Section III - Income Taxes (45 points)

- XYZ began business on 1/1/18. During that year, they had pre-tax financial accounting income of$96,000 and paid $800 of officer life insurance (company is the beneficiary). The accountant has determined that a truck purchased in 2018 for $25,000 will be depreciated as follows:

                                                                2018                 2019                 2020                 2021                 2022

Financial Statement $5,000 $5,000 $5,000      5,000 5,000 Tax Return $9,000 $7,000 $4,000 $ 3,000      2,000

Prepare the journal entry to record income taxes for 2018. Assume that the tax rate for 2018 and beyond is 40%.

- In 2019, XYZ had a financial accounting income of 360,000, which includes $800 of municipal income which is not taxable. In addition to the depreciation differences discussed above, the pre-tax income also includes an unrealized holding loss of $25,000 that cannot be deducted for tax purposes until the security is sold. All securities are held in a trading portfolio.

Prepare the journal entries to record income taxes for 2019. Assume that the tax rate for 2019 and beyond remains at 40%.

- In 2020, XYZ had a financial accounting income of $500,000.. In addition to the depreciationdifference discussed in 2018, $9,000 of the security loss recorded in 2019 was realized in 2020 when some of the securities were sold. Also, in 2020 XYZ adopted the installment sales method for tax purposes and $22,000 of profit recognized in 2020 will be taxable in a future year when the related receivables are collected.

Pre pare the journal entries to record income taxes for 2020. Assume that the tax rate for 2020 has been changed, effective 1/1/2020 to 30% and that the new rate is expected to remain in effect for all future years.

Arrowhead is a manufacturing company that produces only one product, an electronic chip, and has provided the following data concerning its operations in January and February 2020:

January 2020 was the company’s first month of operations. The company has theoretical capacity to produce 1,200 chips a month without impacting any fixed costs. Since maintenance of the machines needs to be performed weekly, the company has practical capacity to produce 1000 chips a month. The company uses practical capacity as its denominator capacity level when determining a rate for its FMOH. The company uses FIFO inventory method for reporting purposes. All relevant costs are presented in the chart below and all estimated costs are equal to the actual costs incurred:

January 2020 February 2020

Selling price $400 $400

Chips in beginning FG inventory 0 200

Chips produced 800 800

Chips sold 600 600

Chips in ending FG inventory 200 400

Variable costs per unit:

    Direct materials $25 $25

    Direct labor $40 $40

    Variable manufacturing overhead $15 $15

    Variable selling and administrative $ 10 $ 10

Fixed costs:

    Fixed manufacturing overhead $120,000 $120,000

    Fixed selling and administrative $30,000 $30,000

A. What is the unit product cost for February 2020 under variable costing?

B. What is the unit product cost for February 2020 under absorption costing?

C. Create a contribution format income statement for February 2020. SHOW YOUR WORK. CLEARLY LABEL ALL STEPS.

D. What is the dollar value of the adjustment for product-volume variance to cost of goods sold (CGS) under absorption costing (if any) for February 2020? Don’t forget to indicate if this adjustment increases or decreases CGS.

One amount is missing in the following trial balance of proprietary accounts, and another is missing from the trial balance of budgetary accounts of the Save Our Resources Commission of the federal government. This trial balance was prepared before budgetary accounts were adjusted, such as returning unused appropriations. The debits are not distinguished from the credits.

In completing the assignment, assume that all assets are entity assets, Fund Balance with Treasury is an intragovernmental asset, and all other assets are governmental. Also, assume that Other Appropriations Realized—2019 were zero.

Required

1. Prepare the Statement of Budgetary Resources of the Save Our Resources Commission for 2020.

I have been able to separate out the Preclosing Trial Balance into debits and credits and came up with a funds balance of $330,000 and an other appropriations of $4,913,000. The text provides a similar Statement of Budgetary Resources, but I can't seem to get it to work

The table provided is as follows (bold lines are the blanks that need to be filled in):

Budgetary Resources:

Budgetary Authority

Status of Budgetary Resources:

New Obligations & Upward Adjustments

Total Status of Budgetary Resources

Changes in Obligated Balance

Unpaid Obligations, Beginning of the Year

New Obligations & Upward Adjustments

Outlays (Disbursements)

Unpaid Obligations, End of Year

During the year ended December 31, 2019, Parent Company (the parent) sold merchandise to Subsidiary Corporation (a 90%-owned subsidiary) for a price of $32,340, at a markup of 32% of cost. Subsidiary sold merchandise acquired from Parent to outsider customers for $38,500 during 2019. Included in Subsidiary’s January 1, 2019, inventories were goods acquired from Parent at a billed price of $3,036 and included in Subsidiary’s December 31, 2019, inventories were goods acquired from Parent at a billed price of $2,310.

(i)         Prepare the working paper eliminating entries (in journal entry format) related to the intercompany sale of merchandise for the year ended December 31, 2019.

(ii)        Show how the working paper eliminating entry in part (i) adjusts cost of goods sold and ending inventory to the correct consolidated balances.

(iii)       How (increase or decrease and the amount) is Parent’s 2019 equity in income of Subsidiary affected by the intercompany sale of merchandise?

Match the descriptions/use to the most appropriate terms that follow:

1. _____Used widely to estimate fair values for many tangible assets acquired in business combinations. Estimates fair values by reference to the current price of replacing an asset with one of comparable utility.

2. ____Acquiring companies totals give a true representation of consolidation figures.

3._____It is easy to apply and often reflects cash flows from the subsidiary.

4. _____Pharmaceutical and high-tech industries have allocated significant portions of acquired business to this particular financial statement account.

5. ______The fair value of many liabilities assumed can be determined by reference to trades for similar debt

A. Goodwill Impairment

B. Market Approach

C. FASB ASC Topics 810

D. FASB ASC Topic 350

E. Equity Method

F. Cost Approach

G. Income Approach

H. Acquired In-Process Research and Development

I. Initial Value Method

J. Partial Equity Method

K. Goodwill

L. Gain on Bargain Purchase

Benjamin, Inc., operates an export/import business. The company has considerable dealings with companies in the country of Camerrand. The denomination of all transactions with these companies is alaries (AL), the Camerrand currency. During 2017, Benjamin acquires 39,000 widgets at a price of 8 alaries per widget. It will pay for them when it sells them. Currency exchange rates for 1 AL are as follows:

1. Assume that Benjamin acquired the widgets on December 1, 2017, and made payment on March 1, 2018. What is the effect of the exchange rate fluctuations on reported income in 2017 and in 2018?
2. Assume that Benjamin acquired the widgets on September 1, 2017, and made payment on December 1, 2017. What is the effect of the exchange rate fluctuations on reported income in 2017?
3. Assume that Benjamin acquired the widgets on September 1, 2017, and made payment on March 1, 2018. What is the effect of the exchange rate fluctuations on reported income in 2017 and in 2018?

Bossier Ltd has just acquired all the issued shares of Millus Ltd. The accounting staff at Bossier Ltd has been analyzing the assets and liabilities acquired in Millus Ltd. As a result of this analysis, it was found that Millus Ltd had been expensing its research outlays. Over the past 3 years, the company has expensed a total of $60,000, including $20,000 immediately before the acquisition date. One of the reasons that Bossier Ltd acquired control of Millus Ltd was its promising research findings in an area that could benefit the products being produced by Bossier Ltd. There is disagreement among the accounting staff as to how to account for the research abilities of Millus Ltd. Some of the staff argue that, since it is research, the correct accounting is to expense it, and so it has no effect on accounting for the group. Other members of the accounting staff believe that it should be recognized on consolidation, but are unsure of the accounting entries to use, and are concerned about the future effects of recognition of an asset, particularly as no tax advantage remains in relation to the asset.

Question 1: What accounting is most appropriate for these circumstances? Please advise.

For each behavior, apply ONE of the theoretical perspectives to explain. Learning Theory to explain ‘Aggression’, you may NOT use learning Theory for either ‘Being Organized’ or ‘Smoking.’

Question 1

a. For Learning Theory, State whether you will be describing Classical Conditioning, Operant Conditioning, or Social Learning.

Use that theory explain how one of the behaviors (Aggression, Being Organized, or Smoking) may have been acquired. (Three sentences or so!)

b. For Biological Theory, State whether you will be describing Classical Conditioning, Operant Conditioning, or Social Learning.

Use Biological theory explain how one of the behaviors (Aggression, Being Organized, or Smoking) may have been acquired (Three sentences or so!)

c. For Psychoanalytic theory, State whether you will be describing Classical Conditioning, Operant Conditioning, or Social Learning.

Use that theory explain how one of the behaviors (Aggression, Being Organized, or Smoking) may have been acquired (Three sentences or so!)

d. Please cut-and-paste your APA style references that you used to complete this assignment.

1. Which of the following results in a decrease in the investment account when applying the equity method?

a. Net income of the investor

b. Net income of the investee

c. Unrealized gain on intercompany inventory transfers for the current year

d. Dividends paid by the investor

e. Purchase of additional common stock by the investor during the current year

2. Which of the following is a characteristic of a business combination that should be accounted for as a purchase?

a. The combination must involve the exchange of equity securities only.

b The acquired subsidiary must be smaller in size than the acquiring parent.

c The two companies may be about the same size, and it is difficult to determine the acquired company and the acquiring company.

d The transaction may be considered to be the uniting of the ownership interests of the companies involved.

e The transaction clearly establishes an acquisition price for the company being acquired.

3. Under the partial equity method, the parent recognizes income when

a dividends are received from the investee.

b dividends are declared by the investee.

c it is earned by the subsidiary.

d the related contract is signed by the subsidiary.

e the related expense has been incurred.

Benjamin, Inc., operates an export/import business. The company has considerable dealings with companies in the country of Camerrand. The denomination of all transactions with these companies is alaries (AL), the Camerrand currency. During 2017, Benjamin acquires 20,000 widgets at a price of 8 alaries per widget. It will pay for them when it sells them. Currency exchange rates for 1 AL are as follows: September 1, 2017 $0.46 December 1, 2017 0.44 December 31, 2017 0.48 March 1, 2018 0.45 Assume that Benjamin acquired the widgets on December 1, 2017, and made payment on March 1, 2018. What is the effect of the exchange rate fluctuations on reported income in 2017 and in 2018? Assume that Benjamin acquired the widgets on September 1, 2017, and made payment on December 1, 2017. What is the effect of the exchange rate fluctuations on reported income in 2017? Assume that Benjamin acquired the widgets on September 1, 2017, and made payment on March 1, 2018. What is the effect of the exchange rate fluctuations on reported income in 2017 and in 2018?