The financial year for Crystal Catering Services ends on 30 June. After analysing the accounting records and other data for the business of Crystal Catering Services, the following information is made available for the year ended 30 June 2020.

• Crystal Catering Services sub-lets space in its building of $2,400 (excluding GST) per month. Crystal Catering Services has not received the rent for June 2020.
• Crystal Catering Services borrowed $15,000 from Metro Bank on 2 February 2020. The principal, plus 5% pa interest, is payable on 15 August. Accrued interest on 30 June has not been recorded.
• The sales assistant earns $130 per day. She will be paid on 3 July for the 5-day period ending 3 July 2020. Accrued wages for sales assistant on 30 June has not been recorded.
• On 18 May, Crystal Catering Services received an advance from a customer for services totalling $890 (plus GST). This was recorded in the unearned cleaning revenue. The services were provided on 26 June 2020.
• Crystal Catering Services purchased a 6-month insurance policy for $1,200 (plus GST) on 1 May 2020. The purchase of this was recorded by debiting Prepaid Insurance.
• Repairs to Crystal Jone’s, the owner of Crystal Catering Services, private motor vehicle of $620 was debited to the Vehicles expense account.

Required:

Using the information above, make the necessary adjusting entries for Crystal Catering Services for the year ended 30 June 2020.

On January 8, 2017, Whitewater Riders purchased a van to transport rafters back to the point of departure after completing the on-the-water portion of the rafting adventures they operate. The cost of the van is $44,000 and Whitewater Rider expects to use the van for four years or 60,000 miles. The estimated selling price after four years is $2,000. The van was driven 12,000 miles in 2017, 18,000 miles in 2018, 21,000 miles in 2019, and 10,000 miles in 2020.

Required:

On the following Whitewater Riders worksheet, compute the annual depreciation expense and ending book value of the van using straight-line, double-declining, and units-of-production methods. In addition, answer the three questions below:

1.   Which method results in the highest net income for Whitewater Riders?

a. 2017 b. 2018 c. 2019. d. 2020

2.   Which method results in the lowest income tax liability for Whitewater Riders?

a. 2017 b. 2018 c. 2019. d. 2020

3.   Which method would you recommend Whitewater Riders use and why?  

Whitewater Riders

Schedule of Van Depreciation for years 2017- 2020

Depreciation Method       Year        Depreciation expense       Ending Book Value

Straight-line                       2017

Straight-line                       2018

Straight-line                       2019

Straight-line                       2020

Double-declining              2017

Double-declining              2018       

Double-declining             2019

Double-declining             2020

Units-of-production         2017     

Units-of-production         2018

Units-of-production         2019

Units-of-production         2020           

Exercise 22-23

Sandhill Corp. was a 30% owner of Teal Company, holding 216,000 shares of Teal’s common stock on December 31, 2019. The investment account had the following entries.

On January 2, 2020, Sandhill sold 108,000 shares of Teal for $3,360,000, thereby losing its significant influence. During the year 2020, Teal experienced the following results of operations and paid the following dividends to Sandhill.

At December 31, 2020, the fair value of Teal shares held by Sandhill is $1,820,000. This is the first reporting date since the January 2 sale.

(b) Compute the carrying amount of the investment in Teal as of December 31, 2020 (prior to any fair value adjustment).

(c) Prepare the adjusting entry on December 31, 2020, applying the fair value method to Sandhill’s long-term investment in Teal Company securities. (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.)

Sarasota Windows manufactures and sells custom storm windows for three-season porches. Sarasota also provides installation service for the windows. The installation process does not involve changes in the windows, so this service can be performed by other vendors. Sarasota enters into the following contract on July 1, 2020, with a local homeowner. The customer purchases windows for a price of $2,440 and chooses Sarasota to do the installation. Sarasota charges the same price for the windows irrespective of whether it does the installation or not. The customer pays Sarasota $2,040 (which equals the standalone selling price of the windows, which have a cost of $1,130) upon delivery and the remaining balance upon installation of the windows. The windows are delivered on September 1, 2020, Sarasota completes installation on October 15, 2020, and the customer pays the balance due.

Sarasota estimates the standalone selling price of the installation based on an estimated cost of $420 plus a margin of 30% on cost.

Prepare the journal entries for Sarasota in 2020. (Credit account titles are automatically indented when the 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. Round answer to 0 decimal places, e.g. 5,125.)

show work and explain

1. Robert started an accounting firm in 2020 and organized as a partnership. Performance of services began on July 1, 2020. The following expenditures were associated with the partnership’s activities in 2020:
   
   

1. What is the total amount of the start-up costs expenditures? What is the total amount of organizational expenditures?
2. Ignore your answer in a. Assume that the total amount of start-up costs expenditure is $48,200 and the total amount of the organizational expenditure is $17,900. What amount of the start-up costs may the partnership immediately expense in 2020? What amount of the organizational expenditures may the partnership immediately expense in 2020?
3. Ignore your answer in a. Assume that the total amount of start-up costs expenditure is $48,200 and the total amount of the organizational expenditure is $17,900. Also, assume that the company immediately expensed $5,000 of start-up costs and $5,000 organizational cost. What amount can the partnership deduct as amortization expense for the organizational expenditures for 2020 (not including the amount it immediately expensed)? What amount can the partnership deduct as amortization expense for the start-up costs for 2020 (not including the amount it immediately expensed)?

Anthony, one of your cousins, is operating a very successful luxury nail salon called An-Toe-Nail. Other than that, Anthony is also work part-time as a freelancer graphic designer.
In 2020, Anthony have the income from his designing job of $100k and the revenue from the An-Toe-Nail salon is $800k. During 2020, below are items that Anthony spend money on:

• Anthony purchased a new car in Jan 2020 which cost $60k. The car is his main vehicle for the year which he will use to drive to and from work.
• Employee salary: $300k in total, paying for 6 nail technicians, each $50k/year.
• Utilities cost: $10k
• Supplies (nail polishes, glitter, chemical, etc.): $10k
• Nail salon equipment: $50k. Anthony told you that these equipment need to be purchased new every year for some reason. Since the nail salon is a luxury one, he spent twice the money to buy this luxury equipment (the similar but lower quality equipment only cost $25k).

Anthony asks for your help in figuring out his taxable income for 2020 before the standard deduction. As a tax expert, you understand that what he means was to help him calculate his AGI.

1. What is Anthony Gross income in 2020? (Show calculation and explanation if needed)
2. What is Anthony Deduction for AGI in 2020? Show calculation and explanation. Answer without explanation will result in no credit
3. Provided that AGI = Total Gross income – Total Deduction for AGI. What is Anthony AGI for 2020?

Problem 13-12

Pronghorn Music Emporium carries a wide variety of musical instruments, sound reproduction equipment, recorded music, and sheet music. Pronghorn uses two sales promotion techniques—warranties and premiums—to attract customers.

Musical instruments and sound equipment are sold with a 1-year warranty for replacement of parts and labor. The estimated warranty cost, based on past experience, is 1% of sales.

The premium is offered on the recorded and sheet music. Customers receive a coupon for each dollar spent on recorded music or sheet music. Customers may exchange 200 coupons and $20 for an MP3 player. Pronghorn pays $33 for each player and estimates that 50% of the coupons given to customers will be redeemed.

Pronghorn’s total sales for 2020 were $7,570,000—$5,898,000 from musical instruments and sound reproduction equipment and $1,672,000 from recorded music and sheet music. Replacement parts and labor for warranty work totaled $97,500 during 2020 ($45,000 of the work is related to pre-2020 sales). A total of 6,340 players used in the premium program were purchased during the year and there were 1,126,000 coupons redeemed in 2020.

The balances in the accounts related to warranties and premiums on January 1, 2020, were as shown below.

Pronghorn Music Emporium is preparing its financial statements for the year ended December 31, 2020. Determine the amounts that will be shown on the 2020 financial statements for the following.