Required information

[The following information applies to the questions displayed below.]

Drs. Glenn Feltham and David Ambrose began operations of their physical therapy clinic, called Northland Physical Therapy, on January 1, 2017. The annual reporting period ends December 31. The trial balance on January 1, 2018, was as follows (the amounts are rounded to thousands of dollars to simplify):

Transactions during 2018 (summarized in thousands of dollars) follow:

1. Borrowed $24 cash on July 1, 2018, signing a six-month note payable.
2. Purchased equipment for $27 cash on July 2, 2018.
3. Issued additional shares of common stock for $4 on July 3.
4. Purchased software on July 4, $4 cash.
5. Purchased supplies on July 5 on account for future use, $6.
6. Recorded revenues on December 6 of $59, including $10 on credit and $49 received in cash.
7. Recognized salaries and wages expense on December 7 of $32; paid in cash.
8. Collected accounts receivable on December 8, $7.
9. Paid accounts payable on December 9, $8.
10. Received a $4 cash deposit on December 10 from a hospital for a contract to start January 5, 2019.

Data for adjusting journal entries on December 31:

11. Amortization for 2018, $1.
12. Supplies of $4 were counted on December 31, 2018.
13. Depreciation for 2018, $2.
14. Accrued interest of $1 on notes payable.
15. Salaries and wages incurred but not yet paid or recorded, $2.
16. Income tax expense for 2018 was $5 and will be paid in 2019.

Required:

2. Record journal entries for transactions (a) through (j). (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field. Enter your answers in thousands of dollars.)

Required information

[The following information applies to the questions displayed below.]

Drs. Glenn Feltham and David Ambrose began operations of their physical therapy clinic, called Northland Physical Therapy, on January 1, 2017. The annual reporting period ends December 31. The trial balance on January 1, 2018, was as follows (the amounts are rounded to thousands of dollars to simplify):

Transactions during 2018 (summarized in thousands of dollars) follow:

1. Borrowed $24 cash on July 1, 2018, signing a six-month note payable.
2. Purchased equipment for $27 cash on July 2, 2018.
3. Issued additional shares of common stock for $4 on July 3.
4. Purchased software on July 4, $4 cash.
5. Purchased supplies on July 5 on account for future use, $6.
6. Recorded revenues on December 6 of $59, including $10 on credit and $49 received in cash.
7. Recognized salaries and wages expense on December 7 of $32; paid in cash.
8. Collected accounts receivable on December 8, $7.
9. Paid accounts payable on December 9, $8.
10. Received a $4 cash deposit on December 10 from a hospital for a contract to start January 5, 2019.

Data for adjusting journal entries on December 31:

11. Amortization for 2018, $1.
12. Supplies of $4 were counted on December 31, 2018.
13. Depreciation for 2018, $2.
14. Accrued interest of $1 on notes payable.
15. Salaries and wages incurred but not yet paid or recorded, $2.
16. Income tax expense for 2018 was $5 and will be paid in 2019.

1. 1, 3, 5 and 8. Set up T-accounts for the accounts on the trial balance. Enter beginning balances and post the transactions (a)-(j), adjusting entries (k)-(p), and closing entry. (Enter your answers in thousands of dollars.)

Drs. Glenn Feltham and David Ambrose began operations of their physical therapy clinic, called Northland Physical Therapy, on January 1, 2017. The annual reporting period ends December 31. The trial balance on January 1, 2018, was as follows (the amounts are rounded to thousands of dollars to simplify):

Transactions during 2018 (summarized in thousands of dollars) follow:

1. Borrowed $13 cash on July 1, 2018, signing a six-month note payable.
2. Purchased equipment for $16 cash on July 2, 2018.
3. Issued additional shares of common stock for $6 on July 3.
4. Purchased software on July 4, $2 cash.
5. Purchased supplies on July 5 on account for future use, $8.
6. Recorded revenues on December 6 of $47, including $9 on credit and $38 received in cash.
7. Recognized salaries and wages expense on December 7 of $21; paid in cash.
8. Collected accounts receivable on December 8, $8.
9. Paid accounts payable on December 9, $9.
10. Received a $2 cash deposit on December 10 from a hospital for a contract to start January 5, 2019.

Data for adjusting journal entries on December 31:

11. Amortization for 2018, $3.
12. Supplies of $2 were counted on December 31, 2018.
13. Depreciation for 2018, $3.
14. Accrued interest of $1 on notes payable.
15. Salaries and wages incurred but not yet paid or recorded, $4.
16. Income tax expense for 2018 was $3 and will be paid in 2019.

1. 1, 3, 5 and 8. Set up T-accounts for the accounts on the trial balance. Enter beginning balances and post the transactions (a)-(j), adjusting entries (k)-(p), and closing entry. (Enter your answers in thousands of dollars.)

Fraser Corp. is a traditional retailer that recently also started an Internet-based subsidiary that sells its product online. Its sales in June 2018 were $710,000. Fraser, the company president, is preparing for a meeting with Tom Scott, a loan officer with Anchor Bank, to review quarter end financing requirements. After discussions with the company’s marketing and finance managers, sales over the next three months were forecasted as follows. Sales in July 2018: $1,250,000, sales in August 2018: $2,250,000 and sales in September 2018: $2,500,000.

Fraser’s balance sheet as of the end of June, 2018 was as follows.

____________________________________________________________________

Fraser Corporation                                                              

Balance Sheet as of June 30, 2018 (in $ Thousands)

____________________________________________________________________

Cash                              $ 50                               Accounts payable         $   10                          

Accounts receivable         710                               Notes payable                  800

Inventories                       600                               Long-term debt               400

Net fixed assets               750                                  Total liabilities          1,210

                                                                                       Equity                           900

          Total assets          $2,110                                       Total                  $2,110

     ____________________________________________________________________

All sales are made on credit terms of net 30 days and are collected the following month and no bad debts are anticipated. The accounts receivable on the balance sheet at the end of June thus will be collected in July. The July sales will be collected in August, and so on The amount of Inventory on hand represents the operating level which the company intends to maintain (i.e., not percentage of sales). Cost of goods sold average 70 percent of sales. Inventory is purchased in the month of sale and paid for in cash. Other cash expenses average 7 percent of sales. Assume taxes are paid monthly and the effective income tax rate is 40 percent for planning purposes. Fraser is planning to purchase a small warehouse in September 2018 for $100,000. Depreciation is $10,000 per month including depreciation expenses for the warehouse.

      The annual interest rate on outstanding long term debt and notes payable is 12% per annum. There are no capital expenditures planned during the period, and no dividends will be paid. The company’s desired end-of-month cash balance is $90,000. The president hopes to meet any cash shortages during the period by borrowing (short term) from the bank at the end of the month. The interest rate on the new bank loans will be 12% per annum. All interest expenses are based on previous month’s debt.

Prepare monthly pro forma balance sheets at the end of July, August, and September 2018.                                                                                                                

                                                                                                                                         .

Question 1

An economy produces and consumes four goods namely milo, rice, bread and sobolo. The prices and quantities of these goods over a three-year period are shown in the table below.

Table I: Prices and quantities of milo, rice, bread and sobolo goods over a 3-year period

1. Calculate nominal GDP in 2017, 2018 and 2019.                                                  
2. Using 2017 as your base year, calculate real GDP in 2017, 2018 and 2019.       
3. Calculate the percentage changes in real and nominal GDP:
   1. between 2017 and 2018                                                                                 
   2. between 2018 and 2019                                                                                 
4. Calculate the GDP deflator for 2017, 2018 and 2019.                                           

Question 2

1. Before computing the Consumer Price Index (CPI), the Ghana Statistical Service (GSS) surveys consumers to determine the “basket of goods” bought by a typical consumer. Assume that the GSS chooses 2018 as its base year and, consistent with the data shown in the Table I in Q.1 decides that the basket of goods in this economy should consist of 24 tins of milo, 16 bags of rice, 30 loaves of bread and 15 bottles of sobolo.

1. Calculate the inflation rate between 2018 and 2019.                               
2. Determine the purchasing power of the Ghana cedi in 2019 and interpret your answer.

b) In the mid-1920s, the American author F. Scott Fitzgerald wrote a somewhat comical article for the Saturday Evening Post magazine titled, “How to Live on $36,000 a Year”, in which he explained how he and his wife managed to spend their entire annual income of $36,000 without saving anything.

1. In the mid-1920s, the consumer price index was around 18; in 2010, the CPI was around 225. Using these figures, calculate how much Fitzgerald’s income would be worth in 2010’s dollars.                                                                                                                    

In 2010, Forbes magazine published a list of the highest-paid authors, showing that J. K. Rowling, author of the Harry Potter books, earned $10 million. After adjusting for the effects of inflation, who earned more: Fitzgerald or Rowling?          

The advantages and disadvantages have been discussed in depth. Explain your views on this post.

Companies have many options far as financing is concerned and with these options comes advantages and disadvantages. A company that chooses to issue bonds can expect the following pros and cons:

-Pros: Borrows funds from bondholders to achieve the amount needed. Southwest Airlines can issue out bonds to get the airplanes they need (Braun & Tiez, 2018). Southwest can issue out bonds to several bondholders and can receive little amounts of money from each bondholder.

-Cons: For the bondholders, if they were overextending their funds to a particular company they can end up losing all their money. Shareholders can also fail by investing in a company with a low turnover ratio for it will take them longer to pay back the bonds. "Companies with shorter payment periods are generally better credit risks than those with longer payment periods".

Issuing bonds are just one of the option a company has when it comes to the concept of financing. Another option is borrowing from the bank. When borrowing from the bank, consider the following benefits and limitations:

-Pros: An alternative to borrow money without commitment or involvement needed after loans are paid off (DeMarceau, 2018). Per DeMarceau (2018), Banks "do not take any ownership position in businesses" (2018).

-Cons: Viewed as last resort due to restrictive debt covenants (Renaud, 2018). Examples by Renaud (2018) of restrictive debt covenants are "They can't issue any more debt until the bank loan is completely paid off. They can't participate in any share offerings until the bank loan is paid off. They can't acquire any companies until the bank loan is paid off" (2018). Bond markets perform to be also merciful than banks and frequently perceived as being comfortable to do business with (2018).

The last type of financing that needs review in this post is Equity financing. Per Kunigis (2017), there pros and cons to equity financing and there are the following:

- Advantages: Considered to be the less stressful option. No need to worry about credit. Learn by experience and partnerships. No monthly payments needed.

-Disadvantages: You must share your profits. Loss control of the business. Conflicts between having to adapt to other's vision and mission for your business.

[The following information applies to the questions displayed below.]

Pastina Company sells various types of pasta to grocery chains as private label brands. The company's fiscal year-end is December 31. The unadjusted trial balance as of December 31, 2018, appears below.

Information necessary to prepare the year-end adjusting entries appears below.

Depreciation on the office equipment for the year is $8,000.

Employee salaries and wages are paid twice a month, on the 22nd for salaries and wages earned from the 1st through the 15th, and on the 7th of the following month for salaries and wages earned from the 16th through the end of the month. Salaries and wages earned from December 16 through December 31, 2018, were $900.

On October 1, 2018, Pastina borrowed $46,800 from a local bank and signed a note. The note requires interest to be paid annually on September 30 at 12%. The principal is due in 10 years.

On March 1, 2018, the company lent a supplier $16,800 and a note was signed requiring principal and interest at 8% to be paid on February 28, 2019.

On April 1, 2018, the company paid an insurance company $3,400 for a two-year fire insurance policy. The entire $3,400 was debited to insurance expense.

$560 of supplies remained on hand at December 31, 2018.

A customer paid Pastina $1,080 in December for 900 pounds of spaghetti to be delivered in January 2019. Pastina credited sales revenue.

On December 1, 2018, $1,200 rent was paid to the owner of the building. The payment represented rent for December 2018 and January 2019, at $600 per month.

6. Prepare a post-closing trial balance.

The following information applies to the questions displayed below.]

Pastina Company sells various types of pasta to grocery chains as private label brands. The company's fiscal year-end is December 31. The unadjusted trial balance as of December 31, 2018, appears below.

Information necessary to prepare the year-end adjusting entries appears below.

Depreciation on the office equipment for the year is $10,500.

Employee salaries and wages are paid twice a month, on the 22nd for salaries and wages earned from the 1st through the 15th, and on the 7th of the following month for salaries and wages earned from the 16th through the end of the month. Salaries and wages earned from December 16 through December 31, 2018, were $1,350.

On October 1, 2018, Pastina borrowed $60,900 from a local bank and signed a note. The note requires interest to be paid annually on September 30 at 12%. The principal is due in 10 years.

On March 1, 2018, the company lent a supplier $24,900 and a note was signed requiring principal and interest at 8% to be paid on February 28, 2019.

On April 1, 2018, the company paid an insurance company $5,200 for a two-year fire insurance policy. The entire $5,200 was debited to insurance expense.

$830 of supplies remained on hand at December 31, 2018.

A customer paid Pastina $1,620 in December for 1,350 pounds of spaghetti to be delivered in January 2019. Pastina credited sales revenue.

On December 1, 2018, $2,200 rent was paid to the owner of the building. The payment represented rent for December 2018 and January 2019, at $1,100 per month.

3. Prepare an adjusted trial balance.

Tru Developers, Inc., sells plots of land for industrial development. Tru recognizes income for financial reporting purposes in the year it sells the plots. For some of the plots sold this year, Tru took the position that it could recognize the income for tax purposes when the installments are collected. Income that Tru recognized for financial reporting purposes in 2018 for plots in this category was $70 million. The company expected to collect 60% of each sale in 2019 and 40% in 2020. This amount over the next two years is as follows:

Tru’s pretax accounting income for 2018 was $100 million. In its income statement, Tru reported interest income of $15 million, unrelated to the land sales, for which the company’s position is that the interest is not taxable. Accordingly, the interest was not reported on the tax return. There are no differences between accounting income and taxable income other than those described above. The enacted tax rate is 40 percent.

Management believes the tax position taken on the land sales has a greater than 50% chance of being upheld based on its technical merits, but the position taken on the interest has a less than 50% chance of being upheld. It is further believed that the following likelihood percentages apply to the tax treatment of the land sales ($ in millions):

Required:
1. What portion of the tax benefit of tax-free interest will Tru recognize on its 2018 tax return?
2. What portion of the tax benefit of tax-free interest will Tru recognize on its 2018 financial statements?
3-a. What portion of the tax on the $70 million income from the plots sold on an installment basis will Tru defer on its 2018 tax return?
3-b. What portion of the tax on the $70 million income from the plots sold on an installment basis will Tru defer in its 2018 financial statements?
4. Prepare the journal entry to record income taxes in 2018 assuming full recognition of the tax benefits in the financial statements of both differences between pretax accounting income and taxable income.
5. Prepare the journal entry to record income taxes in 2018 assuming the recognition of the tax benefits in the financial statements you indicated in requirements 1-3.