Exercise 12-04
| Your answer is partially correct. Try again. | |
Presented below is selected information for Cullumber
Company.
Answer the questions asked about each of the factual situations.
(Do not leave any answer field blank. Enter 0 for
amounts.)
1. Cullumber purchased a patent from Vania Co. for
$1,340,000 on January 1, 2018. The patent is being amortized over
its remaining legal life of 10 years, expiring on January 1, 2028.
During 2020, Cullumber determined that the economic benefits of the
patent would not last longer than 6 years from the date of
acquisition. What amount should be reported in the balance sheet
for the patent, net of accumulated amortization, at December 31,
2020?
| The amount to be reported | $enter the dollar amount to be reported |
2. Cullumber bought a franchise from Alexander Co.
on January 1, 2019, for $3,150,000. The carrying amount of the
franchise on Alexander’s books on January 1, 2019, was $315,000.
The franchise agreement had an estimated useful life of 30 years.
Because Cullumber must enter a competitive bidding at the end of
2021, it is unlikely that the franchise will be retained beyond
2028. What amount should be amortized for the year ended December
31, 2020?
| The amount to be amortized | $enter the dollar amount to be amortized |
3. On January 1, 2020, Cullumber incurred
organization costs of $257,500. What amount of organization expense
should be reported in 2020?
| The amount to be reported | $enter the dollar amount to be reported |
In: Accounting
The statement of comprehensive income of kolad plc, a publicly listed company, is as follows:
Statement of comprehensive income for the year ended 31 March 2020
|
£000 |
|||
|
Revenue |
33,600 |
||
|
Cost of sales |
(22,500) |
||
|
Gross profit |
11,100 |
||
|
Distribution costs |
(3,600) |
||
|
Administrative expenses |
(3,450) |
||
|
Finance costs |
(300) |
||
|
Profit before tax |
3,750 |
||
|
Income tax expense |
(150) |
||
|
Profit for the year |
3,600 |
||
|
Gain on revaluation |
250 |
||
|
Total comprehensive income |
3,850 |
The following supporting information is available:
|
2020 |
2019 |
|
|
£000 |
£000 |
|
|
Inventory |
4,350 |
4,050 |
|
Trade receivables |
1,800 |
900 |
|
Trade payables |
850 |
2,625 |
|
Current tax payable |
825 |
1,800 |
YOU ARE REQUIRED TO:
Discuss whether, in your opinion, the statement of profit or loss or the statement of cash flows is a better indicator of a company’s performance.
In: Accounting
The actuary for the pension plan of Ivanhoe Inc. calculated the following net gains and losses.
|
Incurred during the Year |
(Gain) or Loss |
||
|---|---|---|---|
|
2020 |
$298,600 | ||
|
2021 |
482,900 | ||
|
2022 |
(208,800) | ||
|
2023 |
(289,500) | ||
Other information about the company’s pension obligation and plan
assets is as follows.
|
As of January 1, |
Projected Benefit |
Plan Assets |
||
|---|---|---|---|---|
|
2020 |
$4,014,600 | $2,398,500 | ||
|
2021 |
4,504,200 | 2,220,600 | ||
|
2022 |
5,016,100 | 2,612,400 | ||
|
2023 |
4,230,600 | 3,051,500 |
Ivanhoe Inc. has a stable labor force of 400 employees who are
expected to receive benefits under the plan. The total
service-years for all participating employees is 4,400. The
beginning balance of accumulated OCI (G/L) is zero on January 1,
2020. The market-related value and the fair value of plan assets
are the same for the 4-year period. Use the average remaining
service life per employee as the basis for amortization.
Compute the minimum amount of accumulated OCI (G/L) amortized as a
component of net periodic pension expense for each of the years
2020, 2021, 2022, and 2023. Apply the “corridor” approach in
determining the amount to be amortized each year.
(Round answers to 0 decimal places, e.g.
2,500.)
|
Year |
Minimum Amortization of (Gain) Loss |
|
|---|---|---|
|
2020 |
$enter a dollar amount rounded to 0 decimal places |
|
|
2021 |
$enter a dollar amount rounded to 0 decimal places |
|
|
2022 |
$enter a dollar amount rounded to 0 decimal places |
|
|
2023 |
$enter a dollar amount rounded to 0 decimal places |
In: Accounting
On March 10, 2020, Pharoah Company sold to Barr Hardware 160 tool sets at a price of $50 each (cost $30 per set) with terms of n/60, f.o.b. shipping point. Pharoah allows Barr to return any unused tool sets within 60 days of purchase. Pharoah estimates that (1) 10 sets will be returned, (2) the cost of recovering the products will be immaterial, and (3) the returned tools sets can be resold at a profit. On March 25, 2020, Barr returned 7 tool sets and received a credit to its account. Assume that instead of selling the tool sets on credit, that Pharoah sold them for cash.
(a)
Partially correct answer iconYour answer is partially correct.
Prepare journal entries for Pharoah to record (1) the sale on March 10, 2020, (2) the return on March 25, 2020, and (3) any adjusting entries required on March 31, 2020 (when Pharoah prepares financial statements). Pharoah believes the original estimate of returns is correct. (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.)
|
No. |
Account Titles and Explanation |
Debit |
Credit |
|
(1) |
|||
|
(To record cash sales) |
|||
|
(To record cost of goods sold) |
|||
|
(2) |
|||
|
(To record sales returns) |
|||
|
(To record cost of goods returned) |
|||
|
(3) |
|||
|
(Adjusting entry for sales returns) |
|||
|
(Adjusting entry for cost of goods sold) |
In: Accounting
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|
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In: Accounting
Exercise 20-16
The actuary for the pension plan of Flint Inc. calculated the following net gains and losses.
|
Incurred during the Year |
(Gain) or Loss |
||
|---|---|---|---|
|
2020 |
$302,900 | ||
|
2021 |
476,600 | ||
|
2022 |
(211,800) | ||
|
2023 |
(292,200) | ||
Other information about the company’s pension obligation and plan
assets is as follows.
|
As of January 1, |
Projected Benefit |
Plan Assets |
||
|---|---|---|---|---|
|
2020 |
$4,020,600 | $2,393,400 | ||
|
2021 |
4,484,600 | 2,203,100 | ||
|
2022 |
4,973,800 | 2,609,500 | ||
|
2023 |
4,255,000 | 3,046,600 |
Flint Inc. has a stable labor force of 400 employees who are
expected to receive benefits under the plan. The total
service-years for all participating employees is 4,400. The
beginning balance of accumulated OCI (G/L) is zero on January 1,
2020. The market-related value and the fair value of plan assets
are the same for the 4-year period. Use the average remaining
service life per employee as the basis for amortization.
Compute the minimum amount of accumulated OCI (G/L) amortized as a
component of net periodic pension expense for each of the years
2020, 2021, 2022, and 2023. Apply the “corridor” approach in
determining the amount to be amortized each year.
(Round answers to 0 decimal places, e.g.
2,500.)
|
Year |
Minimum Amortization of (Gain) Loss |
|
|---|---|---|
|
2020 |
$enter a dollar amount rounded to 0 decimal places | |
|
2021 |
$enter a dollar amount rounded to 0 decimal places | |
|
2022 |
$enter a dollar amount rounded to 0 decimal places | |
|
2023 |
$enter a dollar amount rounded to 0 decimal places |
In: Accounting
Garda World Security Corporation has the following shares, taken from the equity section of its balance sheet dated December 31, 2020.
| Preferred shares, $4.46 non-cumulative, | |||
| 43,000 shares authorized and issued* | $ | 2,752,000 | |
| Common shares, | |||
| 78,000 shares authorized and issued* | 1,248,000 | ||
*All shares were issued during 2018.
During its first three years of operations, Garda World Security
Corporation declared and paid total dividends as shown in the last
column of the following schedule.
Required:
Part A
1. Calculate the total dividends paid in each year to the
preferred and to the common shareholders.
|
Year |
Preferred Dividend |
Common Dividend |
Total Dividend |
|
2018 |
$158,000 |
||
|
2019 |
398,000 |
||
|
2020 |
558,000 |
||
|
Total for three years |
$0 |
$0 |
$1,114,000 |
2. Calculate the dividends paid per share to both the preferred and the common shares in 2020. (Round the final answers to 2 decimal places.)
|
Part B
1. Calculate the total dividends paid in each year to the
preferred shares and to the common shareholders assuming preferred
shares are cumulative.
|
Year |
Preferred Dividend |
Common Dividend |
Total Dividend |
|
2018 |
$158,000 |
||
|
2019 |
398,000 |
||
|
2020 |
558,000 |
||
|
Total for three years |
$0 |
$0 |
$1,114,000 |
2. Calculate the dividends paid per share to both the preferred and the common shares in 2020 assuming preferred shares are cumulative. (Round the final answers to 2 decimal places.)
|
Dividends Paid per Share |
|
|
Preferred shares |
|
|
Common shares |
In: Accounting
Exercise 16-23 On June 1, 2018, Marin Company and Headland Company merged to form Sage Inc. A total of 834,000 shares were issued to complete the merger. The new corporation reports on a calendar-year basis. On April 1, 2020, the company issued an additional 552,000 shares of stock for cash. All 1,386,000 shares were outstanding on December 31, 2020. Sage Inc. also issued $600,000 of 20-year, 8% convertible bonds at par on July 1, 2020. Each $1,000 bond converts to 40 shares of common at any interest date. None of the bonds have been converted to date.
Sage Inc. is preparing its annual report for the fiscal year ending December 31, 2020. The annual report will show earnings per share figures based upon a reported after-tax net income of $1,584,000. (The tax rate is 20%.) Determine the following for 2020. (a) The number of shares to be used for calculating: (Round answers to 0 decimal places, e.g. $2,500.)
(1) Basic earnings per share enter a number of shares rounded to 0 decimal places shares
(2) Diluted earnings per share enter a number of shares rounded to 0 decimal places shares
(b) The earnings figures to be used for calculating: (Round answers to 0 decimal places, e.g. $2,500.)
(1) Basic earnings per share $enter a dollar amount rounded to 0 decimal places
(2) Diluted earnings per share $enter a dollar amount rounded to 0 decimal places
In: Accounting
At the end of the financial year 2019, Strong Tool Company anticipated its revenues, expenses, capital expenditures and changes in working capital over the next 3 years (2020-2022) to be as shown in the table below.
|
Year |
Revenues |
Expenses |
Capital Expenditures |
Incremental Changes in Working Capital |
|
2020 |
$400,000 |
$200,000 |
$40,000 |
$15,000 |
|
2021 |
$410,000 |
$200,000 |
$60,000 |
‒ $25,000 |
|
2020 |
$420,000 |
$200,000 |
$80,000 |
$35,000 |
The company estimated the depreciation charges to be fixed at $15,000 every year. The firm has a tax rate of 28% and a cost of capital of 15%.
Requirement 1: You are required to estimate the free cashflow available to the firm (FCFF) for the period of 2020-2022. Calculate each of the missing values in the table below (there are 20 missing values in total).
|
Year |
2020 |
2021 |
2022 |
|
EBIDTA |
1) |
2) |
3) |
|
Depreciation |
15,000 |
15,000 |
15,000 |
|
EBIT |
4) |
5) |
6) |
|
TAXES |
7) |
8) |
9) |
|
EAT |
10) |
11) |
12) |
|
Depreciation |
15,000 |
15,000 |
15,000 |
|
Capital Expenditure |
13) |
14) |
15) |
|
Increase in Working Capital |
16) |
17) |
18) |
|
FCFF |
19) |
20) |
47,600 |
Requirement 2 Free cash flows beyond year 3 are estimated to grow at an annual rate of 5%. Apply the growing perpetuity formula to estimate the terminal value of Strong Tool Company as of year 3. What is the value of the terminal value today?
Requirement 3 Strong Tool Company's current value of existing debt is $80,000. Estimate the value of the equity of the company by applying the free cash flow to the firm method.
In: Accounting
In: Accounting