11. The following differences enter into the reconciliation of financial income and taxable income of Abbott Company for the year ended December 31, 2020, its first year of operations. The enacted income tax rate is 20% for all years. Pretax accounting income $800,000 Excess tax depreciation (480,000) Litigation accrual 70,000 Unearned rent revenue deferred on the books but appropriately recognized in taxable income 60,000 Interest income from New York municipal bonds (20,000) Taxable income $430,000

1. Excess tax depreciation will reverse equally over a four-year period, 2021-2024.

2. It is estimated that the litigation liability will be paid in 2024.

3. Rent revenue will be recognized during the last year of the lease, 2024.

4. Interest revenue from the New York bonds is expected to be $20,000 each year until their maturity at the end of 2024.

Instructions (a) Prepare a schedule of future taxable and (deductible) amounts. (b) Prepare a schedule of the deferred tax (asset) and liability at the end of 2020. (c) Since this is the first year of operations, there is no beginning deferred tax asset or liability. Compute the net deferred tax expense (benefit). (d) Prepare the journal entry to record income tax expense, deferred taxes, and the income taxes payable for 2020.

For each transaction, (1) analyze the transaction using the accounting equation, (2) record the transaction in journal entry form, and (3) post the entry using T-accounts to represent ledger accounts. Use the following (partial) chart of accounts—account numbers in parentheses: Cash (101); Accounts Receivable (106); Office Supplies (124); Trucks (153); Equipment (167); Accounts Payable (201); Unearned Landscaping Revenue (236); Common Stock (307); Dividends (319); Landscaping Revenue (403); Wages Expense (601), and Landscaping Expense (696).

1. On May 15, DeShawn Tyler opens a landscaping company called Elegant Lawns by investing $74,000 in cash along with equipment having a $34,000 value in exchange for common stock.
2. On May 21, Elegant Lawns purchases office supplies on credit for $360.
3. On May 25, Elegant Lawns receives $8,200 cash for performing landscaping services.
4. On May 30, Elegant Lawns receives $1,400 cash in advance of providing landscaping services to a customer.

Go to sec.gov and click on “Filings”; you will see a drop-down box. Click on “Company Filings Search.” In the Fast Search box (right side), type in USB to get the SEC filings for U.S. Bancorp. Find the most recently filed 10K (interactive data), and then click on “financial statements.” From here you can open the firm’s Consolidated Balance Sheet and the Consolidated Statement of Income. Notice that you can access 2 to 3 years of data. Compute the following ratios for as many years as you can, showing your numerator and denominator, as well as the ratio result:

Return on equity

Return on assets

Net interest margin

Net noninterest margin

Earnings spread

Net operating margin

Net profit margin (use net income/total revenue)

Tax management efficiency ratio

Expense control efficiency ratio

Asset utilization ratio (total revenue/total assets)

Equity multiplier (total assets/total stockholders’ equity).

Complete the following:

Assume your company has the following adjusted account balances at the end of the quarter for all dividend, revenue, and expense accounts. All accounts have a normal debit or credit balance. Financial statements are prepared on a quarterly basis.

Dividends: $14,000

Services Revenue: $100,000

Rent Expense: $9,000

Salaries Expense: $23,000

Utilities Expense: $6,000

Depreciation Expense - Furniture: $18,000

1. Prepare the four closing entries required to close the books at the end of the quarter. Be sure to clearly number each entry and clearly identify debits and credits by using the following format (these sample entries are not related to closing entries and are simply here as a formatting example):

Entry #1 Dr. Cash

Cr. Accounts Receivable

Entry #2 Dr. Wages Expense

Cr. Wages Payable

2. Are the financial statements prepared before or after the closing entries? Use several sentences to explain your answer.

3. Why do companies close the books at the end of the reporting period?

Sandhill Co. uses the retail inventory method. The following information is available for the current year.

The approximate cost of the ending inventory by the conventional retail method is (Hint: Round intermediate calculation to 3 decimal places, e.g. 0.635 and final answer to 0 decimal places.)

Sunland Sales Company uses the retail inventory method to value its merchandise inventory. The following information is available for the current year:

If the ending inventory is to be valued at the lower-of-cost-or-market, what is the cost-to-retail ratio?

Brief Exercise 4-4 (Algo) Multiple-step income statement [LO4-1, 4-3]

The following is a partial year-end adjusted trial balance.

Income tax expense has not yet been recorded. The income tax rate is 25%.

a. Determine the operating income (loss).
b. Determine the income (loss) before income taxes.
c. Determine the net income (loss).

Universal Calendar Company began the year with accounts receivable (net) and inventory balances of $270,000 and $50,000, respectively. Year-end balances for these accounts were $290,000 and $30,000, respectively. Sales for the year of $700,000 generated a gross profit of $220,000.

Calculate the receivables and inventory turnover ratios for the year.
  

1.Prepare Rockin Robbin's ​multi-step income statement for the year ended June 30, 2018

2. Journalize Rockin Robbin's closing entries.

3. Prepare a​ post-closing trial balance as of June 30, 2018

Prepare Rockin Robbin's ​multi-step income statement for the year ended June 30, 2018.

​(Use a minus sign or parentheses to show other​ expenses.)

1. At the start of the chapter, we talked about how risky and volatile airlines’ operations

were. Let’s examine this further. Go to finance.yahoo.com. Enter UAL for

United Continental Holdings in the “Get Quotes” box. Go to “Company” along

the left-hand margin.

2. Click on “Profile” in the left-hand column and write a one-paragraph description

of the company. (https://finance.yahoo.com/quote/UAL/profile?p=UAL)

3. Scroll down and click on the “Income Statement.” Describe the pattern of change

for “Total Revenue” and “Income from Continuing Operations” in one paragraph. (https://finance.yahoo.com/quote/UAL/financials?p=UAL)

4. Go to the “Balance Sheet.” In one sentence, describe the pattern of change in

stockholders’ equity and indicate whether this does or does not appear to be a

matter of concern. (https://finance.yahoo.com/quote/UAL/balance-sheet?p=UAL)

5. Click on “Analyst Estimates.” Do UAL’s earnings estimates appear to be more or

less promising for the future? https://finance.yahoo.com/quote/UAL/analysts?p=UAL

6. Finally, click on “Competitors.” How does UAL compare

Create a general journal using the following information. Blunt Company makes credit sales of $25,000 during the month of February 2019. During 2019, collections are received on February sales of $24,500, accounts representing $500 of these sales are written off as uncollectible, and a $100 account previously written off is collected. 1a. Assume that bad debts are estimated as 3% of credit sales at the time of sale. Prepare the journal entries to record the credit sales for February and the related estimate of uncollectible accounts on February 28. Next, record the collections on account, the amount that was written off, and the collection of the account that had been previously written off.

2. Which method—recording bad debts at the time of sale or when they actually occur—is preferred?

Recording bad debts ______ is preferred because this approach enables companies to properly value their receivables and match expenses against revenues in the current period.

A. when they actually occur

B. at time of sale

A company is considering an investment to build a new plant. It would take 2 years to construct the plant. The following investments would be made to build the plant:
- $1.5 million for the land, in year 0
- $4 million to the building contractor at the end of year 1
- $6 million to the building contractor at the end of year 2
The equipment would be purchased and installed in year 2, at a cost of $13 million, to be paid at the end of year 2.

The plant would begin production at the beginning of year 3.

Plant revenues are estimated to be as follows:

The company uses a discount rate of 15%.

a) Determine the equivalent value of the project at the end of year 2 (start of production). Show your cash flow diagram and chosen approach for the calculation.
b) To assess risk, at what fraction of the proposed revenues would the project still be attractive, based on the equivalent value calculated earlier?