   8,000

Cost of Goods Sold 2,000

Inventory   2,000

A company’s average monthly loan balance for the past year is $18,350,000. The interest rates on the loan fluctuated between 6.5% and 7.5% during the year.

The income statement shows interest expense of $1,150,000 for the year.

Answer these four following questions:

1. Show how you would calculate an interest expense Expectation for the interest expense account and show your expected interest expense amount.

2. Compare your expectation of interest expense with the income statement amount and show the difference.

3. If you have determined the tolerable difference is 10% of the company’s recorded amount compare the tolerable dollar amount of difference using this % with your calculated difference above and show the amount your calculated difference is either above or below the 10%tolerable amount.

4.Should you accept the income statement interest expense account as fairly stated or not and why.

Suppose that the forward price for a ton of lumber 1 year from now is $4,800. Storing a ton of lumber in a safe location for a year costs 5% of its value. The relevant interest rate is 18%. If the spot price of a ton of lumber is $4,000, what must be the convenience yield for this commodity?

Suppose that a small family farm sold its output for $100,000 in a given year. The family spent $25,000 on fuel, $40,000 on seed, fertilizer, and pesticides, and $25,000 on equipment, including maintenance. The family members could have earned $20,000 working at other occupations. What is the family’s accounting cost? What is the family’s economic cost? Could the family’s economic cost ever exceed its accounting cost? Why or why not

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