Back in Boston, Steve has been busy creating and managing his new company, Teton Mountaineering (TM), which is based out of a small town in Wyoming. In the process of doing so, TM has acquired various types of assets. Below is a list of assets acquired during 2015: (Use MACRS Table 1, Table 2, Table 3, Table 4 and Table 5.) (Round intermediate calculations and final answer to the nearest whole dollar amount.)
| Asset | Cost | Date Placed in Service | |
| Office furniture | $ | 10,000 | 02/03/2015 |
| Machinery | 560,000 | 07/22/2015 | |
| Used delivery truck* | 15,000 | 08/17/2015 | |
* Not considered a luxury automobile, thus not subject to the luxury automobile limitations.
During 2015, TM had huge success (and had no §179 limitations) and Steve acquired more assets the next year to increase its production capacity. These are the assets acquired during 2016:
| Date Placed | |||||||||||||||||||||||||||||||||||||||||||
| Asset | Cost | in Service | |||||||||||||||||||||||||||||||||||||||||
| Computers & info. system | $ | 40,000 | 03/31/2016 | ||||||||||||||||||||||||||||||||||||||||
| Luxury auto† | 80,000 | 05/26/2016 | |||||||||||||||||||||||||||||||||||||||||
| Assembly equipment | 475,000 | 08/15/2016 | |||||||||||||||||||||||||||||||||||||||||
| Storage building | 400,000 | 11/13/2016 | |||||||||||||||||||||||||||||||||||||||||
|
†Used 100% for business purposes. TM generated taxable income in 2016 before any §179 expense of $732,500. a. Compute the maximum 2015 depreciation deductions including §179 expense (ignoring bonus depreciation). b. Compute the maximum 2016 depreciation deductions including §179 expense (ignoring bonus depreciation). c. Compute the maximum 2016 depreciation deductions including §179 expense, but now assume that Steve would like to take bonus depreciation on the 2016 assets. d. Ignoring part (c), now assume that during 2016, Steve decides to buy a competitor’s assets for a purchase price of $350,000. Compute the maximum 2016 cost recovery including §179 expense (ignoring bonus depreciation). Steve purchased the following assets for the lump-sum purchase price.
|
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In: Accounting
Exercise 10-3
Buffalo Corporation operates a retail computer store. To improve delivery services to customers, the company purchases four new trucks on April 1, 2017. The terms of acquisition for each truck are described below.
| 1. | Truck #1 has a list price of $38,550 and is acquired for a cash payment of $35,723. | |
| 2. | Truck #2 has a list price of $41,120 and is acquired for a down payment of $5,140 cash and a zero-interest-bearing note with a face amount of $35,980. The note is due April 1, 2018. Buffalo would normally have to pay interest at a rate of 9% for such a borrowing, and the dealership has an incremental borrowing rate of 8%. | |
| 3. | Truck #3 has a list price of $41,120. It is acquired in exchange for a computer system that Buffalo carries in inventory. The computer system cost $30,840 and is normally sold by Buffalo for $39,064. Buffalo uses a perpetual inventory system. | |
| 4. | Truck #4 has a list price of $35,980. It is acquired in exchange for 910 shares of common stock in Buffalo Corporation. The stock has a par value per share of $10 and a market price of $13 per share. |
Prepare the appropriate journal entries for the above transactions
for Buffalo Corporation. (Round present value factors
to 5 decimal places, e.g. 0.52587 and final answers to 0 decimal
places, e.g. 5,275. Credit account titles are automatically
indented when amount is entered. Do not indent manually. If no
entry is required, select "No Entry" for the account titles and
enter 0 for the amounts.)
| No. | Account Titles and Explanation | Debit | Credit |
| 1. | |||
| 2. | |||
| 3. | |||
| 4. | |||
List of Accounts
Accounts Payable
Accumulated Depreciation-Building
Accumulated Depreciation-Equipment
Accumulated Depreciation-Machinery
Accumulated Depreciation-Trucks
Buildings
Cash
Common Stock
Contribution Revenue
Cost of Goods Sold
Depreciation Expense
Direct Labor
Discount on Notes Payable
Equipment
Factory Overhead
Gain on Disposal of Buildings
Gain on Disposal of Equipment
Gain on Disposal of Machinery
Gain on Disposal of Trucks
Insurance Expense
Interest Expense
Inventory
Land
Land Improvements
Loss on Disposal of Buildings
Loss on Disposal of Equipment
Loss on Disposal of Machinery
Loss on Disposal of Trucks
Machinery
Maintenance and Repairs Expense
Materials
No Entry
Notes Payable
Organization Expense
Paid-in Capital in Excess of Par - Common Stock
Prepaid Insurance
Retained Earnings
Salaries and Wages Expense
Sales Revenue
Trading Securities
Trucks
In: Accounting
Back in Boston, Steve has been busy creating and managing his new company, Teton Mountaineering (TM), which is based out of a small town in Wyoming. In the process of doing so, TM has acquired various types of assets. Below is a list of assets acquired during 2016: Exhibit 10-8 (Use MACRS Table 1, Table 2, Table 3, Table 4 and Table 5.) (Round intermediate calculations and final answer to the nearest whole dollar amount.)
| Asset | Cost | Date Placed in Service | |
| Office furniture | $ | 10,000 | 02/03/2016 |
| Machinery | 560,000 | 07/22/2016 | |
| Used delivery truck* | 15,000 | 08/17/2016 | |
* Not considered a luxury automobile, thus not subject to the luxury automobile limitations.
During 2016, TM had huge success (and had no §179 limitations) and Steve acquired more assets the next year to increase its production capacity. These are the assets acquired during 2017:
| Date Placed | |||
| Asset | Cost | in Service | |
| Computers & info. system | $ | 40,000 | 03/31/2017 |
| Luxury auto† | 80,000 | 05/26/2017 | |
| Assembly equipment | 475,000 | 08/15/2017 | |
| Storage building | 400,000 | 11/13/2017 | |
†Used 100% for business purposes.
TM generated taxable income in 2017 of $732,500 for purposes of computing the §179 expense.
a. Compute the maximum 2016 depreciation deductions including §179 expense (ignoring bonus depreciation).
b. Compute the maximum 2017 depreciation deductions including §179 expense (ignoring bonus depreciation).
c. Compute the maximum 2017 depreciation deductions including §179 expense, but now assume that Steve would like to take bonus depreciation on the 2017 assets.
d. Ignoring part c, now assume that during 2017, Steve decides to buy a competitor’s assets for a purchase price of $350,000. Compute the maximum 2017 cost recovery including §179 expense (ignoring bonus depreciation). Steve purchased the following assets for the lump-sum purchase price.
| Date Placed | |||
| Asset | Cost | in Service | |
| Inventory | $ | 20,000 | 09/15/2017 |
| Office furniture | 30,000 | 09/15/2017 | |
| Machinery | 50,000 | 09/15/2017 | |
| Patent | 98,000 | 09/15/2017 | |
| Goodwill | 2,000 | 09/15/2017 | |
| Building | 130,000 | 09/15/2017 | |
| Land | 20,000 | 09/15/2017 | |
In: Accounting
Calculation of current and deferred tax, and adjustment entry
The profit before tax, as reported in the statement of profit and loss for Adeline Ltd for the year ended 30 June 2021, amounted to $100 000, including the following revenue and expense items.
|
Sales revenue |
650000 |
|
Interest revenue |
50000 |
|
Government grant (non-taxable) |
50000 |
|
Cost of goods sold |
400000 |
|
Bad Debts expense |
10000 |
|
Depreciation expense – equipment |
10000 |
|
Depreciation expense – plant |
20000 |
|
Research and development expense |
80000 |
|
Wages Expense |
120000 |
|
Long service leave expense |
20000 |
The statement of profit and loss for Adeline Ltd for the year ended 30 June 2021 also included a gain on sale of equipment of $10 000. According to AASB 116/IAS 16, this gain is not classified as revenue, but it is nevertheless part of the accounting profit before tax for the year. The draft statements of financial position of Adeline Ltd at 30 June 2020 and 30 June 2021 showed the following assets and liabilities.
|
Assets |
2020 |
2021 |
|
Cash |
30,000 |
30,000 |
|
Inventories |
100,000 |
150,000 |
|
Accounts receivable |
50,000 |
70,000 |
|
Allowance for doubtful debts |
(5,000) |
(10,000) |
|
Interest receivables |
25,000 |
20,000 |
|
Equipment |
30,000 |
- |
|
Accumulated depreciation - Equipment |
(15,000) |
- |
|
Plant |
20,000 |
20,000 |
|
Accumulated depreciation - Plant |
(40,000) |
(60,000) |
|
Goodwill |
15,000 |
15,000 |
|
Differed Tax Asset |
33,000 |
? |
|
Liabilities |
||
|
Accounts payable |
60,000 |
40,000 |
|
Wages Payable |
50,000 |
80,000 |
|
Revenue received in advanced |
- |
20,000 |
|
Loan Payable |
200,000 |
100,000 |
|
Provision for long service leave |
40,000 |
30,000 |
|
Deferred tax liability |
24,000 |
? |
Additional information
In the year ended 30 June 2020, Adeline Ltd had a tax loss of $65 000 that it carried over in the deferred tax asset. In June 2021, the company received an amended assessment for the year ended 30 June 2020 from the ATO, indicating that an amount of $5000 claimed as a deduction has been disallowed. Adeline Ltd has not yet adjusted its accounts to reflect the amendment.
Amounts received from sales, including those on credit terms, are taxed at the time the sale is made. All other general taxation rules apply.
The movement in the equipment account is caused by the sale of the equipment on 1 March 2021 for which a gain on sale of $10 000 was recognised as part of the profit before tax (see above). Adeline Ltd had purchased the equipment on 1 July 2019 (with an estimated useful life of 2 years and no residual value) and for taxation purposes it claimed its full cost as a deduction at 30 June 2020.
The plant is depreciated on a straight?line basis over 10 years for accounting purposes, but over 5 years for taxation purposes. The plant is not expected to have any residual value.
All research and development expenses were paid in cash during the year ended 30 June 2021.
The company tax rate is assumed to be 30% for the year ended 30 June 2020 and 28% for the year ended 30 June 2021. The balances of the deferred tax accounts at 30 June 2020 are still reflecting the 30% tax rate.
Required
1. Prepare the current tax worksheet and the journal entry to recognise current tax at 30 June 2021.
2. Prepare the deferred tax worksheet and journal entries to adjust deferred tax accounts.
In: Accounting
In: Accounting
Fisk Company uses a standard cost accounting system. During
January, the company reported the following manufacturing
variances.
| Materials price variance | $1,290 | U | Labor quantity variance | $910 | U | |||
| Materials quantity variance | 730 | F | Overhead variance | 830 | U | |||
| Labor price variance | 440 | U |
In addition, 8,490 units of product were sold at $9 per unit. Each
unit sold had a standard cost of $5. Selling and administrative
expenses were $7,580 for the month.
Prepare an income statement for management for the month ended
January 31, 2020.
FISK COMPANY
Income Statement
For the Year Ended January 31, 2020January 31, 2020For the Month
Ended January 31, 2020
$
DividendsExpensesGross Profit (Actual)Gross Profit (at Standard)Net Income / (Loss)RevenuesTotal ExpensesTotal RevenuesTotal VarianceVariances
DividendsExpensesGross Profit (Actual)Gross Profit (at Standard)Net Income / (Loss)RevenuesTotal ExpensesTotal RevenuesTotal VarianceVariances
$
FavorableUnfavorableNeither favorable nor unfavorable
FavorableUnfavorableNeither favorable nor unfavorable
FavorableUnfavorableNeither favorable nor unfavorable
FavorableUnfavorableNeither favorable nor unfavorable
FavorableUnfavorableNeither favorable nor unfavorable
DividendsExpensesGross Profit (Actual)Gross Profit (at Standard)Net Income / (Loss)RevenuesTotal ExpensesTotal RevenuesTotal VarianceVariances
FavorableUnfavorableNeither favorable nor unfavorable
DividendsExpensesGross Profit (Actual)Gross Profit (at Standard)Net Income / (Loss)RevenuesTotal ExpensesTotal RevenuesTotal VarianceVariances
DividendsExpensesGross Profit (Actual)Gross Profit (at Standard)Net Income / (Loss)RevenuesTotal ExpensesTotal RevenuesTotal VarianceVariances
$
In: Accounting
Boris delivers the machine to Bella’s factory on December 29, 2019 and Boris employees complete the installation of the machine on January 10, 2020. (SHOW ALL WORK)
Required:
Please prepare the appropriate accounting entries for Boris on December 29, 2019 and on January 10, 2020 assuming Bella makes the payments required under the contract.
On August 1, 2019, James delivers books to State University with a sales value of $400,000. The books have a cost to James of $10,000. State University immediately pays the amount owed upon delivery.
Required:
Please prepare the entry to reflect the sale of the books for James on August 1, 2019.
In: Accounting
Boris delivers the machine to Bella’s factory on December 29, 2019 and Boris employees complete the installation of the machine on January 10, 2020.
Required:
Please prepare the appropriate accounting entries for Boris on December 29, 2019 and on January 10, 2020 assuming Bella makes the payments required under the contract.
On August 1, 2019, James delivers books to State University with a sales value of $400,000. The books have a cost to James of $10,000. State University immediately pays the amount owed upon delivery.
Required:
Please prepare the entry to reflect the sale of the books for James on August 1, 2019.
In: Accounting
question1
The balance sheet of Indian River Electronics Corporation as of
December 31, 2020, included 13.25% bonds having a face amount of
$90.4 million. The bonds had been issued in 2013 and had a
remaining discount of $3.4 million at December 31, 2020. On January
1, 2021, Indian River Electronics called the bonds before their
scheduled maturity at the call price of 104.
Required:
Prepare the journal entry by Indian River Electronics to record the
redemption of the bonds at January 1, 2021. (If no entry is
required for a transaction/event, select "No journal entry
required" in the first account field. Enter your answers in whole
dollars.)
Question 2
The Bradford Company issued 12% bonds, dated January 1, with a
face amount of $97 million on January 1, 2021. The bonds mature on
December 31, 2030 (10 years). For bonds of similar risk and
maturity, the market yield is 14%. 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 $1)
Required:
1. Determine the price of the bonds at January 1,
2021.
2. to 4. Prepare the journal entries to record
their issuance by The Bradford Company on January 1, 2021, interest
on June 30, 2021 and interest on December 31, 2021 (at the
effective rate).
a. Record the bond issuance by the Bedford Company.
b. Record the interest on June 30,2021(at the effective rate)
C. Record the interest on December 31,2021( at the effective rate).
In: Accounting
Company 1
| Industry Median | 2020 | 2019 | 2018 | 2017 | |
| A/R Turnover | 119.6 | 75.8 | 74.3 | 86.7 | 92.0 |
| Avg. A/R Days | 3.1 | 4.8 | 4.9 | 4.3 | 4.0 |
| Inv Turnover | 3.5 | 5.9 | 5.9 | 6.0 | 5.8 |
| Avg. Inventory Days | 103.0 | 61.3 | 61.8 | 61.3 | 62.6 |
| Avg. A/P Days | 51.0 | 65.3 | 63.0 | 57.8 | 54.3 |
| Fixed Asset Turnover | 2.59 | 2.79 | 2.80 | 2.85 | 2.82 |
| WC / Sales Growth | (1.6%) | (0.6%) | (1.1%) | (1.4%) | (1.7%) |
| Bad Debt Allowance (% of A/R) | - | - | - | - | - |
| ROIC | - | 12.0% | 10.8% | 9.9% | 10.2% |
| Revenue per Employee ($) | - | $214,593.40 | $213,775.90 | $217,706.60 | $211,659.60 |
Company 2
| Industry Median | 2020 | 2019 | 2018 | 2017 | |
| A/R Turnover | 26.8 | 74.2 | 75.1 | 74.7 | 68.2 |
| Avg. A/R Days | 13.6 | 4.9 | 4.8 | 5.0 | 5.4 |
| Inv Turnover | 10.2 | 13.7 | 14.2 | 14.6 | 14.1 |
| Avg. Inventory Days | 35.6 | 26.6 | 25.7 | 25.4 | 26.4 |
| Avg. A/P Days | 31.8 | 23.7 | 22.9 | 22.6 | 23.9 |
| Fixed Asset Turnover | 5.21 | 4.86 | 5.67 | 5.83 | 5.68 |
| WC / Sales Growth | (0.4%) | (0.1%) | (0.4%) | 0.1% | 0.1% |
| Bad Debt Allowance (% of A/R) | 1.7% | - | - | - | - |
| ROIC | - | 5.5% | 13.1% | 4.1% | 8.8% |
| Revenue per Employee ($) | - | $275,418.90 | $268,651.90 | $275,026.90 | $263,929.10 |
Please discuss which company operates more efficiently. The
discussion may include, but not exhaustive to the inventory
management system, capacity utilization, supply chain etc
In: Finance