Cardinal Industries had the following operating results for 2018: Sales = $35,025; Cost of goods sold = $24,555; Depreciation expense = $6,067; Interest expense = $2,745; Dividends paid = $2,059. At the beginning of the year, net fixed assets were $20,010, current assets were $7,103, and current liabilities were $4,034. At the end of the year, net fixed assets were $24,565, current assets were $8,726, and current liabilities were $4,736. The tax rate for 2018 was 24 percent. a. What is net income for 2018? (Do not round intermediate calculations.) b. What is the operating cash flow for 2018? (Do not round intermediate calculations.) c. What is the cash flow from assets for 2018? (Do not round intermediate calculations. A negative answer should be indicated by a minus sign.) d-1. If no new debt was issued during the year, what is the cash flow to creditors? (Do not round intermediate calculations.) d-2. If no new debt was issued during the year, what is the cash flow to stockholders? (Do not round intermediate calculations. A negative answer should be indicated by a minus sign.)

On June 30, 2018, Georgia-Atlantic, Inc., leased a warehouse facility from IC Leasing Corporation. The lease agreement calls for Georgia-Atlantic to make semiannual lease payments of $681,229 over a four-year lease term, payable each June 30 and December 31, with the first payment at June 30, 2018. Georgia-Atlantic’s incremental borrowing rate is 8%, the same rate IC uses to calculate lease payment amounts. Depreciation is recorded on a straight-line basis at the end of each fiscal year. The fair value of the warehouse is $4.8.

Required:
1. Determine the present value of the lease payments at June 30, 2018 that Georgia-Atlantic uses to record the right-of-use asset and lease liability.
2. What pretax amounts related to the lease would Georgia-Atlantic report in its balance sheet at December 31, 2018?
3. What pretax amounts related to the lease would Georgia-Atlantic report in its income statement for the year ended December 31, 2018?

Chapter 16- prob. 7

Zekany Corporation would have had identical income before taxes on both its income tax returns and income statements for the years 2018 through 2021 except for differences in depreciation on an operational asset. The asset cost $290,000 and is depreciated for income tax purposes in the following amounts:

2018       $ 95,700

2019       127,600

2020           43,500

2021          23,200

The operational asset has a four-year life and no residual value. The straight-line method is used for financial reporting purposes.

Income amounts before depreciation expense and income taxes for each of the four years were as follows:

                                                                                              2018 2019 2020                 2021

Accounting income before taxes and depreciation           $155,000                $175,000             $165,000               $165,000

Assume the average and marginal income tax rate for 2018 and 2019 was 30%; however, during 2019 tax legislation was passed to raise the tax rate to 40% beginning in 2020. The 40% rate remained in effect through the years 2020 and 2021. Both the accounting and income tax periods end December 31.

Required: Prepare the journal entries to record income taxes for the years 2018 through 2021. (If no entry is required for a transaction/event, write “No journal entry required” in the first account field.)

Question 3 On 1 January 2018, Aro Limited issued bonds with a face value of $600,000 for cash.
The bond will mature after 5 years with a stated interest rate of 8% per year. Interest is paid annually on 31 December with the first payment on 31 December 2018.
Bond investors require an effective interest rate of 9% per year.
Aro Limited accounts for the bond using the effective-interest method.
Present value of 1 at 8% for 5 years = 0.68058
Present value of 1 at 9% for 5 years = 0.64993
Present value of an ordinary annuity of 1 at 8% for 5 years = 3.99271
Present value of an ordinary annuity of 1 at 9% for 5 years = 3.88965 Required: Round to integers. a.

a. Determine the present value of the bonds on 1 January 2018.

b. Prepare the journal entry to record the issuance of bonds on 1 January 2018.

c. Prepare the bond amortisation table for Aro Limited, indicating the amount of interest payment, interest expense, amortisation, and carrying amount of the bonds at each 31 December for the first three years up to 31 December 2020.

d. Prepare the journal entry to record the first interest payment on 31 December 2018.

[Total for Question 3: 20 marks]

Lerato elected to retire from employment 30 31 August 2018, the day after he celebrated his 60th birthday. His income and deductions for the year of assessment ended 28 February 2019 were as follows:

Salary (March to August 2018) R 90 000
Lump sum gratuity received from his employer on his retirement
On 31 August 2018 (severance benefit) R 50 000
Retirement fund lump sum benefit on commutation of annuities from pension
Fund on 31 August 2018 R542 500
Special remuneration received as a member of a proto-team R25 000
Pension fund contributions (March to August 2018) R 6 750
Capital gain (proceeds less base cost) R60 000
Lerato had never previously received any lump sum benefits. He had been a member of the pension fund for 35 years, and all of his contributions to the fund had previously been allowed as deductions for tax purposes. His taxable income for the previous year of assessment was R124 000, including taxable capital gains of R4 000.
Calculate the normal tax payable by Lerato for the year of assessment ended 28 February 2019

The following selected transactions relate to investment activities of Ornamental Insulation Corporation during 2018. The company buys equity securities as investments. None of Ornamental’s investments are large enough to exert significant influence on the investee. Ornamental’s fiscal year ends on December 31. No investments were held by Ornamental on December 31, 2017.

Required:
1. Prepare the appropriate journal entry for each transaction or event during 2018, as well as any adjusting entries necessary at year end.
2. Indicate any amounts that Ornamental Insulation would report in its 2018 income statement, 2018 statement of comprehensive income, and 12/31/2018 balance sheet as a result of these investments.

Northwest Paperboard Company, a paper and allied products manufacturer, was seeking to gain a foothold in Canada. Toward that end, the company bought 40% of the outstanding common shares of Vancouver Timber and Milling, Inc., on January 2, 2018, for $420 million.

At the date of purchase, the book value of Vancouver's net assets was $785 million. The book values and fair values for all balance sheet items were the same except for inventory and plant facilities. The fair value exceeded book value by $5 million for the inventory and by $30 million for the plant facilities.

The estimated useful life of the plant facilities is 15 years. All inventory acquired was sold during 2018.

Vancouver reported net income of $160 million for the year ended December 31, 2018. Vancouver paid a cash dividend of $30 million.

Required:
1. Prepare all appropriate journal entries related to the investment during 2018.
2. What amount should Northwest report as its income from its investment in Vancouver for the year ended December 31, 2018?
3. What amount should Northwest report in its balance sheet as its investment in Vancouver?
4. What should Northwest report in its statement of cash flows regarding its investment in Vancouver?

Brady Construction Company contracted to build an apartment complex for a price of $6,400,000. Construction began in 2018 and was completed in 2020. The following is a series of independent situations, numbered 1 through 6, involving differing costs for the project. All costs are stated in thousands of dollars.

Brady Construction Company contracted to build an apartment complex for a price of $6,400,000. Construction began in 2018 and was completed in 2020. The following is a series of independent situations, numbered 1 through 6, involving differing costs for the project. All costs are stated in thousands of dollars.

Northwest Paperboard Company, a paper and allied products manufacturer, was seeking to gain a foothold in Canada. Toward that end, the company bought 40% of the outstanding common shares of Vancouver Timber and Milling, Inc., on January 2, 2018, for $540 million.

At the date of purchase, the book value of Vancouver's net assets was $845 million. The book values and fair values for all balance sheet items were the same except for inventory and plant facilities. The fair value exceeded book value by $5 million for the inventory and by $30 million for the plant facilities.

The estimated useful life of the plant facilities is 15 years. All inventory acquired was sold during 2018.

Vancouver reported net income of $160 million for the year ended December 31, 2018. Vancouver paid a cash dividend of $50 million.

Required:
1. Prepare all appropriate journal entries related to the investment during 2018.
2. What amount should Northwest report as its income from its investment in Vancouver for the year ended December 31, 2018?
3. What amount should Northwest report in its balance sheet as its investment in Vancouver?
4. What should Northwest report in its statement of cash flows regarding its investment in Vancouver?