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.

Below is Salem Company’s income statement for 2018 that was prepared by an inexperienced accountant. Salem Company Income Statement As of December 31, 2018 Revenues: Sales revenue ……………..…………………………………… $298,000 Wages payable…………..……………………………………….. 4,000 Gain on sale of investment…………………………………….. 5,250 Deferred revenue………………………………………………. 2,500 Interest payable………………………………………………… 1,000 Accumulated depreciation……………………………………… 10,000 Total revenues ………………………………………………….. $320,750 Less operating expenses: Selling expenses….……………………… …………………. $32,250 Research and development expense………………….…….. 4,750 Prepaid advertising …….…………………………………. 3,000 Indirect manufacturing labor cost..………………………… 16,200 Utilities expense..…. .....................………………………… 10,200 Direct manufacturing labor cost. ………………………..… 41,000 Factory equipment………………………………………….. 40,000 Insurance expense…………………….………………. …… 3,500 Restructuring costs………………………………………….. 4,000 Direct materials purchased………………………………..... 93,000 Interest expense……………………………………………. 1,750 Rent expense…..…………….………………. …………….. 18,000 Other factory indirect costs…………………………………. 3,000 Dividend paid………………………………………………. 1,500 Administrative expenses………………….…………………. 40,400 Short-term investment……………………………………… . 19,000 Total operating expenses …………………………………….. 331,550 Net operating loss …………………………………………….. ($10,800) a. Seventy percent (70%) of utilities expense and 80% of insurance expense are for factory operations. Apply the remaining utilities and insurance expenses equally to selling expense and administrative expenses. b. Sixty percent (60%) of the rent expense is associated with factory operations. Allocate the remaining rent equally to selling expense and administrative expenses. c. Factory equipment was purchased January 1, 2017. It was estimated that the useful life of the equipment is 10 years and the residual value, $4,000. The $10,000 accumulated depreciation above is for 2017. No depreciation was charged for 2018. The company uses the double-declining balance method of depreciation. d. Inventory balances are: January 1, 2018 December 31, 2018 Direct materials……………… $5,000 $6,600 Work-in-process …………….. $8,000 $10,000 Finished goods ……………… $25,000 $28,000 e. The company’s tax rate is 21%. The president is disappointed with the results of operations and has asked you to review the income statement and make a recommendation as to whether the company should look for a buyer for its assets. Required: 1. As one step in gathering data for the president, prepare a corrected schedule of cost of goods manufactured for the year ended December 31, 2018. 2. As a second step, prepare a new multiple-step income statement for the year ended December 31, 2018. 3. Calculate the cost of producing one unit if the company produced 120,000 units in 2018 (round your answer to two decimal points).

Glenview ‘s Corporation’s comparative balance sheets as of Dec31 ,yr. 1 and yr. 2 and its yr. 2 income statement is as follows: Assets Yr2 Yr1 Cash 82,400 25,000 Accounts Receivables 82,600 100,000 Inventory 175,000 225,000 Prepaid Expenses 1000 1500 Furniture and Fixtures 74,000 72,000 Accumulated Depreciation (21,000) (12,000) Total Assets 394,000 411,500 Liabilities and Stockholder’s Equity; Yr1 Yr. 2 Accounts payable 71,700 100,200 Notes Payable(long term) 20,000 10,000 Bonds Payable 50,000 100,000 Income tax Payable 700 2200 Common Stock-$10 par value 120,000 100,000 P a g e | 2 Financial Accounting 2. Paid in capital in excess of par value 90,720 60,720 Retained Earnings 40,880 38,380 Total Liabilities and Stockholder’s Equity 394,000 411,500 Income Statement For the Year Ended Dec 31, Yr. 2 Sales $804,500 Cost of goods Sold ( 563,900) Gross Profit 240,600 Operating Exp(Including depreciation Exp of 23,400) (224,700) Income from Operations 15,900 Gain on Disposal of Furniture and Fixtures 3500 Interest Expense (11,600) Income before Income taxes 7,800 Income Taxes 2300 Net Income 5,500 P a g e | 3 Financial Accounting 2. Additional information about yr2: a) Furniture and fixtures with book value of $3400 was sold at $6900. b) Furniture and fixtures were purchased in the amount of $19,800. c) A $10,000 note payable was paid and $20,000 was borrowed on a new note. d) Bonds payable in the amount of $50,000were converted into 2000 shares of common stock. e) A $3,000 in cash dividends were declared and paid.

Required: Prepare a statement of cash flows using the direct method and supporting schedule of non-cash investing and financing transactions.

Glenview ‘s Corporation’s comparative balance sheets as of Dec31 ,yr. 1 and yr. 2 and its yr. 2 income statement is as follows: Assets Yr2 Yr1 Cash 82,400 25,000 Accounts Receivables 82,600 100,000 Inventory 175,000 225,000 Prepaid Expenses 1000 1500 Furniture and Fixtures 74,000 72,000 Accumulated Depreciation (21,000) (12,000) Total Assets 394,000 411,500 Liabilities and Stockholder’s Equity; Yr1 Yr. 2 Accounts payable 71,700 100,200 Notes Payable(long term) 20,000 10,000 Bonds Payable 50,000 100,000 Income tax Payable 700 2200 Common Stock-$10 par value 120,000 100,000 P a g e | 2 Financial Accounting 2. Paid in capital in excess of par value 90,720 60,720 Retained Earnings 40,880 38,380 Total Liabilities and Stockholder’s Equity 394,000 411,500 Income Statement For the Year Ended Dec 31, Yr. 2 Sales $804,500 Cost of goods Sold ( 563,900) Gross Profit 240,600 Operating Exp(Including depreciation Exp of 23,400) (224,700) Income from Operations 15,900 Gain on Disposal of Furniture and Fixtures 3500 Interest Expense (11,600) Income before Income taxes 7,800 Income Taxes 2300 Net Income 5,500 P a g e | 3 Financial Accounting 2. Additional information about yr2: a) Furniture and fixtures with book value of $3400 was sold at $6900. b) Furniture and fixtures were purchased in the amount of $19,800. c) A $10,000 note payable was paid and $20,000 was borrowed on a new note. d) Bonds payable in the amount of $50,000were converted into 2000 shares of common stock. e) A $3,000 in cash dividends were declared and paid.

Required: Prepare a statement of cash flows using the direct method and supporting schedule of non-cash investing and financing transactions.

1. Commute times in the U.S. are heavily skewed to the right. We select a random sample of 240 people from the 2000 U.S. Census who reported a non-zero commute time. In this sample the mean commute time is 28.9 minutes with a standard deviation of 19.0 minutes. Can we conclude from this data that the mean commute time in the U.S. is less than half an hour? Conduct a hypothesis test at the 5% level of significance. What is the p -value for this hypothesis test?

2.A medical researcher is studying the effects of a drug on blood pressure. Subjects in the study have their blood pressure taken at the beginning of the study. After being on the medication for 4 weeks, their blood pressure is taken again. The change in blood pressure is recorded and used in doing the hypothesis test. Change: Final Blood Pressure - Initial Blood Pressure The researcher wants to know if there is evidence that the drug increases blood pressure. At the end of 4 weeks, 34 subjects in the study had an average change in blood pressure of 2.5 with a standard deviation of 5.1. Find the p -value for the hypothesis test.

3.Child Health and Development Studies (CHDS) has been collecting data about expectant mothers in Oakland, CA since 1959. One of the measurements taken by CHDS is the weight increase (in pounds) for expectant mothers in the second trimester. In a fictitious study, suppose that CHDS finds the average weight increase in the second trimester is 14 pounds. Suppose also that, in 2015, a random sample of 43 expectant mothers have mean weight increase of 16.2 pounds in the second trimester, with a standard deviation of 5.7 pounds. A hypothesis test is done to see if there is evidence that weight increase in the second trimester is greater than 14 pounds. Find the p -value for the hypothesis test.

Which hypothesis test you believe you should use and why.

• One Sample Proportion Z-test

• Two Sample Proportion Z-test

• One Mean t-test

• Pooled t-test

• Non-Pooled t-test

• Paired t-test

• ANOVA F-test

• Bootstrapping is also an option

Questions:

4. The NOAA National Climatic Data Center of the United States provides data on the average annual temperature for every state in the United States. The average annual temperatures are based on data collected by weather stations throughout each state during the years 1971 to 2000. Is there strong evidence that the mean average annual temperature in the United States is greater than 50 degrees Fahrenheit? Explain. Use a significance level of 5%.

5. As gas prices continue to rise, more customers are beginning to take into account miles per gallon (a measure of the average distance traveled per unit of energy consumed) when determining which type of car to purchase. Do cars made in Japan typically get more miles per gallon than cars made in the United States? A random sample of 79 cars made in Japan had a mean of 30.48 and a standard deviation of 6.11 miles per gallon. A random sample of 249 cars made in the United States produced a mean of 20.14 and a standard deviation of 6.41 miles per gallon. Use a significance level of 0.10.

6. The U.S. Census Bureau reports that 26% of all U.S. businesses are owned by women. A Colorado consulting firm surveys a random sample of 410 businesses in the Denver area and finds that 115 of them have women owners. Should the firm conclude that its area is unusual? Test an appropriate hypothesis and state your conclusion. Use =0.05.

1. Review the following situations and determine the employee’s net pay by figuring out what earnings & benefits are subject to Income Tax, Canada / Quebec Pension Plan, Quebec Parental Insurance Plan (if applicable) and Employment insurance. Make sure to reduce net and taxable income by any applicable voluntary/non statutory deductions as well. All rates should be based on 2019.

1. Lawrence works in Alberta and is paid on a bi-weekly basis. He has a claim code of 1 on both his TD1 and TD1AB. He has the following type of earnings, benefits & deductions. He will not max out on CPP or EI this pay and will have full deductions.

1. Regular $2000
2. Vacation Pay $1000
3. Group Life – Employer paid Taxable benefit $25
4. RRSP contribution $150
5. Coffee Fund $5

Calculate Lawrence’s pensionable, insurable and taxable amounts. Then calculate CPP & EI deductions and look up the corresponding federal and provincial tax amounts in the tax tables based on his province, pay frequency and claim codes. Once all deductions have been calculated figure out the net pay.

2. Celine works in Nova Scotia and is paid on a semi-monthly basis. She has a claim code of 2 on both his TD1 and TD1NS. She has the following type of earnings, benefits & deductions. She will not max out on CPP or EI this pay and will have full deductions.

1. Regular $4000.00
2. Overtime $500.00
3. Parking – Employer paid Taxable benefit $50.00
4. RPP contribution $300.00
5. Union Dues $25.00

Calculate Celine’s pensionable, insurable and taxable amounts. Then calculate CPP & EI deductions and look up the corresponding federal and provincial tax amounts in the tax tables based on her province, pay frequency and claim codes. Once all deductions have been calculated figure out the net pay.

Exercise 19-08

Express Delivery is a rapidly growing delivery service. Last year, 80% of its revenue came from the delivery of mailing “pouches” and small, standardized delivery boxes (which provides a 20% contribution margin). The other 20% of its revenue came from delivering non-standardized boxes (which provides a 70% contribution margin). With the rapid growth of Internet retail sales, Express believes that there are great opportunities for growth in the delivery of non-standardized boxes. The company has fixed costs of $13,640,100.

(a) What is the company’s break-even point in total sales dollars? At the break-even point, how much of the company’s sales are provided by each type of service? (Use Weighted-Average Contribution Margin Ratio rounded to 2 decimal places e.g. 0.22 and round final answers to 0 decimal places, e.g. 2,510.)

(b) The company’s management would like to hold its fixed costs constant but shift its sales mix so that 60% of its revenue comes from the delivery of non-standardized boxes and the remainder from pouches and small boxes. If this were to occur, what would be the company’s break-even sales, and what amount of sales would be provided by each service type? (Use Weighted-Average Contribution Margin Ratio rounded to 2 decimal places e.g. 0.22 and round final answers to 0 decimal places, e.g. 2,510.)

Steps:

            1) Multiply prevalence (i.e., % in population) by N

            2) Enter value as Total # in the Clinical group

            3) Enter Total for non-clinical by subtracting that result from N

            4) Clinical group column:

                        a) Multiply Clinical total by the sensitivity of the test and enter in top row (Correct +)

                        b) Subtract that value from the Clinical Group total to get the bottom row value (# misses)

            5) Non-clinical group

                        a) Multiply non-clinical total by the specificity of the test and enter in bottom row (correct -)

                        b) Subtract that value from the column total to obtain the top row value (# False +)

            6) Add values in rows to obtain row totals

            7) PPV = (Correct +s / Total +s) = top left cell divided by top row total

            8) NPV = (Correct –s/ Total –s) = bottom right cell divided by bottom row total

1.) COVID Antibody Test: Many antibody tests are being assessed currently. I took the following data for one test from a preliminary report posted by University of California San Francisco researchers three days ago. If you obtain decimal values, round to one decimal place.

            Percentage Cases in Population Tested: 14%                        Sensitivity = .8182      Specificity = .8692

__________________________________________________________________________________________

                                                                           True State (unknown)

                                                Clinical Group                                     Non-Clinical Group                            Total

__________________________________________________________________________________________

            “Clinical”                               

Test Result

            “Non-Clinical”           

__________________________________________________________________________________________

Total                                                                                                                                                                1000

__________________________________________________________________________________________

            PPV = ______________                    NPV = ______________                    % Correct = _____________

Based on these results, do you believe this test is ready for usage? Why or why not? [Consider the 2 types of errors, and which would be the greatest concern for this type of test]