a.)On December 31, 2019, the Notes Receivable account at P. Davis Materials Corporation had a balance of $12,000, which represented a six-month, 12 percent note received from a customer on October 1.
b. ) During the week ended June 7, 2019, McCormick Media received $32,000 from customers for subscriptions to its magazine Modern Business. On December 31, 2019, an analysis of the Unearned Subscription Revenue account showed that half of the subscriptions were earned in 2019.
C.) On November 1, 2019, Perez Realty Company rented a commercial building to a new tenant and received $43,200 in advance to cover the rent for six months. Upon receipt, the $43,200 was recorded in the Unearned Rent account.
D.) On November 1, 2019, the Mighty Bucks Hockey Club sold season tickets for 40 home games, receiving $3,200,000. Upon receipt, the $3,200,000 was recorded in the Unearned Season Tickets Income account. At December 31, 2019, the Mighty Bucks Hockey Club had played 5 home games.
For each of the above independent situations, indicate the adjusting entry that must be made on the December 31, 2019, worksheet assuming no previous adjusting entries have been made during the year
In: Accounting
The Diversified Portfolio Corporation provides investment advice
to customers. A condensed income statement for the year ended
December 31, 2018, appears below:
| Service revenue | $ | 1,220,000 |
| Operating expenses | 860,000 | |
| Income before income taxes | 360,000 | |
| Income tax expense | 72,000 | |
| Net income | $ | 288,000 |
The following balance sheet information also is
available:
| 12/31/18 | 12/31/17 | ||||
| Cash | $ | 491,000 | $ | 86,000 | |
| Accounts receivable | 152,000 | 116,000 | |||
| Accounts payable (operating expenses) | 102,000 | 76,000 | |||
| Income taxes payable | 26,000 | 47,000 | |||
In addition, the following transactions took place during the
year:
Common stock was issued for $132,000 in cash.
Long-term investments were sold for $66,000 in cash. The original cost of the investments also was $66,000.
$96,000 in cash dividends was paid to shareholders.
The company has no outstanding debt, other than those payables listed above.
Operating expenses include $46,000 in depreciation expense.
Required:
1. Prepare a statement of cash flows for 2018 for
the Diversified Portfolio Corporation. Use the direct method for
reporting operating activities.
2. Prepare the cash flows from operating
activities section of Diversified’s 2018 statement of cash flows
using the indirect method.
In: Accounting
The Diversified Portfolio Corporation provides investment advice to customers. A condensed income statement for the year ended December 31, 2021, appears below:
| Service Revenue | $1,080,000 |
| Operating Expenses | $790,000 |
| Income before Income Tax | $290,000 |
| Income Tax Expense | $72,500 |
| Net Income | $217,500 |
The following balance sheet information also is available:
| 12/31/2021 | 12/31/2020 | |
| Cash | $399,500 | $79,000 |
| Accounts Receivable | $138,000 | $109,000 |
| Accrued Liabilities (for operating expense) | $88,000 | $69,000 |
| Income Taxes Payable | $19,000 | $33,000 |
In addition, the following transactions took place during the year:
Required:
1. Prepare a statement of cash flows for 2021 for
the Diversified Portfolio Corporation. Use the direct method for
reporting operating activities.
2. Prepare the cash flows from operating
activities section of Diversified’s 2021 statement of cash flows
using the indirect method.
In: Accounting
The Diversified Portfolio Corporation provides investment advice
to customers. A condensed income statement for the year ended
December 31, 2021, appears below:
| Service revenue | $ | 940,000 |
| Operating expenses | 720,000 | |
| Income before income taxes | 220,000 | |
| Income tax expense | 55,000 | |
| Net income | $ | 165,000 |
The following balance sheet information also is
available:
| 12/31/2021 | 12/31/2020 | ||||
| Cash | $ | 326,000 | $ | 72,000 | |
| Accounts receivable | 124,000 | 102,000 | |||
| Accrued liabilities (for operating expenses) | 74,000 | 62,000 | |||
| Income taxes payable | 12,000 | 19,000 | |||
In addition, the following transactions took place during the
year:
Required:
1. Prepare a statement of cash flows for 2021 for
the Diversified Portfolio Corporation. Use the direct method for
reporting operating activities.
2. Prepare the cash flows from operating
activities section of Diversified’s 2021 statement of cash flows
using the indirect method.
In: Accounting
The Diversified Portfolio Corporation provides investment advice
to customers. A condensed income statement for the year ended
December 31, 2018, appears below:
| Service revenue | $ | 1,060,000 |
| Operating expenses | 780,000 | |
| Income before income taxes | 280,000 | |
| Income tax expense | 84,000 | |
| Net income | $ | 196,000 |
The following balance sheet information also is
available:
| 12/31/18 | 12/31/17 | ||||
| Cash | $ | 375,000 | $ | 78,000 | |
| Accounts receivable | 136,000 | 108,000 | |||
| Accounts payable (operating expenses) | 86,000 | 68,000 | |||
| Income taxes payable | 18,000 | 31,000 | |||
In addition, the following transactions took place during the
year:
Required:
1. Prepare a statement of cash flows for 2018 for
the Diversified Portfolio Corporation. Use the direct method for
reporting operating activities.
2. Prepare the cash flows from operating
activities section of Diversified’s 2018 statement of cash flows
using the indirect method.
In: Accounting
The Diversified Portfolio Corporation provides investment advice
to customers. A condensed income statement for the year ended
December 31, 2021, appears below:
| Service revenue | $ | 1,160,000 |
| Operating expenses | 830,000 | |
| Income before income taxes | 330,000 | |
| Income tax expense | 82,500 | |
| Net income | $ | 247,500 |
The following balance sheet information also is
available:
| 12/31/2021 | 12/31/2020 | ||||
| Cash | $ | 441,500 | $ | 83,000 | |
| Accounts receivable | 146,000 | 113,000 | |||
| Accrued liabilities (for operating expenses) | 96,000 | 73,000 | |||
| Income taxes payable | 23,000 | 41,000 | |||
In addition, the following transactions took place during the
year:
Required:
1. Prepare a statement of cash flows for 2021 for
the Diversified Portfolio Corporation. Use the direct method for
reporting operating activities.
2. Prepare the cash flows from operating
activities section of Diversified’s 2021 statement of cash flows
using the indirect method.
In: Accounting
The Diversified Portfolio Corporation provides investment advice to customers. A condensed income statement for the year ended December 31, 2018, appears below: Service revenue $ 1,100,000 Operating expenses 800,000 Income before income taxes 300,000 Income tax expense 60,000 Net income $ 240,000 The following balance sheet information also is available: 12/31/18 12/31/17 Cash $ 425,000 $ 80,000 Accounts receivable 140,000 110,000 Accounts payable (operating expenses) 90,000 70,000 Income taxes payable 20,000 35,000 In addition, the following transactions took place during the year: Common stock was issued for $120,000 in cash. Long-term investments were sold for $60,000 in cash. The original cost of the investments also was $60,000. $90,000 in cash dividends was paid to shareholders. The company has no outstanding debt, other than those payables listed above. Operating expenses include $40,000 in depreciation expense. Required: 1. Prepare a statement of cash flows for 2018 for the Diversified Portfolio Corporation. Use the direct method for reporting operating activities. 2. Prepare the cash flows from operating activities section of Diversified’s 2018 statement of cash flows using the indirect method.
In: Accounting
Scenario: Kim Weathers, CEO of Southwest Idaho Bank and Trust, has decided to retain the bank’s corporate jet at a time most of the bank’s competitors have sold theirs. The bank has built a reputation for being an expert in taking care of the needs of a diverse, specialized segment of customers such as cattle ranchers in Montana and western Texas as well as almond growers in California. Ms. Weathers has determined that the bank’s executives, including her, need to be able to travel to meet with her clients on short notice, and the only way to be able to do this is to retain the corporate jet.
Stock analysts, wary of the bank’s decision to retain the jet, estimated that the bank generated an additional $26,000,000 in revenue in 2019 that the bank otherwise would not have made if it hadn’t kept the jet. External accountants were able to compute the all-in cost of the jet to the company in 2019 as being $20,000,000. There is no evidence the jet was used on non-official bank business.
Is this an Agency problem? (yes or no)
Why is this or is this not an agency problem? (1-2 sentences)
Is there an agency cost involved? (yes or no)
If there is an agency cost involved, describe it, and indicate whether it is a direct or indirect cost. (1-2 sentences)
If it is an agency problem, what could be done to alleviate or prevent it? (1-2 sentences)
In: Accounting
The Diversified Portfolio Corporation provides investment advice
to customers. A condensed income statement for the year ended
December 31, 2018, appears below:
| Service revenue | $ | 940,000 |
| Operating expenses | 720,000 | |
| Income before income taxes | 220,000 | |
| Income tax expense | 66,000 | |
| Net income | $ | 154,000 |
The following balance sheet information also is
available:
| 12/31/18 | 12/31/17 | ||||
| Cash | $ | 315,000 | $ | 72,000 | |
| Accounts receivable | 124,000 | 102,000 | |||
| Accounts payable (operating expenses) | 74,000 | 62,000 | |||
| Income taxes payable | 12,000 | 19,000 | |||
In addition, the following transactions took place during the
year:
Required:
1. Prepare a statement of cash flows for 2018 for
the Diversified Portfolio Corporation. Use the direct method for
reporting operating activities.
2. Prepare the cash flows from operating
activities section of Diversified’s 2018 statement of cash flows
using the indirect method.
In: Accounting
The Diversified Portfolio Corporation provides investment advice
to customers. A condensed income statement for the year ended
December 31, 2018, appears below:
| Service revenue | $ | 1,220,000 |
| Operating expenses | 900,000 | |
| Income before income taxes | 320,000 | |
| Income tax expense | 96,000 | |
| Net income | $ | 224,000 |
The following balance sheet information also is
available:
| 12/31/18 | 12/31/17 | ||||
| Cash | $ | 439,000 | $ | 90,000 | |
| Accounts receivable | 160,000 | 120,000 | |||
| Accounts payable (operating expenses) | 110,000 | 80,000 | |||
| Income taxes payable | 30,000 | 55,000 | |||
In addition, the following transactions took place during the
year:
Required:
1. Prepare a statement of cash flows for 2018 for
the Diversified Portfolio Corporation. Use the direct method for
reporting operating activities.
2. Prepare the cash flows from operating
activities section of Diversified’s 2018 statement of cash flows
using the indirect method.
In: Accounting